The EUR/USD pair dropped more as strong US jobs data boosted demand for the Dollar. The current rate is 1.1652. Producer prices in the Eurozone have gone down, indicating that the European Central Bank’s easing cycle may be over. Traders are leaning toward the Dollar ahead of the US Nonfarm Payrolls report, driven by solid US job numbers and lower-than-expected jobless claims. The US Dollar Index (DXY) climbed 0.19% to 98.91, exceeding its 200-day SMA of 98.87. This could mean it might rise above 99.00 soon. In the US, Treasury Secretary Scott Bessent has called for interest rate cuts to boost growth. Meanwhile, Eurozone data indicates rising consumer confidence, but economic sentiment dipped due to weaker numbers from service providers, retailers, and consumers.

Germany’s Factory Orders and US Trade Deficit

In Germany, factory orders for November surpassed expectations with a jump of 5.6%. The US trade deficit shrank to $29.4 billion, mainly due to lower imports. We also tracked inflation expectations and unemployment rates. The technical outlook for EUR/USD looks weaker, with initial support at the 50-day SMA of 1.1640 and further support and resistance levels identified. We saw a similar trend last year in 2025, where a strong US labor market created a significant gap in policies between the Federal Reserve and the European Central Bank. This divergence is pushing the Dollar higher and putting pressure on the EUR/USD exchange rate. Traders should expect this trend to continue in the near future. The US economy is demonstrating strong growth, which supports the Dollar. The latest December jobs report showed the economy added 216,000 jobs, exceeding forecasts and keeping the unemployment rate low at 3.7%. This solid data reduces the chances of the Federal Reserve quickly cutting interest rates. On the other hand, the Eurozone’s situation resembles what we saw in 2025. Producer prices are weak, with the year-over-year Producer Price Index showing a drop of 6.8%, indicating ongoing disinflation. This limits the European Central Bank’s reasons to tighten policy, keeping the Euro in check. For traders of derivatives, this situation indicates that buying put options on the EUR/USD might be wise to take advantage of further declines. This approach offers defined risk while also allowing exposure to the bearish trend. Implied volatility is expected to rise ahead of the upcoming US Nonfarm Payrolls report, making this an important time to position.

Technical Analysis and Trading Strategies

The EUR/USD pair is once again testing its 200-day Simple Moving Average, a crucial technical level that we saw last year. If it breaks below this support decisively, it could lead to more selling, similar to the drop toward 1.1561 we observed in 2025. Traders should keep a close eye on this level for confirmation of continuing trends. With expected increased market movement around the upcoming US data releases, even those with a neutral outlook should think about strategies that benefit from volatility. A long straddle, which involves buying both a call and a put option at the same strike price, could be an effective strategy. This allows for profit from significant price movements in either direction. Create your live VT Markets account and start trading now.

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