The Euro (EUR) is trading steadily in the mid to upper 1.15s, continuing the bullish momentum from the previous week. Last week’s comments from the ECB’s Schnabel maintained a neutral stance but indicated concerns about rising inflation risks.
Euro Area Rate Expectations Rise
The euro area rate expectations rose, with year-end 2026 rates reaching a new local high of 2%. The interest rate differentials are moving higher again, providing a fundamental boost to the EUR.
The EUR is cautiously pushing past recent recovery levels, aiming to exceed 1.16 again. The recovery in the RSI confirms the spot moves, maintaining a neutral position around 50, with near-term resistance expected ahead of the 50-day moving average at 1.1662.
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We’re seeing the Euro quietly push into the mid/upper 1.15s, building on last week’s bullish momentum. The European Central Bank’s growing concerns about inflation are fueling this move. This is nudging expectations for interest rate hikes higher into 2026.
Eurozone Inflation and Investment Opportunities
Eurostat’s latest flash estimate showed October’s headline inflation for the Eurozone at 2.5%, slightly above forecasts and reinforcing the ECB’s hawkish tone. We saw a similar stubbornness back in late 2023 when inflation proved difficult to bring down below the 2.5% mark. These persistent price pressures suggest the interest rate differential will continue to favor the Euro over the US Dollar.
This creates an opportunity for options traders looking at the coming weeks. Given the expected range between 1.1550 and 1.1650, we should consider strategies that benefit from this contained upward move. Selling out-of-the-money puts with strike prices below 1.1500 could be a viable way to collect premium while the pair consolidates higher.
This view is strengthened by recent data from the US, where the October CPI report last week showed core inflation cooling to 2.8%, its lowest level in over a year. The political uncertainty surrounding the US government funding vote is also weighing on the dollar. This divergence in economic data and central bank sentiment supports a cautiously bullish stance on the EUR/USD pair.
From a technical standpoint, the Relative Strength Index is now around the 50 mark, confirming the shift from bearish to neutral momentum. We are watching the 50-day moving average at 1.1662 as the next key resistance level. A bull call spread, buying a call at 1.1600 and selling one at 1.1650, could capture potential upside while defining risk ahead of that ceiling.
