The EUR/USD is trading slightly higher at 1.1728, close to three-week highs. The currency consolidates previous gains, with the US dollar weak ahead of President Trump’s upcoming Davos speech.
The currency has been affected by Trump’s threats of tariffs against European nations opposing his plans to acquire Greenland. Market participants hope for reduced tensions following the Davos World Economic Forum, although Trump’s actions, such as revealing private European leader communications, keep concerns heightened.
Euro Vs Other Currencies
The heat map shows the Euro gaining 0.17% against the Swiss Franc and losing 0.10% against the dollar. Meanwhile, the European Parliament contemplates suspending its trade agreement with the US in response to Trump’s threats.
ECB President Christine Lagarde’s speech at Davos is likely reiterating steady monetary policy amid uncertainties. Economic data has shown strong sentiment in Germany, while US job creation remains low. The EUR/USD finds immediate support at 1.1710, with resistance seen between 1.1761 and 1.1765.
The Euro is the second most traded currency, with EUR/USD representing 30% of foreign exchange transactions. The ECB manages monetary policy, focusing on price stability, with interest rates influencing the Euro’s strength. Positive economic data usually strengthens the Euro by attracting foreign investment and signaling potential rate hikes by the ECB.
Given the high tension and uncertainty surrounding President Trump’s speech at Davos, we are seeing the EUR/USD pair pause after a strong run-up. The market is clearly in a wait-and-see mode, with the “Sell America” trade taking a breather. This consolidation above the 1.1700 level presents a critical juncture for traders.
Strategies And Insights
Traders should consider buying volatility ahead of the speeches from both Trump and ECB President Lagarde. Given the unpredictable nature of these geopolitical events, using options strategies like straddles or strangles on EUR/USD could be effective. This allows profiting from a large price move in either direction without having to guess the outcome of the Davos talks.
We saw a similar pattern during the height of the US-China trade war back in 2019, where headline risk caused sharp, unpredictable swings in currency markets. Back then, the CBOE Volatility Index (VIX) frequently spiked above 20 on tariff announcements, rewarding those who were positioned for increased market choppiness. The current situation with the EU over Greenland feels very similar, suggesting volatility is currently underpriced.
Beyond the immediate event risk, the underlying economic data seems to favor continued Euro strength against the Dollar. The German ZEW survey showing investor sentiment at a four-year high contrasts sharply with weak US employment data. A recent ADP report of only 8,000 net new jobs is far below the average of over 170,000 we saw through much of 2025, confirming a significant slowdown in the US labor market.
This divergence suggests a medium-term strategy of buying EUR/USD call options or selling out-of-the-money put options. This would position for a potential breakout above the 1.1765 resistance level if Trump’s rhetoric remains aggressive and economic data continues to favor the Eurozone. We believe the fundamental weakness in the US, combined with a steady ECB, provides a strong tailwind for the Euro.
