Insights 
VT 
On Wednesday, the EUR/USD pair saw a modest recovery as the US Dollar slipped from its recent highs. The Euro gained against the Dollar, trading near 1.1611 after reaching an intraday low of 1.1576. Meanwhile, the US Dollar Index dropped to around 98.84, a 0.13% decrease.
Technically, the EUR/USD remains in a descending channel that began on September 17. The pair is trading below the 50-day and 100-day Simple Moving Averages at 1.1690 and 1.1656, respectively, favouring a bearish outlook. A move above these levels could shift the pair upwards towards 1.1750 and potentially 1.1800.
Key Support and Resistance Levels
On the downside, support is identified at 1.1550, with further declines possibly targeting 1.1500 and 1.1400. Momentum indicators show mixed signals, with the Relative Strength Index at 44, implying weak bullish momentum. The MACD indicates easing downside pressure, although not fully reversed.
For bullish confirmation, the EUR/USD needs to close above 1.1700. Until then, sellers may maintain pressure, defending the 1.1650-1.1700 region and possibly aiming for 1.1500. The US Dollar was noted to be strongest compared to the British Pound today.
We are seeing a familiar bearish tone in EUR/USD, but the situation is quite different now on October 22, 2025. Looking back at market conditions from a few years ago, we saw the pair trading around 1.16 while the US Dollar Index was below 99. Today, with the dollar index holding firm above 107, the EUR/USD is finding it difficult to stay above the 1.04 level.
Interest Rate Differential Impact
The primary reason for this is the widening interest rate differential between the Federal Reserve and the European Central Bank. The Fed is maintaining its benchmark rate around 5.00% to keep a lid on inflation, whereas the ECB has already initiated an easing cycle, cutting its rate to 3.50% in response to a stagnant Eurozone economy. This policy divergence makes holding US dollars more attractive for yield-seeking traders.
Recent economic data reinforces this view, as the latest US inflation report showed a reading of 2.7%, still above the Fed’s target. In contrast, Eurozone inflation has cooled to 2.2%, accompanied by weak GDP growth forecasts of only 0.5% for the last quarter, compared to a more resilient 1.8% in the United States. This fundamental weakness continues to put pressure on the euro.
In the derivatives market, this has led us to favor strategies that profit from a continued, gradual decline or consolidation at these lower levels. We see traders increasingly buying EUR/USD put spreads, such as purchasing the 1.03 puts and simultaneously selling the 1.01 puts for the coming weeks. This approach offers a clear, risk-defined way to target a move toward parity.
Implied volatility remains relatively low, making options strategies an affordable way to position for the next move. While the path of least resistance appears to be downward, some are selling out-of-the-money puts with strike prices below 1.02 to collect premium, betting that a floor may be forming. However, the prevailing macroeconomic winds suggest downside risks will likely dominate through November.
