EUR/USD fell towards the 1.1600 area on Tuesday as the US Dollar strengthened on firmer Treasury yields and US labour data. Eurozone news was mixed and offered limited support for the euro.
The ADP report said US private employers added 42,250 jobs in the first week of May. This was the strongest reading since the series began in October 2025 and supported expectations of a cautious Federal Reserve on rate cuts.
Dollar Strength Drivers
The US Dollar also gained after President Donald Trump used tougher language on Iran. He said, “we may have to give Iran another hit” and “Iran is begging to make a deal”, which increased safe-haven demand.
In the Eurozone, ECB officials pointed to concerns about long-term growth. An ECB report said labour market trends and immigration support activity, but demographic challenges may affect future growth.
On the 4-hour chart, EUR/USD traded at 1.1599, below the 20-period SMA at 1.1638 and the 100-period SMA at 1.1710. Support was near 1.1592 and RSI was around 27, while resistance sat at 1.1612, 1.1624, 1.1635 and 1.1710.
Looking back at the events of May 2025, we saw a clear playbook where strong US jobs data and geopolitical risk sent the dollar soaring. The EUR/USD pair fell toward 1.1600 as the market priced in a more cautious Federal Reserve and a flight to safety. This pattern of dollar strength driven by US economic outperformance and global uncertainty is a key theme we must watch.
Strategy Considerations Ahead
Today, a similar dynamic is in place, with the latest US Non-Farm Payrolls for April 2026 adding a solid 215,000 jobs, far outpacing the Eurozone’s recent performance. The Fed is consequently holding interest rates steady, while recent Eurozone GDP data for the first quarter showed growth of only 0.2%. This growing divergence between the two economies suggests further downside for the EUR/USD pair.
Given this outlook, buying put options on the EUR/USD for the coming weeks appears to be a prudent strategy. This allows us to profit from a potential decline in the pair toward the 1.1400 area while strictly limiting our maximum loss to the premium paid. It is a defined-risk way to express a bearish view on the euro.
We can also consider shorting EUR/USD futures contracts to gain more direct exposure to the downward momentum. Back in May 2025, the break of the 1.1592 support level was a critical bearish signal. We should watch the current support at 1.1420 with the same attention, as a decisive break below it could trigger a new wave of selling.
Furthermore, with ongoing trade tensions in the Pacific reviving safe-haven demand for the dollar, an increase in market volatility is likely. Implied volatility on one-month EUR/USD options is currently trading at a modest 6.8%, which is historically low. This suggests that buying straddles or strangles could be a cost-effective way to trade a potential spike in volatility, regardless of the direction.
