The September 2025 Euro FX futures contract (E6U25) is currently trading around 1.1440 after topping out near 1.19 the 1st of July. This decline reflects a broader market repricing, driven by evolving expectations around monetary policy from the Federal Reserve and the European Central Bank, softening Eurozone growth prospects, and a technical backdrop that has turned decisively bearish. Coupled with shifts in sentiment and options market positioning, the current setup presents an opportunity to initiate a tactical short with an attractive risk-reward profile.
Fundamental Analysis – Central banks and diverging momentums
Monetary policies on either side of the Atlantic appear to diverge. The Federal Reserve has kept its federal funds rate steady in the 4.25%–4.50% range since December 2024, resisting political pressure to ease. In contrast, the European Central Bank has gradually lowered its deposit rate from 4% to 2.00% since mid-2024 and maintained that level in July, considering inflation is now back to its 2% target. This has widened the yield differential in favor of the U.S. dollar.
Forward guidance from both central banks suggests a cautious stance. The Fed’s June 2025 dot plot anticipates a modest rate cut by year-end, though FOMC members remain divided. Meanwhile, the ECB projects subdued inflation and modest growth, implying no urgency for further easing.
On the macro front, U.S. GDP rebounded sharply in Q2 (+3.0% annualized), though driven largely by a collapse in imports. Domestic demand and job creation have slowed, and tariffs may push core inflation above 3% again. In the eurozone, Q2 GDP barely expanded (+0.1%), with uneven performance across member states. Inflation is stable at 2%, with core pressures easing. Altogether, the dollar retains a slight edge amid firmer data and a more hawkish Fed.
Technical Outlook – Bearish shift with volume confirmation
From a technical standpoint, the E6U25 contract has clearly broken down from its prior range. The area around 1.1775, which previously served as a high-volume node and resistance, was breached with strong downside momentum. The price action has since carved out a clean pattern of lower highs and lower lows, and volume has notably increased on bearish sessions, confirming the shift in control.
The current structure suggests a vacuum between 1.1775 and 1.1500, with only minor resistance expected around 1.1545, where some residual volume lies. There is little to no support before the 1.1280–1.1300 area, which aligns with a lower volume shelf on the visible range volume profile (VRVP). If price retraces to retest the 1.1525–1.1575 zone, that area is likely to act as a tactical selling opportunity before potentially resuming the downtrend.
Sentiment Analysis
CFTC data as of late July shows asset managers holding a substantial long position in EUR/USD, though these are beginning to unwind. The positioning profile leaves the euro vulnerable to further long liquidation if the selloff deepens.
Retail sentiment reinforces this view, as most retail traders are caught on the wrong side of the move. Open interest is stable but elevated, and trading activity has begun to rise slightly, hinting at retail dip-buying that may lack conviction. No major retail capitulation has occurred yet.
Broad market volatility remains subdued, and EUR/USD-specific indicators show a similar picture. The CME CVOL Index for EUR/USD remains around 8, a level considered moderately low by historical standards, reflecting a calm, non-disruptive market environment that favors technical trading, including respect for resistance levels and trend-following strategies.
Options Analysis
According to the CME FX Options Vol Converter, the landscape for EUR/USD still exhibits a modest downside bias. Risk reversals across one to three months tenors remain slightly negative, reflecting moderate demand for euro puts.
In listed markets, CME data for August expiries shows notable open interest concentration in puts at the 1.1450 and 1.1500 strikes, with deltas indicating directional positioning rather than purely hedging activity. On the call side, interest is more dispersed but visible above 1.1650, particularly at 1.1700 and 1.1750, suggesting some appetite for upside. However, the deltas are lower.
Trade Idea
A tactical short trade is favored in the 1.1525–1.1575 zone, which coincides with a potential pullback level within a well-established downtrend. This level also aligns with a minor volume shelf, providing a natural resistance area where sellers are likely to re-enter the market.
The suggested stop level is 1.1650, just above the recent short-term swing highs, which would invalidate the current bearish structure. The target lies around 1.1290, near the next major support zone and volume cluster.
Final thoughts
The EUR/USD rally in May/June was primarily fueled by expectations of synchronized easing and softer U.S. data. However, the Fed’s reluctance to commit to a cut, combined with a relatively more aggressive ECB stance, has shifted the narrative back in favor of the dollar. With asset managers showing signs of willingness to further unwind their exposure, combined with sentiment indicators pointing to complacency, a deeper retracement remains plausible.
The technical breakdown, lack of implied vol support for a rebound, and fresh open interest on euro puts collectively argue for tactical downside continuation. The proposed trade seeks to capture that move with a controlled stop and a realistic price target. Unless EUR/USD can reclaim the 1.1650–1.1700 zone decisively, the path of least resistance remains downward.
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When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: tradingview.com/cme/.
This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
Fundamental Analysis – Central banks and diverging momentums
Monetary policies on either side of the Atlantic appear to diverge. The Federal Reserve has kept its federal funds rate steady in the 4.25%–4.50% range since December 2024, resisting political pressure to ease. In contrast, the European Central Bank has gradually lowered its deposit rate from 4% to 2.00% since mid-2024 and maintained that level in July, considering inflation is now back to its 2% target. This has widened the yield differential in favor of the U.S. dollar.
Forward guidance from both central banks suggests a cautious stance. The Fed’s June 2025 dot plot anticipates a modest rate cut by year-end, though FOMC members remain divided. Meanwhile, the ECB projects subdued inflation and modest growth, implying no urgency for further easing.
On the macro front, U.S. GDP rebounded sharply in Q2 (+3.0% annualized), though driven largely by a collapse in imports. Domestic demand and job creation have slowed, and tariffs may push core inflation above 3% again. In the eurozone, Q2 GDP barely expanded (+0.1%), with uneven performance across member states. Inflation is stable at 2%, with core pressures easing. Altogether, the dollar retains a slight edge amid firmer data and a more hawkish Fed.
Technical Outlook – Bearish shift with volume confirmation
From a technical standpoint, the E6U25 contract has clearly broken down from its prior range. The area around 1.1775, which previously served as a high-volume node and resistance, was breached with strong downside momentum. The price action has since carved out a clean pattern of lower highs and lower lows, and volume has notably increased on bearish sessions, confirming the shift in control.
The current structure suggests a vacuum between 1.1775 and 1.1500, with only minor resistance expected around 1.1545, where some residual volume lies. There is little to no support before the 1.1280–1.1300 area, which aligns with a lower volume shelf on the visible range volume profile (VRVP). If price retraces to retest the 1.1525–1.1575 zone, that area is likely to act as a tactical selling opportunity before potentially resuming the downtrend.
Sentiment Analysis
CFTC data as of late July shows asset managers holding a substantial long position in EUR/USD, though these are beginning to unwind. The positioning profile leaves the euro vulnerable to further long liquidation if the selloff deepens.
Retail sentiment reinforces this view, as most retail traders are caught on the wrong side of the move. Open interest is stable but elevated, and trading activity has begun to rise slightly, hinting at retail dip-buying that may lack conviction. No major retail capitulation has occurred yet.
Broad market volatility remains subdued, and EUR/USD-specific indicators show a similar picture. The CME CVOL Index for EUR/USD remains around 8, a level considered moderately low by historical standards, reflecting a calm, non-disruptive market environment that favors technical trading, including respect for resistance levels and trend-following strategies.
Options Analysis
According to the CME FX Options Vol Converter, the landscape for EUR/USD still exhibits a modest downside bias. Risk reversals across one to three months tenors remain slightly negative, reflecting moderate demand for euro puts.
In listed markets, CME data for August expiries shows notable open interest concentration in puts at the 1.1450 and 1.1500 strikes, with deltas indicating directional positioning rather than purely hedging activity. On the call side, interest is more dispersed but visible above 1.1650, particularly at 1.1700 and 1.1750, suggesting some appetite for upside. However, the deltas are lower.
Trade Idea
A tactical short trade is favored in the 1.1525–1.1575 zone, which coincides with a potential pullback level within a well-established downtrend. This level also aligns with a minor volume shelf, providing a natural resistance area where sellers are likely to re-enter the market.
The suggested stop level is 1.1650, just above the recent short-term swing highs, which would invalidate the current bearish structure. The target lies around 1.1290, near the next major support zone and volume cluster.
Final thoughts
The EUR/USD rally in May/June was primarily fueled by expectations of synchronized easing and softer U.S. data. However, the Fed’s reluctance to commit to a cut, combined with a relatively more aggressive ECB stance, has shifted the narrative back in favor of the dollar. With asset managers showing signs of willingness to further unwind their exposure, combined with sentiment indicators pointing to complacency, a deeper retracement remains plausible.
The technical breakdown, lack of implied vol support for a rebound, and fresh open interest on euro puts collectively argue for tactical downside continuation. The proposed trade seeks to capture that move with a controlled stop and a realistic price target. Unless EUR/USD can reclaim the 1.1650–1.1700 zone decisively, the path of least resistance remains downward.
---
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: tradingview.com/cme/.
This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
Founder of Satelys Ltd, which specializes in developing automated trading systems for the FX market, and a consultant for CME Group.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Founder of Satelys Ltd, which specializes in developing automated trading systems for the FX market, and a consultant for CME Group.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.