Recent Labour Market Trends

The US Dollar has recently risen but did not break the 200-day moving average, settling at 99.80. Analysts at OCBC note that the bullish momentum is fading, with the Relative Strength Index (RSI) also declining. Current support levels for the USD are at 99.80, 99.10, and 98.40. Resistance is found at 100.30/60. This week, a lack of decisive data and a divided Federal Reserve contributed to an early rally for the USD. However, if US data shows further weakness and the Federal Reserve cuts rates more, we could see a weaker US Dollar. Recent data points to a softening labour market, with a slowdown in private sector job creation and an increase in layoffs. One report indicated job cuts surged by 183% from September to October, totaling 153,000. So far this year, 1.1 million job cuts have been announced, the highest since the COVID-19 pandemic began in 2020. Additionally, job postings on Indeed and wage growth rates have dropped throughout the year. The expectation is for a softer US Dollar, especially if the Federal Reserve continues to cut rates, depending on overall risk sentiment and external growth conditions. At the same time, the US government is experiencing its longest shutdown, which has lasted over 36 days. The recent rise of the US Dollar seems to be ending after failing to break its 200-day moving average. With momentum fading, the Dollar Index (DXY) appears set for a moderate decline from 99.80. Keep an eye on support levels of 99.10 and then 98.40 in the upcoming weeks. This outlook is supported by this morning’s Non-Farm Payrolls report for October 2025, which showed the US economy added only 110,000 jobs, falling short of the 180,000 forecast, and confirming the trend of a weakening labor market. This follows a report from Challenger, Gray & Christmas that indicated job cuts have reached their highest level since the beginning of the COVID pandemic in 2020, reinforcing the expectation that the Federal Reserve will maintain its easing approach.

Positioning for Further Dollar Weakness

With the Federal Reserve cutting rates by 25 basis points at its last meeting and core inflation decreasing to 2.8%, further cuts are anticipated in early 2026. Reflecting on the extended government shutdown from 2018-2019, the DXY experienced fluctuating, sideways trading before it weakened — a pattern that may occur again now. This ongoing shutdown, already the longest on record, adds to the negative outlook for the dollar. For traders in derivatives, this situation suggests positioning for further dollar weakness. Consider buying put options on the UUP (the dollar index ETF) with targeted strike prices below the current level, set to expire in late December 2025 or January 2026. Since recent data surprises have increased volatility, using put debit spreads could be a cost-effective strategy to express this bearish outlook. This strategy can also apply to currency pairs, especially by buying call options on EUR/USD futures. The euro has shown strength, and as long as risk sentiment remains stable, the pair could reach the resistance level of 1.1550. The outlook for the British Pound is less clear due to the Bank of England’s weak demand forecast, suggesting a more cautious approach, like a bull call spread on GBP/USD, may be wise. The long government shutdown and weak economic signals are creating broader market uncertainty, as reflected by the VIX remaining above 20. Traders should think about using VIX call options as a hedge against any sudden risk-off events, which could emerge from political gridlock or unexpected economic downturns. This environment also supports the strength seen in safe-haven assets like gold, currently above $4,000 an ounce. Create your live VT Markets account and start trading now.

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