Insights 
VT 
Since mid-September, EUR/USD has seen a decline, attributed to position adjustments according to Jane Foley, an analyst from Rabobank.
The EUR/USD pair fell to 1.16 as market participants reduced their short positions on the US dollar. Earlier, there had been long positions on the Euro and short positions on the USD, built on expectations of aggressive rate cuts by the Fed and concerns about the loss of the USD’s safe-haven status.
Us Dollar As A Safe Haven
Despite challenges, the US dollar is expected to remain a safe-haven asset due to the size of US capital markets and the global influence of the currency. However, future Fed policy and leadership changes could impact the USD’s strength.
Recent short covering for the USD brought EUR/USD back to the 1.16 range. Anticipation of choppy trading is forecasted within the coming months, with potential delays in reaching the 1.20 level due to economic uncertainties in Europe. The situation might persist until the following spring.
We remember the correction back in late 2024, which was driven by an unwind of short dollar positions that pushed EUR/USD down toward 1.16. Today on October 16, 2025, the pair is struggling to hold above 1.1850, showing that upward momentum remains a challenge. This suggests that the fundamental issues from that time have not disappeared.
Much like in 2024, traders are again building up bets against the greenback, with recent CFTC data showing speculative net-short positions rising for the fourth straight week. However, the Federal Reserve has remained more hawkish than anticipated through 2025, holding rates steady last month as services inflation persisted above 3%. This creates the risk of another painful short squeeze if upcoming US data surprises to the upside.
The Path To 1 20
The anticipated move to 1.20, which was delayed last spring, continues to face resistance due to persistent weakness in Europe. Germany’s latest IFO Business Climate index fell to 92.5, its lowest level since the energy price concerns of 2024, dampening enthusiasm for the Euro. This weakness makes long Euro positions vulnerable, especially if the European Central Bank signals a more dovish stance in its next meeting.
Given this backdrop, range-trading strategies seem appropriate for the next few weeks. One-month implied volatility in EUR/USD options has risen to 7.8%, suggesting the market is pricing in choppiness rather than a clear breakout. Traders might consider selling out-of-the-money calls near the 1.20 resistance or buying puts to hedge against a drop back toward the 1.17 level.
