EU-US Strained Relations Impact<\/p>\n
Eurozone flash PMIs displayed mixed results with services expanding. Manufacturing PMI showed some improvement but remained below the 50-mark, signalling contraction. US economic data supports a steady interest rate outlook from the Federal Reserve, with Q3 GDP revised upward and inflationary pressures noted in November.<\/p>\n
EUR\/USD remains within specific Fibonacci retracement levels. The pair holds a mild positive momentum, with technical indicators hinting at a bullish tendency. Resistance is noted around the 1.1765 area, with targets set beyond this level.<\/p>\n
Political Sentiment Over Economic Fundamentals<\/p>\n
Given the US dollar’s weakness despite strong economic data, we believe the market is being driven more by political sentiment than by fundamentals. The current EUR\/USD strength is a direct result of strained transatlantic relations, and this trend is likely to continue in the near term. Therefore, traders should be cautious about betting on a dollar rebound based on economic figures alone.<\/p>\n
This geopolitical risk has pushed currency volatility to levels we haven’t seen in some time. The Cboe EuroCurrency Volatility Index (EVZ), for instance, touched a 10-month high of 9.8 just last week, up from an average of 6.5 throughout the last quarter of 2025. This elevated volatility suggests that options strategies designed to profit from large price swings could be more effective than placing simple directional bets.<\/p>\n
The policy divergence between the central banks is also becoming a key factor supporting the euro. While the Fed is holding steady, we recall European Central Bank officials in December 2025 hinting at a more aggressive stance on inflation, which the market interpreted as hawkish. This contrasts with the Fed’s current wait-and-see approach, making the euro fundamentally more attractive.<\/p>\n
We have seen this pattern before, particularly during the trade tariff disputes in 2024, when political headlines repeatedly overrode economic data releases. In such an environment, the dollar remained weak for extended periods even when US growth was outpacing Europe’s. History suggests that until these political tensions with the EU are clearly resolved, the path of least resistance for the dollar is down.<\/p>\n
For the coming weeks, we see value in buying EUR\/USD call options to capitalize on further upside while limiting risk. Given the high volatility, strategies like a bull call spread could help reduce the upfront premium cost. A break above the key 1.1765 resistance level could trigger a quick move towards the 1.1800 handle.<\/p>\n
Today\u2019s upcoming US PMI data release will be a crucial test of this market dynamic. A stronger-than-expected reading might fail to lift the dollar if sentiment remains negative, confirming the political theme’s dominance. However, a miss on the data could significantly accelerate the EUR\/USD rally, as it would align weak data with the existing bearish dollar sentiment.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD holds near multi-week highs amid weak US Dollar, geopolitical tensions, and mixed economic data.<\/p>\n","protected":false},"author":62,"featured_media":16963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40008","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40008","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=40008"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40008\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16963"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=40008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=40008"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=40008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}