The Euro (EUR) needs to break and close below 1.1615 to anticipate a move towards 1.1585, according to UOB Group’s FX analysts.
Last Thursday, there were expectations for the Euro to test 1.1650. The Euro fell to 1.1642, and it was anticipated it might test 1.1635 before a sustained recovery. The following support at 1.1615 seemed unlikely to be reached at that time. However, the Euro dropped to a low of 1.1617, though recovery signs are absent. It is now expected to consolidate between 1.1615 and 1.1665.
Over one to three weeks, a negative outlook on the Euro has been maintained since early last week. On Friday, it was noted that while the Euro’s downward momentum improved, breaking below 1.1615 would not be unexpected. However, closure below this point is necessary for a move to 1.1585. The potential for the Euro to close under 1.1615 remains, as long as it does not break the strong resistance level at 1.1690.
We recall a similar setup in January 2025 when a close below 1.1615 was needed to confirm further downside for the Euro. That analysis pointed to strong resistance at 1.1690, which ultimately held, leading to a significant decline over the following year. This historical precedent is useful for framing our current strategy.
The situation today is markedly different, with the EUR/USD trading much lower, near 1.0750. This long-term weakness is supported by recent economic data showing Eurozone inflation slowing to 2.3% in December 2025, while US inflation remains more persistent at 2.9%. This data reinforces expectations that the European Central Bank may cut interest rates before the US Federal Reserve.
For traders, this suggests that bearish positions on the Euro remain favorable. Buying EUR/USD put options with a strike price around 1.0700 could be a prudent way to position for a potential break lower. This strategy offers a defined risk while allowing for profit if the pair continues its downward trend.
Current one-month implied volatility for EUR/USD is hovering at a relatively low 6.8%, which is below the three-year average of around 8.5%. Low volatility makes buying options cheaper, presenting a cost-effective opportunity to gain short exposure. A surprise in economic data could cause volatility to rise, which would also increase the value of these long put positions.
The key risk to this bearish outlook would be a sustained move above the recent high of 1.0820. We see this level as the new “strong resistance” for the coming weeks. A decisive break above this point would signal that the downward momentum is fading, requiring a reassessment of short-biased strategies.
