Euro rebounds above 1.1250 after weak US jobs data weighs on US Dollar

• EUR/USD rebounds after US job creation falls well short of market expectations.
• US employers added only 29K jobs in September, while figures for the previous two months were revised lower.
• Expectations of an October Fed rate hike decline after softer inflation and employment data.

EUR/USD rebounds to around 1.1260 on Friday, gaining 0.16% on the day at the time of writing, after hitting an intraday low of 1.1221 earlier in the day. The pair finds fresh buying interest as the US Dollar (USD) comes under pressure following significantly weaker-than-expected United States (US) employment figures.

The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls (NFP) increased by only 29K in September, significantly below market expectations of 90K.

Previous months' revisions further reinforce signs of weakness in the labor market. The August increase was also revised down to 133K from the previously reported 162K. July employment growth was revised down from an initially reported increase of 21K to a decline of 10K. Overall, employment gains in August and July were revised down by a combined 60K.

Other details of the employment report provide little support to the Greenback. The Unemployment Rate edges higher to 4.2%, while the Labor Force Participation Rate increases to 61.8% from 61.6%. Meanwhile, Average Hourly Earnings rise 3% YoY, below market expectations of 3.2%, easing concerns about wage-driven inflationary pressures.

The US Dollar reacts negatively to the report, allowing EUR/USD to erase its earlier losses. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, falls around 0.23% following the publication to trade near 101.80 at the time of press.

The employment figures also trigger a significant adjustment in expectations surrounding the Federal Reserve's (Fed) next monetary policy decision. According to the CME FedWatch tool, markets now assign around a 17% chance to an interest rate hike in October, down from roughly 24% before the NFP release and 64% a week earlier.

The shift follows two consecutive days of softer US economic data. Thursday's weaker-than-expected Personal Consumption Expenditures (PCE) inflation figures had already reduced expectations that the Fed would tighten monetary policy again in October. Friday's weak employment report adds to evidence that the US economy may be losing momentum, further reducing the case for an immediate rate increase.

Expectations for the December meeting remain comparatively resilient, however, with markets still pricing in around a 62% chance of a rate hike, according to the CME FedWatch tool.

On the other side of the pair, the Euro (EUR) remains vulnerable to domestic headwinds despite Friday's rebound. Preliminary Harmonized Index of Consumer Prices (HICP) data showed that Eurozone inflation accelerated to 3.8% YoY in September from 3.2% in August, exceeding expectations of 3.6%. Core inflation edged up to 2.5% from 2.4%, in line with forecasts.

The stronger inflation figures could increase pressure on the European Central Bank (ECB) to maintain a restrictive monetary stance. However, concerns over France's fiscal position and elevated Oil prices continue to limit demand for the single currency, leaving EUR/USD on track for a significant weekly decline despite its post-NFP recovery.

EUR/USD technical analysis

In the one-hour chart, EUR/USD trades at 1.1251, keeping a mildly bearish tone as the pair holds below the 100‑period and 200‑period simple moving averages (SMAs) at 1.1319 and 1.1360 respectively. The short-term RSI at 47 stays just under the neutral 50 line, hinting at sluggish momentum that reinforces the impression of a capped recovery while intraday bounces are likely to face selling pressure against nearby overhead barriers.

On the topside, initial resistance emerges at 1.1270, ahead of a more significant cap at 1.1312, with the 100‑period SMA at 1.1319 and the 200‑period SMA at 1.1360 layering a broader supply zone above. On the downside, support is seen first at 1.1215, followed by the recent structural floor at 1.1200, where sellers may hesitate and short-term dip buyers could attempt to stabilize the pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)