The Euro is currently trading above 1.1750, supported by expectations of interest rate cuts from the Fed, even though unemployment in the Eurozone rose to 6.3% in August. Recent U.S. economic data shows a weak job market, with the ADP Employment Change reporting a loss of 32,000 jobs in September. This puts increased pressure on the Fed to ease monetary policy. The U.S. government shutdown has halted the release of official job reports, like jobless payrolls, leading us to look at alternative indicators such as the Challenger Job Cuts. The chances of a rate cut in October are nearly certain at 99%, and the likelihood for December is also increasing. Although the ISM Manufacturing Index showed slight improvement, it still revealed a decline in employment. In contrast, inflation in the Eurozone rose to 2.2% in September.

Technical Overview

Looking at the EUR/USD technically, it shows a bullish trend but faces resistance at 1.1760 and 1.1795. Key support is found between 1.1710 and 1.1715, with lower targets at 1.1645 and 1.1610. The Challenger Job Cuts report, a crucial measure of the labor market, will be released on November 6, 2025, providing insights into company layoffs across industries. With a high chance of rate cuts from the Federal Reserve, we should expect continued weakness in the U.S. Dollar against the Euro. A simple strategy is to buy EUR/USD call options targeting the resistance levels of 1.1795 and 1.1820. These trades would be profitable if the euro breaks out of its current range in the next few weeks. This situation is reminiscent of late 2023 policy discussions, but the current data is much more definitive. September’s Challenger Job Cuts report released today revealed 90,300 announced layoffs, significantly confirming the negative trend from the ADP report. This is the highest number of layoffs since the tech-sector job losses in early 2024, leaving the Fed with limited options to keep rates steady. The ongoing U.S. government shutdown adds uncertainty, raising implied volatility in the options market. While this makes buying options pricier, it also indicates potential for significant price changes once official payroll data is finally released. We might look at strategies like a long straddle to take advantage of this increased volatility, regardless of the market direction.

Market Sentiment and Strategies

Despite the strong bearish outlook for the dollar, we must guard against surprises. Past experiences, like during the 2018 shutdown, show how quickly market sentiment can change with unexpected news. Purchasing some out-of-the-money EUR/USD puts near the 1.1710 support level could provide a cost-effective hedge against our main bullish positions. The market has nearly fully anticipated a rate cut for the Fed’s October meeting, with the CME FedWatch Tool indicating 99% odds. Thus, options with expirations in November and December 2025 will be the most relevant for trading this unfolding trend. Our main focus should be on the widening gap between a dovish Fed and a European Central Bank that seems to be holding steady. Create your live VT Markets account and start trading now.

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