Bullish sentiment is strong! The euro against the US dollar is heading towards a four-year high, targeting the key psychological level of 1.20
The euro to US dollar exchange rate is expected to reach a four-year high, approaching 1.20 USD. Recently, the euro has risen slightly to 1.1791 USD, an increase of 0.3%. If it breaks through 1.1829 USD, it will reach its highest level since September 2021. The market is focused on the Federal Reserve's potential interest rate cuts, which have enhanced the euro's appeal, leading to a continued rise in demand for bullish options
According to Zhitong Finance APP, the euro to US dollar exchange rate has slightly risen, heading towards a four-year high. On Tuesday, the euro exchange rate reached its highest level since July 3, with an increase of up to 0.3%, reaching 1.1791 US dollars. Since 2025, the currency exchange rate has risen nearly 14%, marking the best nine-month performance on record. If it can break through the high of 1.1829 US dollars set in July, it will reach the highest level since September 2021. Options trading indicates that this could lay the groundwork for a push towards the closely watched 1.20 US dollar mark.
Traders are closely monitoring the potential interest rate cuts that the Federal Reserve may take this week, which would lead to a significant divergence between the euro and European Central Bank interest rates. Demand has been supported by expectations that the European Central Bank will not further lower rates as the Federal Reserve is about to embark on an easing policy. The expectation that the Federal Reserve may cut rates by 25 basis points three times by the end of the year has also enhanced the euro's attractiveness.
The one-week risk reversal indicator (used to measure positions and market sentiment) shows that since the European Central Bank hinted that it has ended its easing policy, investor demand for options to buy euros has continued to rise. Data provided by the American Depositary Trust and Clearing Corporation also confirms this: more than two-thirds of the euro to US dollar options traded on Monday were bullish bets, with particularly strong demand for options with strike prices above 1.20 US dollars.
According to forex traders familiar with capital flows, hedge funds that previously sought bullish opportunities through complex structures are now turning to simply betting on revenue growth, indicating that investor confidence is continuously strengthening.
According to strategists at Morgan Stanley, the tactical position of the dollar is neutral before the Federal Reserve makes its decision. This means that if policymakers confirm that the market's expectation of three rate cuts this year is correct, the euro still has room for further appreciation
