Insights 
VT 
The Euro’s Range Trading Phase
Current price trends indicate no major momentum shifts. Thus, for the upcoming days, the Euro is likely to continue in this limited price range.
Noteworthy mentions include the US Dollar’s decline due to trade deal optimism with China, and the Federal Reserve’s interest rate decisions. Gold also saw pressure, falling to approximately $4,000, as risk sentiment influenced market actions.
This overview is meant for informational purposes and not as investment guidance. All market movements come with risks, including the potential for significant loss, emphasising the importance of individual research before making trading decisions.
In the coming weeks, we expect the Euro to trade sideways, contained within a range of 1.1585 and 1.1680. The downward momentum we observed earlier in October has faded, suggesting the market has entered a period of consolidation. The price action from last week confirms this view, as the pair failed to make any significant moves in either direction.
The Economic Context
This stability is underpinned by economic data from both sides of the Atlantic that offers no clear directional catalyst. Recent US Core PCE inflation has settled near the Federal Reserve’s 2% target, while the latest flash CPI from the Eurozone shows inflation remaining sticky but not accelerating. This has left both the Fed and the ECB in a holding pattern, removing a key driver for currency volatility.
For derivative traders, this environment points toward selling volatility rather than buying direction. Implied volatility on one-month EUR/USD options has fallen to levels we haven’t seen since this past summer, reflecting market consensus for limited price movement. This makes strategies that profit from time decay and range-bound trading particularly attractive.
We believe that implementing strategies like short strangles or iron condors is appropriate for the current market. By selling out-of-the-money calls and puts with strike prices beyond the expected 1.1585-1.1680 range, traders can collect premium. These positions will profit as long as the EUR/USD pair remains within this channel and volatility stays low.
Caution is still warranted, as any unexpected remarks from central bank officials could disrupt this calm. Looking back at similar low-volatility periods, such as in 2021, we know that they can end abruptly. Therefore, managing position size and defining risk parameters for these options structures is essential.
