Australian unemployment is forecast to rise in September, suggesting a cooling job market. EUR/USD saw gains, up 0.35%, trading above 1.1600 for the second day, with the Dollar falling to a six-day low. Expectations of US Federal Reserve rate cuts and US-China trade tensions affect the Greenback.

Talks between the US and China continue to strain, with new port fees complicating matters. The US had little data to report, but the Beige Book suggested stagflation risks. In the Eurozone, inflation data was varied, suggesting the ECB will keep a dovish policy.

The Beige Book

The Beige Book showed stable US employment but minimal economic growth. A longer pause on tariffs for Chinese products is considered. Fed Chair Jerome Powell noted labour market issues and hinted at moving towards neutral interest rates.

EUR/USD’s technical outlook is neutral-to-bearish, fluctuating around the 100-day Simple Moving Average of 1.1644. Support levels are at 1.1600, 1.1550, and 1.1500, with resistance at 1.1650 and 1.1700.

The Euro, used by 19 EU countries, ranks as the second most-traded currency globally. The ECB’s focus is price stability, influencing the Euro’s value through interest rates based on inflation. Economic data releases affect the Euro’s value significantly.

Given the US Dollar’s weakness, we see opportunity in the EUR/USD pair, which is testing key levels. The expectation of a Federal Reserve rate cut has only grown since the US CPI report from October 10, 2025, showed an unexpected dip in core inflation to 2.8%. The CME FedWatch Tool now shows the market pricing in an 85% probability of a rate cut at the November meeting, making short-dollar positions attractive.

The US-China Trade Dispute

The US-China trade dispute continues to weigh on the dollar and inject volatility into the market. The new ‘Container Processing Surcharge’ announced by Beijing last week is a tangible escalation that traders must now price in. We are already seeing this pressure shipping futures, with the Baltic Dry Index falling 5% over the past week.

While the Euro is gaining, we must remember this is primarily a story of dollar weakness, as the European Central Bank remains dovish. Eurozone flash CPI for September came in at 1.9%, just under the ECB’s 2% target, giving them no reason to change their stance. This suggests a cap on the Euro’s rally unless European economic data starts to surprise to the upside.

The cooling Australian labor market is part of a broader global theme that reminds us of the slowdown we witnessed in late 2023. The Reserve Bank of Australia noted this “welcome rebalancing” in its last meeting, reinforcing their neutral policy and limiting the Australian dollar’s potential. This should inform any commodity currency strategies, as it points to weakening global demand.

With EUR/USD sitting on its 100-day moving average around 1.1644, the technical picture is tense. A sustained break above the 1.1650 resistance level could trigger a quick move to 1.1700, while a failure to hold here risks a slide back toward the 1.1600 support. Options traders could consider using straddles to play the potential for a significant move in either direction driven by upcoming data releases.

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