EUR/USD extended a second day of losses as risk aversion lifted demand for the US Dollar, dragging the pair below 1.1200. It traded near 1.1180 at the European open after failing to hold Thursday’s highs around 1.1270, even as German data came in stronger. German industrial production rose 0.7% in September, beating expectations for a flat reading and accelerating from August’s 0.1% increase, with autos and pharmaceuticals driving gains while construction and machinery output fell.
Attention then turns to Eurozone retail sales for September, expected to dip 0.1% after a 0.1% rise in August, a profile that offered little immediate support for the single currency. The Dollar held firm as a tech-led equity sell-off boosted safe-haven flows, with chipmaker stocks sliding in the US and Asia on worries over AI-related demand and regulatory risk. Markets also awaited October’s NFP report after a run of stronger US labour signals, including jobless claims at a near four-month low, firmer ADP hiring in October, and a jump in September job openings in the JOLT data.
Positioning for Further EUR/USD Weakness
We believe derivative traders should position for continued downside momentum in EUR/USD over the coming weeks. The euro’s inability to stay above 1.1200 despite German factory output rising 0.7% shows that global risk sentiment is overriding positive local economic releases. We should consider buying short-dated put options on the euro to capture further downward drift toward lower support levels.
Equity Derivatives Strategies and Dollar Momentum
In the equity derivatives market, we recommend using downside put spreads on tech-heavy benchmarks to hedge against sector volatility. Historically, sharp pullbacks in semiconductor shares trigger broader risk-off moves that boost the safe-haven greenback by 1% to 2% over short trading windows. Protecting stock exposure with option put spreads allows us to stay covered if tech-driven market pullbacks extend further.
Finally, we need to align short-term currency trades with strong U.S. economic indicators, as resilient employment data continues to back higher yields. Historical market data shows that when U.S. weekly jobless claims fall near multi-month lows alongside strong employment prints, the US dollar maintains upward momentum for several consecutive weeks. Entering bear put spreads on EUR/USD or long dollar futures provides a structured, defined-risk strategy while macro conditions favor the greenback.
