The EUR/USD pair experienced some buying interest during the Asian session on Thursday, recovering from a previous dip near the resistance zone of 1.1375-1.1380. Despite the uptrend, the pair remains within a familiar range above the 1.1300 mark, amidst ongoing market uncertainties.

Friedrich Merz’s election as Germany’s chancellor eases economic concerns for the Eurozone, providing support for the euro. Concurrently, the US Dollar has failed to gain traction despite the Federal Reserve’s hawkish stance, owing to uncertainties surrounding US trade tariffs raised by Fed Chair Jerome Powell.

Impact Of Us Trade Policy

US trade policy ambiguities, amplified by Trump’s shifting stance and potential EU tariffs on Boeing, discourage assertive market participation. Traders are expected to closely monitor the US Weekly Initial Jobless Claims data and Trump’s upcoming press conference, which may impact USD pricing dynamics.

According to current currency percentage changes, the US Dollar showed strength against the Swiss Franc but faced declines against other major currencies. These fluctuations reflect the complex interplay of market factors, emphasizing the importance of closely following economic and political developments.

While the EUR/USD has pushed upward during the Asian session, this movement can largely be seen as a temporary reaction to earlier selling, rather than a firm breakout. The pair’s attempt to find direction near the 1.1375 mark didn’t fully convince, though the bounce suggests short-term support still holds above 1.1300. We should note that price action remains tightly contained, and that’s telling in itself—volatility is compressed, which often precedes sharper directional moves.

With Merz taking office in Germany, there’s now a clearer fiscal direction in one of the Eurozone’s core economies. Merz is widely seen as fiscally conservative, and his leadership brings expectations of more predictable policy, particularly in regard to Euro-area stimulus spending. That perception has lent the euro a level of steadiness that contrasts with recent swings in the dollar.

Across the Atlantic, Powell’s recent remarks about US trade tariffs haven’t done much to help the greenback. The Federal Reserve has maintained its hawkish tone, but without accompanying policy moves or consensus about the next rate step, traders seem hesitant. There’s still a high level of inconsistency in message versus action. Add to that the unpredictability created by Trump’s posture towards EU trade—the possibility of added tariffs on Boeing hangs in the background—and dollar sentiment becomes muddled.

Market Outlook And Strategies

We’ve also seen some disparity in the dollar’s performance, registering gains against the franc but losing ground elsewhere. That uneven strength reinforces the lack of directional conviction, and here is where derivatives traders need to pay sharp attention.

We are closely watching initial jobless claims out of the US and, more notably, Trump’s scheduled address. Anything surprising in the data or speech could disrupt the current hold pattern. If the job data underwhelms or if rhetoric around tariffs escalates, expect a reaction that overrides technical levels in the short run.

For now, repositioning remains light and sporadic. Traders are reluctant to commit big volume until more clarity emerges from macro news or a clean break above— or below—current boundaries. It’s wise to stay focused on comparative strength indicators and pricing around shorter expiries, where premium adjustments can signal shifts in sentiment before spot moves.

In the absence of strong signals from macro policy, expect underlying options market behaviour to carry extra weight. The skew in EUR/USD calls has started to edge higher, suggesting increasing demand for upside protection. We interpret that as cautious optimism, but not full-blown confidence. Risk premia continue to be unevenly distributed across maturities, giving seasoned participants room to take advantage of mispricings—especially around event dates.

We’ve also noticed a thinning of forward curve pricing around near-term tenors, suggesting that liquidity is being withheld while clarity is pending. In practice, this limits strong directional bets and favours strategies that lean on volatility, rather than outright moves.

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