Stabilising Markets
In the US, President Trump has signed a bill ending a government shutdown, stabilising markets. The upcoming ADP Employment Change report is anticipated, as recent employment figures are low, expecting an increase to 48K from 41K.
The US ISM Services PMI is predicted to slow to 53.5 in January from 54.4 in December. This report will also influence traders’ perspectives on the US Dollar.
EUR/USD needs to surpass the 1.1875 mark to confirm a trend shift, while support is at the February 2 and 3 lows at 1.1775. The ADP Employment Change and ISM Services PMI are vital indicators for gauging economic performance.
We are seeing the Euro struggle as it faces headwinds from its own slowing economy. The drop in Eurozone inflation to a 16-month low of 1.7% is significant, especially when we recall the European Central Bank battling figures well above 2% for most of 2025. This, combined with services activity PMIs being revised downward, paints a picture of economic fatigue that could pressure the ECB to adopt a more cautious tone.
Opportunities for Derivative Traders
On the other side of the pair, the US Dollar is holding its ground ahead of important data. The market’s low expectation for the ADP employment report at 48K sets the stage for a potential upside surprise, which would be bullish for the dollar. This is happening as the Federal Reserve transitions to new leadership, with Kevin Warsh expected to be less inclined toward rate cuts, creating a policy divergence against a weakening Eurozone.
For derivative traders, this environment suggests a bearish stance on the EUR/USD pair in the coming weeks. Buying put options with strike prices below the current support level, such as 1.1750 or 1.1700, could be a prudent strategy. Opting for expirations in late February or March 2026 would allow enough time for the expected downward trend to materialize following the release of key US employment figures.
We should anticipate a spike in implied volatility around today’s ADP and ISM Services data releases, which will make options more expensive. A potential tactic is to wait for any minor rally in the EUR/USD, perhaps back toward 1.1850, before entering put positions to get a more favorable entry price. This disciplined approach can help manage the higher premium costs associated with predictable economic events.
The main risk to this strategy is a significant disappointment in the upcoming US economic data. If the ADP report comes in much weaker than the 41K we saw in December 2025, or the ISM Services PMI shows a sharp decline, the dollar could sell off. A sustained break above the key resistance level of 1.1875 would signal that our bearish outlook is incorrect and require a swift reassessment of any short positions.
