The Euro is trading steadily above 1.1750, bolstered by expectations of Fed rate cuts, despite the Eurozone’s unemployment rate rising to 6.3% in August. U.S. economic data has continued to show signs of a weak labour market, notably with the ADP Employment Change indicating a net job loss of 32K in September, intensifying the pressure on the Fed for monetary easing.
The U.S. government shutdown has led to the absence of official job reports, such as the jobless payrolls, shifting the focus to other indicators like the Challenger Job Cuts. Probabilities for a rate cut in October are nearly certain at 99%, with December odds also rising. The ISM Manufacturing Index showed marginal improvement but revealed a contraction in employment, while Eurozone’s inflation ticked up to 2.2% in September.
Technical Overview
Technically, the EUR/USD reflects a bullish stance yet faces resistance at 1.1760 and 1.1795. The key support lies between 1.1710 and 1.1715, with further downside targets at 1.1645 and 1.1610. The Challenger Job Cuts, an essential indicator of labour market health, will be released on November 6, 2025, shedding further light on corporate layoffs across sectors.
Given the high probability of Federal Reserve rate cuts, we should position for continued US Dollar weakness against the Euro. One straightforward approach is buying EUR/USD call options with strike prices aiming for the 1.1795 and 1.1820 resistance levels. These trades would directly profit if the pair breaks its current range in the coming weeks.
This situation feels reminiscent of the policy pivot discussions from late 2023, but the data driving it now is far more concrete. September’s Challenger Job Cuts report, released today, showed a surprising 90,300 announced layoffs, a sharp increase that confirms the negative trend seen in the ADP report. This is the highest reading we’ve seen since the tech-sector layoffs back in the first quarter of 2024, giving the Fed very little room to hold rates steady.
The ongoing US government shutdown adds a layer of uncertainty, which is elevating implied volatility in the options market. This makes buying options more expensive, but it also reflects the potential for a sharp price move once official payroll data is eventually released. We could consider strategies like a long straddle to capitalize on this heightened volatility, regardless of the direction.
Market Sentiment and Strategies
While the bearish case for the dollar is strong, we need to manage the risk of a surprise. We’ve seen in the past, such as during the 2018 shutdown, how quickly sentiment can shift on unexpected news. Buying some out-of-the-money EUR/USD puts with a strike near the 1.1710 support level could serve as a low-cost hedge against our primary bullish positions.
The market has almost fully priced in a rate cut for the October Fed meeting, with the CME FedWatch Tool showing 99% odds. Therefore, options with November and December 2025 expiries are the most relevant instruments to trade this developing theme. The primary focus should be on the widening policy divergence between a dovish Fed and a European Central Bank that appears firmly on hold.
