Insights 
VT 
EUR/USD is set to end the week with a 0.21% loss but stays above 1.16 for the third consecutive day. US inflation data missed estimates but remains below the Federal Reserve’s 2% target. S&P Global reports suggest economic strength with growth in manufacturing and services PMIs in October.
Key Economic Influences
The University of Michigan indicates growing consumer pessimism and potential for rising prices amid a prolonged US government shutdown. The US Dollar Index rose slightly to 98.94. US CPI rose 3.0% year-over-year, while core CPI saw a marginal decrease from the previous month.
October US business activity showed resilience, with manufacturing and services PMIs rising. Consumer sentiment declined slightly with inflation expectations showing minimal change. The Fed is expected to cut rates by 25 basis points soon.
EUR/USD’s technical outlook remains neutral with support at 1.1600 and resistance aligning with the 20- and 100-day SMAs. The Euro accounted for 31% of all forex transactions in 2022. The European Central Bank maintains price stability through interest rate adjustments.
Key economic indicators, including GDP and Trade Balance, can influence the Euro, with strong data benefiting the currency. Positive trade balances strengthen currencies by increasing demand for exports.
Trading Strategy Considerations
With the EUR/USD trading in a tight range above 1.16, we see a market caught between conflicting signals from the United States. While weak inflation data supports the case for a Federal Reserve rate cut, surprisingly strong business activity PMIs suggest underlying economic strength. This uncertainty creates a challenging environment, as the CME’s FedWatch Tool now shows an 88% probability of a rate cut in November, a conviction the economic data doesn’t fully support.
The ongoing US government shutdown, now in its fourth week, and a new trade investigation into China add significant political risk. A preliminary report from the Congressional Budget Office on October 23, 2025, estimated the shutdown is shaving approximately $2 billion per week off Q4 GDP growth, which could force the Fed’s hand regardless of other data. For traders, this means we should anticipate sudden spikes in volatility tied to news out of Washington D.C.
Across the Atlantic, the situation is also mixed, with improving European PMI data suggesting economic recovery is taking hold. Eurostat data released on October 22, 2025, showed Eurozone industrial production rose 0.8% month-over-month, providing a tailwind for the Euro. However, Moody’s negative outlook for France reminds us of the persistent sovereign debt challenges that plagued the region in years past, capping the Euro’s potential.
Given the consolidation between key support at 1.1600 and resistance near 1.1660, we should consider strategies that profit from this lack of movement. Selling an iron condor, with short call options above 1.1750 and short put options below 1.1550 for December expiration, could be an effective way to collect premium. This strategy will benefit as long as the currency pair remains within this expected range over the coming weeks.
However, we must also prepare for a potential breakout driven by a political event or a surprise from the Fed. Implied volatility on EUR/USD options has remained low, with the Cboe EuroCurrency Volatility Index (EVZ) hovering near 6.5%, below its three-month average of 8.0%. This makes buying long straddles or strangles an inexpensive way to hedge against, or profit from, a sharp move in either direction.
Ultimately, the market is betting heavily on the Fed cutting rates, which should weigh on the US Dollar. A simple way to position for this outcome is through buying EUR/USD call spreads, which offers a defined-risk way to target a move toward the 1.1800 level. This is a bet that the Fed’s dovish stance, rather than the resilient PMI data, will be the dominant driver for the dollar in the final quarter of 2025.
