The Euro has softened by 0.1% against the US Dollar. It lags behind all G10 currencies except for the British Pound and Swiss Franc.
The European Central Bank’s recent neutral to dovish comments have limited the Euro’s potential gains. As a result, short-term interest rate markets are anticipating minor rate cuts.
Euro Price Activity and Trends
Recent Euro price activity suggests resistance around 1.1750, with the Relative Strength Index indicating a bullish trend. The currency is expected to remain between 1.1680 support and 1.1780 resistance in the near term.
FXStreet provides insights and notes from industry experts but emphasises that their content is not investment advice. They stress the importance of thorough research before making investment decisions.
The website includes legal disclaimers about potential risks and inaccuracies in their content. Furthermore, they do not endorse or assume liability for damages resulting from their information.
We are seeing the Euro struggle against its G10 peers, a pattern reminiscent of what we observed last year. The European Central Bank’s dovish tilt continues to cap any significant upside for the currency. This sentiment was reinforced after Eurostat’s recent data showed December 2025 inflation fell to 2.5%, further justifying the bank’s cautious growth-first stance.
Interest Rates and Market Positioning
The short-term rates market is now pricing in at least one 25-basis-point cut by the third quarter, a more defined shift than the marginal sentiment from a few weeks ago. This outlook is reflected in the German-US 10-year yield spread, which has widened to over 150 basis points in favor of the dollar. For traders, this makes long-EUR positions expensive to hold due to the negative carry.
Recent positioning data confirms this bearish shift, as reports from the CFTC for the week ending January 13th showed a significant reduction in net long Euro contracts by large speculators. The options market is also reflecting this, with the price of puts rising relative to calls. This suggests we should consider strategies that protect against or profit from a decline in the EUR/USD pair.
Recalling the resistance we saw around the 1.1800 level in late 2025, any rallies toward that area now seem like selling opportunities. A break below the recent support at 1.1650 could accelerate a move lower. Therefore, buying puts or establishing bearish put spreads with strike prices below 1.1650 could be a prudent way to position for the coming weeks.
