The EUR/USD has surged to fresh highs beyond 1.1920 amid current trade tensions and political uncertainties impacting the US Dollar. Tariffs on South Korea, fears of a US government shutdown, and market expectations for the Federal Reserve to ease further are weakening the US Dollar.
The Euro has rebounded to challenge its September 2025 highs, situated around 1.1920, supported by positive market sentiment. Meanwhile, the US is embroiled in trade uncertainties and immigration-related tensions, possibly contributing to a government shutdown.
Impact Of Tariffs And US Politics
The increase of tariffs on South Korea to 25% may further strain US international trade, yet Asian markets remain unaffected. Tensions in the US Congress regarding a funding bill could lead to a government shutdown, affecting the US Dollar’s strength.
In the economic context, US Durable Goods Orders have risen sharply by 5.3% in November. However, the focus moves to US Consumer Confidence and the Federal Reserve’s upcoming monetary policy decision.
The EUR/USD bulls are testing resistance at 1.1920, with technical indicators showing momentum. A confirmed break above may shift focus to 1.2000, while support is expected at 1.1830 in case of a bearish reaction.
Consumer confidence is a key economic indicator, reflecting spending willingness, which is vital for the US economy’s growth. Meanwhile, Christine Lagarde of the ECB will soon deliver a speech, affecting the Euro’s trend.
Market Strategy And Upcoming Events
With the EUR/USD pressing against the 1.1920 resistance, a level we have not seen hold since September 2025, the market is at a critical point. This strength in the euro is primarily a story of US dollar weakness, which is being hit by trade tariff uncertainty and the rising risk of a government shutdown. Traders should position for heightened volatility around this key technical barrier in the coming days.
For those of us anticipating a breakout above 1.1920, buying call options with a 1.2000 strike price for late February offers a way to play the upward momentum. Implied volatility for one-month EUR/USD options has ticked up to 7.5%, reflecting the market’s anticipation of a move, but this is still reasonable compared to the 9% levels seen during similar political uncertainty in 2025. This suggests that buying options could still be a cost-effective strategy if we believe the dollar’s troubles will continue.
Conversely, if we view the 1.1920 level as a strong ceiling, initiating bearish strategies like buying puts could be prudent, especially if the price fails to hold above it. A clear trigger would be a break below the 1.1830 support level, which would signal that the recent rally has run out of steam. We should remember the sharp rejection from this same price zone last autumn, which led to a quick drop.
The fundamental picture is dominated by the Fed’s policy meeting this week and the political gridlock in Washington. History shows these shutdowns, like the 35-day one we saw back in late 2018 and early 2019, can significantly damage dollar sentiment for weeks. The US Consumer Confidence number released today, which printed at a disappointing 109.2 against an expected 114.5, already confirms that public mood is darkening.
Upcoming speeches from ECB President Lagarde could also act as a major catalyst. Any hints of a more hawkish stance from the European Central Bank could provide the final push the euro needs to break through resistance. Given the packed calendar, traders who are uncertain about direction but expect a sharp price swing could consider strategies like long straddles to capitalize on the rising event risk.
