The EUR/USD pair lost over 0.30% as US President Trump announced the cancellation of planned tariffs related to Greenland negotiations. This decision, shared on Truth Social from Davos, Switzerland, improved risk sentiment, boosting US equities with gains between 1.16% and 1.21% and strengthening the US Dollar Index by 0.20% to 98.75.
Economic updates ahead include US GDP figures, jobless claims, and the Core PCE Index, while in the Eurozone, the ECB’s policy accounts and EU consumer confidence data are due. The Euro was weakest against the US Dollar this week, dropping 0.86%, and strongest against the Japanese Yen, gaining 1.18%.
Eur Usd Technical Outlook
The EUR/USD pair’s technical outlook suggests a potential test of lower prices, having dropped below 1.1700, with a key support level at 1.1662. This currency pair is influenced by economic data including GDP, unemployment rates, manufacturing indices, and inflation. A strong economic performance can support the Euro by attracting foreign capital and prompting ECB interest rate hikes. Conversely, a negative trade balance or weak economic data can push the currency lower.
Looking back at the events of 2025, we saw how quickly the market shifted when the former President dropped tariff threats related to Greenland. The US Dollar strengthened immediately, and the EUR/USD pair fell below the 1.1700 level. This dynamic, where geopolitical headlines can override short-term economic data, remains a key factor for us to monitor.
The data that followed those events last year has largely supported a stronger dollar. The final reading for US Q3 2025 GDP came in at a solid 2.2%, and more recently, the Core PCE inflation for December 2025 finished the year at 2.8%, well above the Fed’s target. This reinforces the view that the Federal Reserve has little reason to consider cutting rates in the near term.
Opportunities for Traders
Meanwhile, the European Central Bank appears to be in a more difficult position. The latest German IFO Business Climate Index fell to 85.2, a worrying sign for the Eurozone’s economic engine. This growing policy divergence between a firm Fed and a cautious ECB continues to put downward pressure on the EUR/USD exchange rate.
For derivatives traders, this environment presents clear opportunities. We observed last year how one-month implied volatility on EUR/USD jumped to over 8% during the tariff scare before collapsing once the threat was removed. This pattern suggests that selling volatility by using strategies like short strangles could be profitable after any future politically-driven market spikes.
Given the fundamental weakness in the Eurozone, we should also consider directional plays. The break below the key 1.1700 mark last year was technically significant, and the 200-day moving average, now near 1.1590, is a plausible target in the coming weeks. Purchasing EUR/USD put options or establishing bear put spreads offers a defined-risk way to position for further downside.
