EUR/USD Market Overview EUR/USD is steady around 1.1480, recovering after five days of losses. This stabilization follows a shift in market predictions regarding interest rate cuts, prompted by positive US economic data showing strong employment and robust service sector activity. The odds of a 25-basis-point rate cut by the Federal Reserve in December decreased from 68% to 62% after the strong job figures. Meanwhile, the US Dollar Index held steady at 100.18. In Europe, the economy is picking up steam, driven by significant growth in Spain and Germany, as indicated by the HCOB Eurozone Composite PMI. In October, US services sector activity increased, with the Services PMI reaching 52.4. The ADP report also showed a rise in private payrolls by 42,000, exceeding expectations. These positive reports lowered the chances for immediate rate cuts. EUR/USD Trading Dynamics The EUR/USD pair is facing pressure, remaining below the 1.1500 level. Important support levels are at 1.1450 and 1.1400. If these levels are breached, further declines could follow. A move above 1.1500 could push the pair toward 1.1550 and 1.1600. The Euro is important in the global market, with trade volumes and economic indicators like inflation and trade balance playing key roles in its direction. A familiar pattern is developing, although the economic fundamentals have changed since late 2023, when EUR/USD was near 1.1500. Today, the pair is struggling to stay above 1.0950, showing a different economic climate. The market is now more focused on the timing and extent of Federal Reserve rate cuts. Back then, strong ADP and ISM data led traders to reduce their bets on rate cuts. In contrast, the latest Non-Farm Payrolls report for October 2025 showed only 130,000 jobs added, below expectations, raising speculation of a softer stance from the Federal Reserve. The CME FedWatch Tool now indicates a 45% chance of a rate cut by January 2026, signaling a shift in sentiment. Inflation Dynamics Inflation trends have changed since we saw the ISM Prices Paid index peak at 70. The latest US CPI data from October 2025 shows core inflation remains stubbornly high at 2.8%, well above the Fed’s target. Meanwhile, the Eurozone’s HICP has dropped to 2.4%, providing the European Central Bank with more room to ease policy if necessary. The unexpected strength in the German economy from late 2023 has not persisted. The latest ZEW Economic Sentiment survey for Germany has plummeted to its lowest point in over a year, raising worries about industrial output and a possible winter recession. This weakness is putting pressure on the Euro, sharply contrasting previous optimism. Given this situation, we should think about buying put options on EUR/USD to safeguard against a further decline toward the 1.0800 level. This strategy lets us benefit from negative movements while limiting risk to the premium paid, a sensible approach as central bank policy shifts. Volatility is likely to increase, and having options can provide an advantage. Additionally, ongoing US-EU trade discussions regarding carbon tariffs may create uncertainty for the Euro. Unlike past tariff issues discussed before the Supreme Court, this debate directly affects core European industries. Any sign of stalled negotiations could lead to another drop in the pair. Create your live VT Markets account and start trading now.

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