The Euro is expected to consolidate in the range of 1.1655 to 1.1720. In the longer term, there is an upside risk, but breaking above 1.1805 seems unlikely at present, according to UOB Group’s FX analysts.
In a 24-hour view, following a significant surge in the USD, consolidation is anticipated, with the Euro ending at 1.1682, down by 0.36%. A softer tone suggests a range between 1.1655 and 1.1720 for today. Similarly, over one to three weeks, the Euro could continue rising despite previous overextensions. The probability of surpassing 1.1805 remains low unless it falls below the revised strong support level of 1.1625.
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Given the expectation for the Euro to consolidate between 1.1655 and 1.1720, selling volatility appears to be a viable strategy for the near term. Options strategies that profit from time decay and a stable price, such as an iron condor, could perform well in this environment. The defined range offers clear levels to set the short strikes for such a position.
However, we believe the underlying risk remains to the upside, so a purely neutral stance may be too risky. A better approach might involve selling out-of-the-money puts below the new 1.1625 support level or constructing a bullish risk reversal. This aligns with the view that while a major breakout is unlikely, the floor for the currency pair has risen.
This market view is supported by the economic data we saw at the end of 2025. The European Central Bank held rates steady in its final meetings last year as Eurozone inflation cooled significantly to 2.4% by November. This lack of a hawkish push from the ECB is likely capping the Euro’s immediate upside potential.
Simultaneously, the US economy continues to show resilience, with the labor market adding a stronger-than-expected 210,000 jobs in December 2025. This relative strength in the US is providing a solid base for the dollar. It explains why the Euro is struggling to break convincingly above the 1.1770 area we saw it test recently.
We saw a similar period of price compression during the summer of 2025 before the pair eventually trended higher into the autumn. Current implied volatility on one-month EUR/USD options has fallen below 6%, reflecting the market’s anticipation of this continued range. This makes selling premium more attractive than buying it, provided risk is managed against a sudden breakout.
