The EUR/USD rate briefly surpassed 1.1800 in late December but faces renewed pressure. There is a possibility for the rate to move toward 1.1640–1.1600 if the support level of 1.1680 does not hold. This is influenced by geopolitical events and upcoming US data.
Recent Changes in Dutch Pension Reforms
The recent changes in Dutch pension reforms could impact European asset markets. These adjustments might lead to shifts in EUR swap rates as funds transition from defined benefit to defined contribution systems. The steepening of the 10-30 year EUR swap curve last year is notable and might affect shorter-dated rates, potentially supporting the euro.
The first quarter of the year may see a steady EUR/USD rate. However, the possibility of the euro gaining value could arise from the second quarter onwards, driven by the effects of German fiscal stimulus. The FXStreet Insights Team presents curated market observations from experts, alongside insights from internal and external analysts.
We are seeing renewed pressure on EUR/USD, a situation reminiscent of early 2025 when the pair struggled to hold ground above 1.1800. Today, the pair is trading significantly lower, finding it difficult to stay above 1.0750. The key support levels we are watching now are much lower than the 1.1680 floor we monitored a year ago.
Recent data from late 2025 supports a stronger dollar, as the final jobs report showed a robust 216,000 positions added and core inflation remains sticky at 3.9%. This contrasts sharply with the Eurozone, where German industrial production numbers for November 2025 showed a surprising contraction. This fundamental divergence makes a stronger case for dollar upside than we saw throughout much of last year.
German Fiscal Stimulus and Eurozone Growth
The anticipated boost from German fiscal stimulus, which we hoped would lift the euro in 2025, has not fully materialized to counter weak growth. The European Central Bank is therefore in a much more difficult position than the US Federal Reserve. This policy gap is now the dominant theme, more so than the Dutch pension fund flows that concerned us last year.
For the coming weeks, this environment suggests positioning for further downside in EUR/USD. We believe buying out-of-the-money put options expiring in March presents a compelling risk-defined strategy. Specifically, targeting strikes around the 1.0600 level could provide valuable protection and profit potential if current support breaks.
Implied volatility in the pair has remained relatively low, making option premiums an attractive way to express a directional view. A decisive break below the 1.0720 support level could trigger a quick move lower, similar to the sharp declines we witnessed in the third quarter of 2023. This makes holding bearish positions through derivatives more prudent than shorting the spot market directly.
