The Euro (EUR) is maintaining stability in the mid-1.15s, starting Monday’s North American session unchanged from Friday. The past week’s recovery was supported by the narrowing yield spreads that resulted from softened Federal Reserve expectations, with the European Central Bank’s stance remaining neutral.
The options market shows a positive bias towards the Euro, with three-month risk reversals again pricing in a premium for upward protection. A key focus this week is Tuesday’s ZEW sentiment survey, with forecasts suggesting improvements in the current situation and expectations indices.
Last week’s recovery saw a rebound from support levels below 1.15, while the Relative Strength Index bottomed slightly above 30, indicating oversold conditions. Limited resistance is anticipated around the 50-day moving average of 1.1665, with expectations of a near-term range between 1.1520 and 1.1620.
The Euro is holding steady in the mid-1.15s, consolidating the recovery we saw last week after a significant bounce off support below 1.15. Momentum indicators had become oversold, and this current stability suggests a temporary floor may be forming. This price action creates a defined range for traders to work with in the coming weeks.
This recent strength is fundamentally driven by shifting interest rate expectations, which have caused yield spreads to narrow in the Euro’s favor. Markets are softening their outlook on the U.S. Federal Reserve’s path, while expectations for the European Central Bank remain decidedly neutral. This dynamic makes holding Euros relatively more attractive than it was a few weeks ago.
To support this view, we’ve seen the spread between the U.S. 10-year Treasury and the German 10-year Bund tighten from over 180 basis points to around 162 basis points in early November 2025. CME Group’s FedWatch Tool shows the probability of another Fed rate hike before year-end has dropped from nearly 60% to just under 40% in the last ten days. These statistics confirm the market is dialing back its hawkish Fed bets.
The derivatives market is also signaling a bullish shift, as three-month risk reversals once again price a premium for protection against Euro upside. This means traders are willing to pay more for calls than puts, indicating a greater fear of missing a rally than of being caught in a decline. We saw a similar dynamic in the options market back in the first quarter of 2024, which occurred just before the Euro gained two cents over the following month.
Given this, we see the pair trading in a near-term range between 1.1520 and 1.1620, with resistance further up at the 50-day moving average of 1.1665. Strategies like selling puts with a strike price near the 1.1500 support level could be considered to collect premium while the market consolidates. Alternatively, bull call spreads could offer a defined-risk way to position for a potential breakout towards resistance, especially with Tuesday’s German ZEW sentiment survey acting as a near-term catalyst.
