The EUR/USD edged up to 1.1755 in early Friday trading, maintaining a positive trajectory above the 100-day EMA. The ECB’s decision to keep rates unchanged and a cautious outlook supported the Euro, with anticipation of US policy shifts potentially affecting the Dollar.
Technically, the EUR/USD remained bullish, trading above the 100-day EMA at 1.1635 with an RSI at 59.8. The Bollinger bands indicate modest volatility, with resistance at the upper band of 1.1820 and support at the lower band near 1.1655, suggesting an upward bias.
The Euro’s Global Significance
The Euro is used by 20 EU countries and ranks second globally in trading volume. In 2022, it accounted for 31% of forex transactions, with EUR/USD being the most traded pair. The ECB governs Eurozone monetary policy, adjusting interest rates to manage inflation and growth, impacting the Euro’s value.
Eurozone inflation is tracked by the HICP, with rising rates prompting ECB intervention. Economic data, like GDP and PMI, affect the Euro, with strong economies bolstering its strength. Trade balance impacts the Euro by altering currency demand, where a surplus strengthens it.
The current environment for EUR/USD around 1.1755 is constructive, pointing towards further gains in the coming weeks. We see a clear divergence with the European Central Bank holding firm after their December 2025 meeting, while political uncertainty clouds the US Federal Reserve’s future. This fundamental backdrop suggests a strategy of buying on any short-term dips.
ECB Strategy and Dollar Uncertainty
The ECB’s data-dependent approach appears justified, especially as the latest flash estimate for Eurozone inflation in December 2025 ticked up to 2.9%. This stubborn inflation reduces the likelihood of rate cuts anytime soon, providing a solid floor for the Euro. Consequently, we should view the Euro’s side of the equation as relatively stable to strong.
On the other side, the dollar faces headwinds from speculation over Fed Chair Powell’s successor later this year. We remember the market volatility caused by similar political pressure on the Fed back in 2018, which undermines confidence in the dollar. This uncertainty about Fed independence is likely to weigh on the greenback until a clear path is announced.
Given the upward momentum and the price holding above the key 100-day moving average near 1.1635, buying call options with strike prices above the 1.1820 resistance level could be a viable strategy. The latest CFTC data also shows speculative net long positions building, confirming that market sentiment aligns with this bullish technical picture. Selling out-of-the-money puts could also be considered to collect premium while expressing this view.
