The Euro has dropped below 1.1500 against the US Dollar, reversing earlier gains due to a cautious market and expectations about the Federal Reserve’s interest rates. Over the past five trading days, EUR/USD has fallen by about 1.5%, with the US Dollar getting stronger because of the Fed’s hawkish stance and negative market sentiment.

US Manufacturing Sector and Fed Officials

Despite ongoing contraction in the US manufacturing sector, the US Dollar remains strong. The ISM Manufacturing PMI for October marks its eighth straight monthly decline. Federal Reserve officials are split on future policy, with some urging caution due to high inflation, while others believe current measures are too tight. In Europe, ECB President Christine Lagarde’s upcoming speech is not expected to offer new insights into monetary policy. Key US data is missing due to a government shutdown, but markets are looking forward to Wednesday’s ADP Employment report. Futures have lowered the chance of a December rate cut to 67% from 90%, which supports US Treasury yields and strengthens the US Dollar. EUR/USD is facing resistance below 1.1530 after failing to stabilize above this mark. If it remains below 1.1500, the pair could drop to 1.1450. On the other hand, if it breaks through 1.1500, attention may shift to 1.1530 and higher. As of November 4, 2025, the EUR/USD pair is under significant pressure, trading near 1.0750. The current market sentiment is risk-averse, leading investors to lean towards the safety of the US Dollar. This trend suggests that any rises in the Euro may only present temporary selling opportunities.

Driving Factors and Technical Levels

A major factor behind this is the growing difference in monetary policy between the European Central Bank (ECB) and the US Federal Reserve (Fed). The latest flash estimates for October 2025 show Eurozone inflation has cooled to 2.4%, putting more pressure on the ECB to consider rate cuts early next year. In contrast, US core inflation stays stubbornly above 3%, giving the Fed a reason to stick with its “higher for longer” approach. We are looking ahead to this Friday’s US Non-Farm Payrolls report for more insights into the economy’s strength. The October 2025 report showed a resilient labor market, adding a solid 170,000 jobs, which supports a hawkish Fed. A strong reading here could reinforce dollar strength and push EUR/USD lower. For options traders, this situation is raising implied volatility in EUR/USD contracts. The uncertainty around future central bank actions means markets are betting on larger price swings. This suggests that strategies focusing on volatility, rather than a specific direction, might be worthwhile in the coming weeks. A crucial technical level to watch is the 1.0700 support area. A solid break below this psychological mark could lead to year-to-date lows around 1.0630, observed in September 2025. To shift the current bearish outlook, we would need to see a convincing move back above the resistance at 1.0820. Create your live VT Markets account and start trading now.

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