The USD pulled back after reaching its resistance point at the 200-day moving average. Even without significant data affecting policies, several speeches from Federal Reserve officials might cause some market shifts. The Challenger job cut report showed a dramatic rise in US job cuts, with 153,074 announced in October. This marks a 175% increase from last year and a 183% rise from last month, making it the highest October total in over 20 years.

ADP Employment Change and Labor Demand

ADP’s report for October showed better-than-expected employment change, with an increase of 42,000 jobs. However, overall labor demand remains weak, averaging just 10,000 jobs added each month over the past three months. Forecasts suggest that the Federal Reserve might introduce a 25 basis point rate cut in December, bringing rates to between 3.50% and 3.75%. This possible change comes amid ongoing worries about inflation not rising, hinting at future downward pressure on the USD. The US Dollar is weakening after failing to surpass its 200-day moving average, an important technical barrier. This decline coincides with a sharp downturn in the US labor market. Traders may view this situation as a sign that the dollar is likely to weaken further in the coming weeks. Economic trouble is clear, particularly from the job cuts report in October. The 153,074 cuts represent the most for any October in over 20 years and the worst month in a fourth quarter since the 2008 financial crisis. To put it in perspective, during the 2023 slowdown, monthly cuts rarely exceeded 85,000, highlighting the severity of today’s situation.

Fed Interest Rate Cut Projections

The fragility in employment supports our belief that the Federal Reserve will likely cut interest rates again in December. The market anticipates a 67% chance of a 25-basis-point cut. Traders should prepare for this using interest rate derivatives. Purchasing March 2026 SOFR futures would directly benefit from this expectation, as their value rises with anticipated lower rates. In the foreign exchange market, this outlook suggests that shorting the US Dollar is a smart move. We recommend considering buying call options on the EUR/USD pair for potential gains if the Euro strengthens against the weakened dollar. Using options instead of futures allows for limited risk, capping losses to the premium paid for the contract. While the data indicates a downward trend for the dollar, remarks from Fed officials may lead to short-term fluctuations. Therefore, using options could be a wise tactic to express a negative outlook on the dollar. This method provides protection against any unexpected hawkish comments that could lead to a brief rise in the currency before the overall downtrend continues. Create your live VT Markets account and start trading now.

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