The EUR/USD is trading with minor losses around 1.1620 in early European sessions. The currency pair maintains a positive outlook above the 100-day EMA, but the bearish RSI at 42.60 suggests possible further downside. A strong resistance level is identified at 1.1657, with the first support at 1.1555.

The EUR/USD’s bullish momentum remains despite challenges such as the US-China trade tensions supporting the US Dollar and political unrest in France. Further gains could push the pair to a resistance point at 1.1758, while a fall may see it drop to key support at 1.1403.

The Euro’s Influence

The Euro, used by 19 EU countries, accounted for 31% of 2022’s foreign exchange transactions, with over $2.2 trillion traded daily. The ECB’s monetary policy and inflation data heavily influence the Euro’s value, as higher interest rates usually boost the currency.

Economic indicators like GDP, PMIs, and the Trade Balance can impact the Euro, with strong data bolstering the currency. A positive Trade Balance strengthens the Euro, while a negative balance can weaken it.

We are looking at the EUR/USD pair trading around the 1.1620 level, a price point that has proven to be significant in the past. While the pair remains above the key 100-day moving average, there is a sense of caution in the market. The bearish signal from the Relative Strength Index mentioned in earlier analysis deserves attention, suggesting that downside risk has not disappeared.

Current Market Dynamics

The fundamental picture has evolved since the market focused on US-China trade tensions years ago. Now, in October 2025, the European Central Bank is the main driver, holding its deposit rate at 3.50% to combat persistent inflation, with the latest Eurozone HICP data for September showing inflation at a sticky 2.8%. This hawkish ECB stance provides a strong underlying support for the Euro, contrasting with the situation a few years back.

Despite the supportive interest rate policy, the political situation in France continues to be a concern, just as it was in the past. The fragmented government that emerged from the 2024 elections creates legislative uncertainty, potentially limiting the Euro’s upside potential. This unresolved political risk is why we see gains being capped, even with favorable monetary policy.

On the other side of the pair, the focus has shifted from trade wars to monetary policy divergence. Recent US inflation data has cooled, leading the Federal Reserve to signal a more dovish stance for early 2026. This growing gap between a hawkish ECB and a potentially pausing Fed is a powerful bullish argument for EUR/USD that did not exist in the same way before.

For derivative traders, this creates an opportunity to use options to manage the conflicting signals. A bull call spread, buying a call option with a 1.1650 strike and selling one with a 1.1750 strike, could be a strategy to profit from a potential rise while capping risk. This approach allows us to capitalize on the strong fundamental support from the ECB.

However, we must respect the key support level at the 100-day EMA, currently near 1.1555. A break below this level could trigger a sharper decline, especially if any negative headlines emerge from France. Therefore, holding protective put options with a strike below 1.1550 would be a prudent hedge against unexpected downside moves in the coming weeks.

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