The Euro is holding steady near a five-week high against the US Dollar at 1.1680, even though Eurozone Retail Sales have stagnated. The expected growth of 0.1% did not materialize. A weaker US Dollar is helping the Euro, especially with predictions of a 25-basis point cut by the Federal Reserve in their upcoming meeting. In October, Eurozone Retail Sales showed no growth, but they did increase by 1.5% year-on-year, beating the expected 1.4% and up from 1.0% in September. The Euro also received a boost from strong HCOB Services PMI results, reflecting a healthy service sector.

US Economic Concerns

On the other hand, recent US economic data shows a slight decline in the job market, raising speculation about possible Federal Reserve rate cuts. The ADP Employment Change report revealed an unexpected drop of 32,000 jobs, heightening concerns over the US labor market. Weekly US Jobless Claims are expected to rise to 220,000 from 216,000. Thursday’s Eurozone data aligned with positive market trends, as service PMI figures for Germany and France exceeded initial expectations. Despite these developments, the EUR/USD pair faces resistance around 1.1675, with technical analysis suggesting potential gains towards recent highs. The Euro’s future looks strong, driven by the differing paths of the Fed and the ECB. There is a clear gap in central bank policies, with markets estimating over a 90% chance of a Federal Reserve rate cut next week. In contrast, the European Central Bank is likely to keep its deposit rate steady at 4.00%, a level it has maintained since late 2023. This situation heavily favors a long position in the Euro against the US Dollar.

Opportunities And Risks

Given this outlook, we should consider buying EUR/USD call options with strike prices above the current resistance at 1.1680. This strategy allows us to benefit from moves towards 1.1730 or higher while limiting our risk. The upcoming Friday’s Personal Consumption Expenditures (PCE) data is a key event to watch, as it will be crucial for the Fed’s decision-making. The anticipated increase in Jobless Claims to 220,000 continues a trend of softening in the labor market observed throughout 2025. Claims were consistently below 215,000 in the latter half of 2024, so this ongoing rise supports the case for a Federal Reserve easing. A number significantly below consensus today could lead to a temporary surge in the dollar, but the overall weakening trend seems likely to continue. Conversely, the Euro’s strength is buoyed by solid economic data, including a recent upward adjustment to the HCOB Services PMI. Considering the recession fears of 2023, the current strength of the Eurozone economy gives the ECB little reason to consider rate cuts. President Lagarde’s recent positive comments reinforce this hawkish position and highlight the policy split. We can expect increased volatility surrounding today’s Jobless Claims release, particularly after Friday’s PCE report. Using options strategies like bull call spreads can effectively position for potential gains while managing costs and minimizing the risk of a sudden downturn. This approach allows us to remain in the trade through the upcoming Fed and ECB meetings next week with a defined risk profile. Create your live VT Markets account and start trading now.

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