The EUR/USD pair has hit its highest level since October 3rd, mainly due to a weakening US Dollar after weaker-than-expected Jobless Claims data. The latest Initial Jobless Claims stand at 236,000, exceeding forecasts and suggesting a softening labor market, which negatively impacts the Dollar. The Euro is gaining strength against the US Dollar, reaching approximately 1.1748. At the same time, the US Dollar Index is slipping to 98.25, its lowest since October 17th, influenced by the Federal Reserve’s cautious approach that impacts overall Dollar sentiment.

Jobless Claims Impact

Recent data shows the 4-week moving average has increased to 216,750, while Continuing Jobless Claims have fallen to 1.838 million. These results align with the Federal Reserve’s recent statement highlighting risks to employment, contributing to a 25 basis point interest rate cut. Currency movements reflect these changes. The heat map indicates the US Dollar has shown varying percentage changes against major currencies, being strongest against the Australian Dollar. Meanwhile, the Euro rose by 0.46% against the USD, continuing its upward trend amid weak US economic data. With the EUR/USD at 1.1748, the current trend indicates continued weakness in the US Dollar. We may want to consider positioning for further gains in the Euro as the market processes the Fed’s recent interest rate cut, reflecting a clear shift in momentum against the Dollar. The latest jobless claims of 236,000 are significant, pushing the 4-week moving average above 215,000. A similar trend occurred in late 2023 when rising claims preceded a slowdown in hiring in early 2024. This historical trend suggests that the current cooling labor market might continue, potentially weighing on the Dollar in the coming weeks.

Market Forecast

Attention now turns to the upcoming Non-Farm Payrolls (NFP) report. Current market chatter suggests a headline number below 120,000, marking the lowest reading in more than a year and likely reinforcing the Fed’s cautious stance. A weak NFP report would likely push the EUR/USD toward the 1.1850 resistance level. For those trading derivatives, this environment favors buying call options on the EUR/USD. Although increased market volatility makes options more expensive, it also allows for potential profits from sharp upward moves while managing risk. There is growing interest in the January 2026 and February 2026 contracts with strike prices at 1.1800 and 1.1900. Additionally, the interest rate futures market is presenting an intriguing picture. The latest data from the CME FedWatch Tool indicates a 65% probability of another 25 basis point cut by the Fed’s March 2026 meeting. This expectation of further rate cuts may hinder any potential recovery of the Dollar in the near term. Beyond the Euro, the Dollar’s overall weakness creates opportunities against other currencies, with the exception of the Australian Dollar, which faces its own challenges. Given the Swiss Franc’s notable strength against the Dollar today, trading USD/CHF puts could be an effective strategy. We should remain aware that the Fed has clearly expressed concerns about the job market, a narrative that typically does not change quickly. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now