The Euro remains subdued beneath 1.1500 due to poor market sentiment and Eurozone economic indicators. Eurozone Producers’ Price Index fell for the second month in October, hinting at factory deflation, while the US ADP Employment report may confirm a weak labour market.

EUR/USD trades near 1.1480 as risk-averse mood drives demand for the US Dollar, compounded by global equity downturns. Despite expectations of improved Euro data, it hasn’t bolstered market outlook.

Eurozone Services PMI and Economic Indicators

Eurozone and German Services PMI data outperformed predictions, with increases in sector activity. The German Factory Orders rose by 1.1% in September, contrary to expectations, although year-on-year figures show a decline.

The US faces its longest government shutdown as officials await ADP Employment data, expected to see a mild job increase. The US ISM Services PMI anticipates a slight uplift in service sector activity for October.

EUR/USD remains near three-month lows with ongoing bearish pressure, though easing indicators suggest possible consolidation. Downside potential targets 1.1440 support, with bullish shifts projected above 1.1500.

The ADP Employment Change is crucial for gauging private sector job trends, affecting USD strength. The ISM Services PMI signals US economic health, with over 50 indicating expansion, boosting USD if results surpass forecasts.

Economic Market Outlook

With the EUR/USD struggling below the key 1.1500 level, the immediate outlook appears bearish. The market’s risk-averse mood is channeling funds into the safe-haven US Dollar, and we see little on the horizon to change this in the short term. This pressure suggests that strategies favouring a stronger dollar against the euro are prudent.

All eyes are on the incoming US data, especially given the ongoing government shutdown, now the longest in our nation’s history. Recalling the 35-day shutdown in 2018-2019, we saw it trim quarterly GDP growth by an estimated 0.2%, making the current economic situation even more fragile. Today’s ADP employment report is therefore critical for gauging the health of the private sector.

The consensus forecast for only 25,000 new jobs is troublingly low and a sharp contrast to the stronger job creation numbers we saw just a year ago. A weak report, especially following last month’s negative reading, will intensify speculation that the Federal Reserve may be forced to consider easing policy in December. This makes any derivative positions highly sensitive to today’s data release.

On the other side of the pair, deflationary pressures are returning to the Eurozone, as confirmed by the latest Producer Price Index. This is a significant reversal from the high inflation environment the European Central Bank was fighting back in 2023. These renewed concerns about falling prices will continue to weigh on the single currency.

Given this backdrop, we anticipate continued weakness, with the technical level of 1.1440 being the next logical target for bears. A break below this support could accelerate selling pressure toward the August lows around 1.1390. Traders should consider positions that profit from this expected decline over the coming weeks.

For those looking at options, buying put options on the EUR/USD offers a way to speculate on further downside with a defined risk. The heightened uncertainty around the US economic data suggests volatility may increase, making options an attractive tool. This strategy allows for participation in a downward move while capping potential losses if the market suddenly reverses.

However, we must watch for any upside surprises in the US employment or services data. A significant beat on expectations could trigger a sharp relief rally, pushing the pair back above the 1.1545 resistance area. Such a move would challenge the prevailing bearish sentiment and force a reassessment of short positions.

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