The Euro remains near the 1.1600 support level, with limited progress above 1.1650 due to France’s political issues. The focus is on Federal Reserve Chair Jerome Powell’s upcoming speech, as economic data releases are delayed by the US government shutdown.

EUR/USD hovers around one-month lows, trading at 1.1615. The persistent bearish trend is reinforced by political uncertainty in France and the upcoming Fed speeches, including New York Fed President John Williams’ earlier indication of further monetary easing.

European Central Bank Policy Discussion

The European Central Bank’s recent discussions indicate no immediate changes in policy, despite concerns over global uncertainty. Inflationary risks are a point of divergence for policymakers, with mixed opinions on potential price pressures.

Recent data reflects a mixed economic outlook. Germany’s trade balance saw a surplus of EUR 17.2 billion in August, primarily due to a 1.3% drop in imports. Concurrently, Germany reported a 4.3% decline in industrial production.

A ceasefire agreement between Israel and Hamas has been reached, which may impact market sentiment. However, EUR/USD continues its bearish pressure, with the Relative Strength Index below 50, while sellers remain active near the 1.1650 resistance level. Immediate technical resistance is identified between 1.1645 and 1.1650.

We are watching the EUR/USD pair closely as it tests the critical 1.1600 support level. The Euro is under pressure from within Europe, while the Dollar’s future path depends heavily on the Federal Reserve’s next move. This creates a tense standoff for traders in the coming weeks.

US Economic Outlook

The primary weight on the Euro comes from France’s political instability and signs of a German economic slowdown. Recent data confirms this, with Germany’s IFO Business Climate index having fallen to 85.2 in September 2025 for the third straight month. With Eurozone inflation at a subdued 1.9%, there is little reason to expect help from the European Central Bank.

In the US, the picture is clouded by the ongoing government shutdown, which is delaying key economic reports. Federal Reserve officials are already signaling a dovish stance, supported by the weaker-than-expected 130,000 jobs added back in August 2025. All eyes are now on Fed Chair Powell’s upcoming speech to see if more rate cuts are coming this year.

For traders expecting European weakness to win out, buying puts with a strike price below 1.1600 is a direct strategy. This allows us to profit from a breakdown of the current support level. A bear put spread, which involves buying a higher strike put and selling a lower one, could be used to reduce the upfront cost of the trade.

Given the uncertainty around Powell’s speech, we must consider the possibility of a sharp reversal higher. A historical parallel can be seen in early 2019, when a clear dovish pivot from the Fed led to sustained dollar weakness over the following months. To position for this, buying out-of-the-money call options above the 1.1720 resistance offers a low-cost way to capture a potential bullish breakout.

If you believe a large price swing is coming but are unsure of the direction, a volatility play makes sense. A long straddle, which involves buying both a call and a put option at the same strike price near 1.1615, would profit if the pair moves significantly in either direction. This strategy is ideal for capturing the market’s immediate reaction to the Fed speeches this week.

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