The EURUSD is reaching new session highs, moving toward upside targets of 1.1769 and 1.17874, the highs from late July. Earlier, the pair fell briefly below 1.1730-1.1741 but regained momentum in New York hours, breaking above the zone and consolidating.
The 1.1730-1.1741 area now serves as near-term support. If the pair falls back below this range, it might trigger some profit-taking, but staying above encourages further growth towards July highs.
Reduced US Yields Influence
Reduced US yields have influenced the dollar’s decline. The flatter yield curve also assists this trend as inflation worries lessen.
* The 2-year yield is 3.494%, down 1.2 basis points.
* The 5-year yield is 3.567%, down 1.5 basis points.
* The 10-year yield is 4.043%, declining by 4.2 basis points.
* The 30-year yield is 4.687%, down 8.7 basis points.
The 10-year yield hasn’t been this low since April 7, with the 30-year yield at its lowest since May 1.
We have seen this pattern before, where falling U.S. yields and a softer dollar push the EUR/USD higher. Looking back, we saw similar price action in the summer of 2023 when the pair was trading above 1.1700. As of today, September 8, 2025, the currency pair is much lower, hovering around 1.0850, showing how the broader economic landscape has shifted.
The environment today is quite different, even with U.S. yields falling. The 10-year yield is currently sitting near 3.50%, well below the 4.04% level from that period in 2023. This drop is supported by the latest August 2025 inflation report, which showed year-over-year CPI at 2.5%, keeping pressure on the Federal Reserve to continue its easing cycle.
Impact of Central Bank Divergence
However, the euro’s weakness comes from Europe itself, as the European Central Bank is signaling a more aggressive rate-cutting path amid sluggish growth. Recent German factory orders for July 2025 showed a surprising decline, adding to concerns about the Eurozone economy. This divergence between central bank expectations is capping the EUR/USD’s potential, unlike the situation we saw a couple of years ago.
For derivative traders, this suggests a more range-bound market than a strong directional trend. Implied volatility on one-month EUR/USD options has fallen to just 5.5%, its lowest point in over a year, making it expensive to buy options for big breakouts. This environment favors strategies that benefit from time decay and limited price movement.
Therefore, traders might consider selling out-of-the-money options to collect premium. A short strangle, involving the sale of a call option with a strike price near 1.1000 and a put option with a strike near 1.0700, could be an effective strategy for the coming weeks. This approach profits as long as the EUR/USD stays between these levels.
For those anticipating a slow grind higher based on further U.S. weakness, buying call spreads is a defined-risk alternative. For instance, one could buy the 1.0900 strike call and sell the 1.1000 strike call for the October expiry. This limits the upfront cost while still offering upside potential if the dollar’s downtrend accelerates.
