Euro Hits One-Month High as Options Show Fresh Demand Emerging
The euro rose to its highest since late October against the dollar, with options pricing and positioning showing the rally has potential to continue.
Mounting pressure on the greenback and a fresh set of euro-friendly drivers lifted the common currency 0.3% on Wednesday to $1.1662. It’s heading for an eighth day of gains, the longest streak in five months.
Options into year-end show bullish sentiment is the strongest in two weeks, while volumes jumped to the highest in nearly two months on Tuesday as demand for euro calls comfortably outpaced puts.
The dollar weakness is being driven by wagers President Donald Trump ’s likely to head the Federal Reserve will move to lower rates. National Economic Council Director Kevin Hassett is seen as dovish, and with a December rate cut already largely priced in, the prospect of a more accommodative Fed is adding pressure on the dollar.
Euro Bulls Play Tactics Before 2026 Brings Endgame: Trader Talk
Meanwhile, from the European side, softer energy prices have pushed the euro area’s terms of trade to the best levels of the year, while hedging costs have fallen for eurozone investors looking to insure against FX losses on US assets.
Even a “modest increase in hedge ratios can lead to quite a supply of dollars,” Chris Turner, head of FX strategy at ING, wrote. “Over the next couple of weeks, we should probably look out for buy-side dollar selling at key FX fixes.”
Traders who follow technical indicators flagged Bollinger Bands near levels that have historically preceded large moves in the euro. Seasonal patterns also point higher: December has traditionally been the euro’s best month of the year since its introduction.
Recent trading confirms “a bullish shift in the short-term trend,” said Roberto Cobo Garcia , head of G-10 currency strategy at BBVA SA, who sees a high probability of the pair continuing this advance. The price action has established a so-called higher-highs, higher-lows structure, he said.
