The bond markets are calmer, bringing some relief to financial sectors, while the dollar stays stable. Currency traders are cautious, waiting for important US data releases. Major dollar pairs are showing little movement. The EUR/USD is trading within a narrow 30-pip range due to large option expirations. The USD/JPY has risen slightly by 0.1%, reaching 148.27 after talks between the US and Japan about auto tariffs. Commodity currencies are slightly down, but the changes are not significant. For example, AUD/USD has fallen by 0.4%, resulting in a weekly change of just -0.2%. In the coming days, key US economic data will be released, which are crucial for market direction. Yesterday’s JOLTS job openings hinted at possible market reactions. Today’s attention is on the ADP employment change, weekly jobless claims, and ISM services PMI data, all leading up to tomorrow’s non-farm payrolls. This data will be closely monitored by the markets heading into the weekend. With the market in a holding pattern, this creates a classic setup for a volatility event. The tight ranges in pairs like EUR/USD indicate calm before the storm of major US employment data. This quieter time allows traders to consider strategies that could benefit from significant price movements, no matter the direction. Derivative traders should consider buying volatility ahead of the Non-Farm Payrolls report. Options strategies like straddles or strangles on EUR/USD could be useful, as they pay off if the pair breaks out of its current tight range. Similar quiet periods in 2023 were followed by strong movements when key jobs data surprised the market. The spotlight is on the US labor market, which has shown resilience throughout early 2025, preventing the Federal Reserve from cutting rates. The expectation for tomorrow’s payrolls report is around 180,000 jobs, but a much higher figure could boost the dollar significantly. We’ve seen August job numbers exceed expectations before, especially in 2022, when a strong report changed market rate predictions. For EUR/USD, the large option expirations are acting as a temporary anchor at the current price. Once the data is released and the expirations are cleared, the pair will be able to move freely, with a strong US report likely testing support levels below 1.0700. This is particularly relevant given the recent Eurozone manufacturing PMIs for August 2025, which indicated continued contraction in Germany. In USD/JPY, the pair’s sensitivity to US yields means a solid jobs report could easily drive it back toward the 150 level. We should be cautious, as Japanese officials have recently started voicing concerns about currency weakness as the pair has trended higher this year. Any movement above 149 might trigger verbal, if not actual, intervention. The weakness in commodity currencies like the Australian dollar could worsen if the US data is strong. The 0.4% drop is small for now, but disappointing trade balance figures from China for August 2025 have already set a bearish tone. A strong US jobs report could intensify the situation, likely pushing AUD/USD to test its year-to-date lows.

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