The Euro is consolidated just above 1.16, despite weaker than expected ZEW sentiment survey figures. The current calendar is sparse, contributing to a quiet market atmosphere and minimal short-term risk in either direction.
The fundamental outlook for the Euro remains supportive. The yield spreads have improved since late May and the options market has confirmed this trend since late June.
The relative strength index stays neutral at around the 50 level, with the 50-day moving average at 1.1614 showing upward momentum. The medium-term range spans from support just below 1.14 to resistance in the lower 1.18s, while the near-term range is between 1.1550 support and 1.1680 resistance.
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With the Euro in a holding pattern just above 1.16, we see the quiet summer market creating a period of consolidation. The immediate risk is low, keeping the currency within a tight near-term range between 1.1550 support and 1.1680 resistance. In this environment, strategies that profit from low volatility, like selling out-of-the-money strangles, could be effective in the coming days.
We believe the fundamental outlook remains supportive for a stronger Euro. The recent July 2025 Eurozone core inflation print held firm at 2.9%, keeping the European Central Bank on a hawkish path. This contrasts with the latest US Non-Farm Payrolls data from early August 2025, which showed job growth slowing to a modest 175,000 and hints at a less aggressive Federal Reserve.
This bullish sentiment is being priced into the derivatives market, confirming the trend we first saw in late June 2025. The one-month 25-delta risk reversal, a measure of positioning, has narrowed to just -0.1, showing a significant drop in demand for puts that protect against a fall in the Euro. This suggests traders could consider buying call options or establishing bull call spreads to target a move higher.
Looking back, this period of low activity is typical for August, much like the summer lulls we observed in 2023 and 2024. The neutral Relative Strength Index reading confirms this lack of immediate directional pressure. However, these quiet phases can often build potential for a stronger trend to emerge as trading volumes return in September.
Given the supportive fundamentals and the defined medium-term resistance in the lower 1.18s, we believe traders should use this quiet period to position for a gradual move higher. The upward momentum of the 50-day moving average supports this view. Structuring trades that benefit from a rise toward that 1.18 resistance over the next several weeks seems like a sensible approach.
