The Euro has extended its decline, testing levels below 1.1600, as market participants reduce expectations for US Federal Reserve easing. This drop comes in the backdrop of increased tensions between China and Japan, which has dampened risk appetite.

The EUR/USD pair started the week under pressure, moving back towards the 1.1600 mark from highs above 1.1650. While markets remain risk-averse, upcoming US economic data releases are providing support for the US Dollar.

Eurozone Concerns

The European Central Bank’s Vice President expressed confidence in Eurozone inflation nearing targets but warned about tariffs and debt risks. Meanwhile, US President Trump has rescinded tariffs on over 200 products, acknowledging inflation concerns tied to import costs.

Later, the release of the Eurozone Economic Growth Forecasts and US Empire State Manufacturing Index, alongside several Federal Reserve officials’ speeches, is anticipated. Current data shows varied performance among major currencies against the Euro, with the Euro being strongest against the Australian Dollar.

The New York Empire State Manufacturing Index is expected to indicate deteriorating business conditions, with construction spending also showing a continuous decline. Technical analysis points to the EUR/USD under pressure with the potential for further downside momentum indicated by key technical indicators.

The Euro is weak against the dollar, holding below the 1.1600 level as markets grow cautious and scale back bets on a near-term Federal Reserve rate cut. Today’s US manufacturing and construction data will be a key test for the market’s direction. We are seeing a clear preference for the safety of the dollar amid rising geopolitical friction between China and Japan.

Market Strategies

This view is supported by the latest US inflation data from October 2025, which showed the Consumer Price Index remaining sticky at 3.4% year-over-year, resisting a swift return to the Fed’s target. This, along with a solid jobs report from early November that added 180,000 payrolls, gives the Fed little reason to rush into easing monetary policy. As a result, the market’s probability of a December rate cut has fallen to just 43%.

In contrast, recent economic signals from the Eurozone have been less encouraging, with the latest flash manufacturing PMI for November 2025 dipping to 45.2, pointing to an ongoing contraction in the sector. This divergence in economic strength is reminiscent of the dynamic we saw back in 2022, when aggressive Fed tightening pushed the dollar significantly higher against the Euro. This reinforces the current bearish sentiment for the EUR/USD pair.

Given the weakening technical momentum, we should consider buying EUR/USD put options to position for a potential break lower. Strike prices near 1.1550 or 1.1500 could prove effective if strong US data propels the pair below its current support levels. This strategy allows for capitalizing on a move towards the lows seen earlier this month.

Alternatively, for those expecting the pair to remain range-bound, selling call options or setting up bear call spreads with strikes above the 1.1670 resistance level is a sound strategy. This allows us to collect option premium while betting that the pair will fail to break out of its established bearish channel. The series of speeches from Fed officials later today will likely inject volatility, which could make these premium-selling strategies more attractive.

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