EUR/USD Volatility Eases as Traders Await Potential US-EU Trade Deal

EUR/USD Volatility Eases as Traders Brace for US-EU Trade Agreement

Thursday, July 10 – The EUR/USD pair continues to trade in a narrow 1.170–1.175 range, as historical volatility declines and markets adopt a more cautious stance in anticipation of a potential US-EU trade deal.

Volatility Drops to Pre-Tariff Levels

According to recent data, EUR/USD 1-week historical volatility has dropped below 7.0, a stark contrast to levels above 20 in April and over 9.0 just weeks ago. This sharp decline highlights reduced trader appetite for aggressive positioning amid lingering trade tensions.

Sentiment Shift in Risk Reversals

Another sign of this shift is the 1-month 25-delta EUR/USD risk reversal, which has bounced back to neutral territory after dipping into negative in June. This move suggests that traders are scaling back bullish euro bets, reflecting a less aggressive stance in the face of tariff risks and trade uncertainty.

Potential US-EU Trade Deal Limits EUR/USD Breakout

Market chatter suggests that a US-EU trade agreement could soon materialize. Early drafts from the European Commission hint at asymmetrical tariffs, with a 10% baseline, signaling a move toward de-escalation. Unless the final terms deliver a major surprise, EUR/USD is expected to remain range-bound.

EUR/USD Technical Snapshot

• Range: 1.1700 – 1.1750
• Bias: Neutral to mildly bearish
• Volatility: Suppressed as traders await confirmation on trade deal developments