The euro against the US dollar is approaching the 1.2 mark. When will it reach a turning point?

Recently, the euro has risen strongly, approaching the key resistance level of 1.20. This price level has been a target for strategists and traders for several months. In the past three days, the euro has accumulated a 1.6% increase against the US dollar and is currently nearing $1.17. According to data from the Depository Trust & Clearing Corporation (DTCC), this month, the nominal trading volume of bullish euro options is most concentrated in this area, making $1.17 a potential important turning point. The market is generally optimistic about its future trend, with several institutions predicting that the euro will rise to $1.20 against the US dollar by the end of the year or within the next 12 months. The euro last reached the level of $1.20 four years ago. However, if the resistance level of $1.17 is not broken, it may trigger a wave of profit-taking or capital flow rebalancing. As of the time of writing, the euro to US dollar exchange rate is fluctuating around $1.1608. Approaching Key Resistance Level, Market Confidence in Euro Strengthens Currently, market analysts are generally optimistic about the future trend of the euro. HSBC strategists raised their year-end forecast for the euro to US dollar to $1.20 last week, up from $1.15, as they expect the dollar to generally weaken in the coming months. Danske Bank analysts reiterated their prediction last month that the euro will reach $1.20 in the next 12 months, while Deutsche Bank strategists expect the euro to rise to that level before December this year. On Tuesday, the euro to US dollar briefly rose to $1.1641, reaching the highest intraday level since October 2021. This was mainly due to the easing of geopolitical tensions and softening US economic data. The ceasefire announced by Iran and Israel, along with cautious remarks from Federal Reserve Chairman Jerome Powell, also supported the euro's latest surge. Currently, the currency market expects the Federal Reserve to cut rates by a cumulative 59 basis points by the end of the year, while the European Central Bank is only expected to cut by 25 basis points. European Central Bank Chief Economist Philip Lane stated on Tuesday that although there are still some price pressures, the process of bringing inflation back to 2% is nearing completion. Data from the options market also indicates that investors remain confident in the euro's strength. The risk reversal indicator (which reflects the price difference between bullish and bearish options) saw its fourth largest increase in over three years on Tuesday, signaling a decisive return of bullish sentiment. Previously, the dollar had received temporary support due to rising oil prices. From a broader perspective, the outlook for the euro remains optimistic. DTCC data shows that over 60% of the nominal trading volume of euro options this month is concentrated in bullish options.