A surprisingly weak United States labor market report triggered a broad pullback in the US Dollar, paving the way for the Euro to stage a sharp intraday rebound on Friday. After touching an intraday trough of 1.1221, the EUR/USD currency pair recovered toward 1.1260, booking an intraday advance of roughly 0.16%. The sell-off in the Greenback intensified as traders reassessed the likelihood of an interest rate increase by the Federal Reserve at its upcoming October monetary policy meeting.
US Nonfarm Payrolls Miss Market Projections
Data published by the US Bureau of Labor Statistics revealed that Nonfarm Payrolls grew by a mere 29,000 positions during September. This fell dramatically short of the consensus forecast of 90,000, underscoring a notable deceleration in hiring across American businesses.
Deepening the bleak picture, employment gains from the preceding summer months were subjected to major downward adjustments. The preliminary figure for August was downgraded from 162,000 to 133,000. July was revised even more drastically, flipping from an initially reported addition of 21,000 positions into a net loss of 10,000 jobs. Combined, these retroactive changes erased 60,000 jobs from previously published data, highlighting that hiring conditions had deteriorated earlier than initially thought.
Unemployment Edges Higher While Wage Inflation Moderates
The secondary components of the monthly jobs release offered virtually no support for the US Dollar. The nationwide Unemployment Rate ticked up to 4.2%, even as the Labor Force Participation Rate expanded from 61.6% to 61.8%. Simultaneously, Average Hourly Earnings rose by 3% on a year-over-year basis, trailing the 3.2% increase projected by economists. Softer wage growth helps alleviate persistent worries regarding wage-driven inflationary pressures, dampening expectations for prolonged policy tightening.
Reflecting the shift in sentiment, the US Dollar Index, which benchmarks the currency against a basket of six key global peers, slid approximately 0.23% to hover near 101.80. Even though bets on an October rate hike dwindled rapidly, pricing from the CME FedWatch tool indicated that market participants still attach an estimated 62% probability to an interest rate hike in December.
Structural Headwinds and Technical Levels for the Euro
While persistent European inflation prints may compel the European Central Bank to keep monetary conditions restrictive, the Euro continues to face notable internal headwinds. Ongoing unease regarding the fiscal trajectory of France and elevated crude oil prices continue to dampen investor appetite for the shared currency. Analysis from ING indicates that French fiscal risk premiums continue to weigh on the Euro, while Deutsche Bank notes pressure stemming from broader European stress. Consequently, EUR/USD remains on course for a substantial weekly drop despite the post-payrolls bounce, having traded as low as 1.1312 earlier in the week, well below its January high of 1.2082 and marking its lowest level since May 2025.
From a chart perspective, initial upside resistance stands at 1.1270, followed by a firmer hurdle at 1.1312. Above that, the 100-period simple moving average at 1.1319 and the 200-period simple moving average at 1.1360 define an overhead supply barrier. On the downside, immediate support emerges around 1.1215, backed by critical structural support at 1.1200, where buyers previously emerged. Live market readings show EUR/USD trading at 1.13 with a 14-day RSI of 17, placing the asset deep in oversold territory, while moving average alignment reflects a dominant longer-term downtrend with a death cross pattern.
Cross-Asset Reaction Across Currencies, Commodities and Crypto
The Greenback's slide sparked varied moves across international markets. The Australian Dollar climbed toward 0.6950 as expectations revived for a potential interest rate hike in November amid stubborn global yields and price risks. Meanwhile, USD/JPY struggled to maintain momentum near 158.00 after stronger-than-projected Tokyo CPI prints prompted traders to square positions ahead of the weekend.
Benefiting from the retreating Dollar, spot Gold surged through the pivotal $4,200 per troy ounce threshold. In the digital asset sector, sentiment turned broadly positive, with Bitcoin reclaiming levels above $86,000, Ethereum rising past $2,700 while facing resistance near $2,800, and Ripple trading around $1.54. Moving into the upcoming week, financial markets will closely track the Federal Reserve minutes, ISM Services PMI, US Treasury debt auctions, ECB meeting minutes, Canadian employment numbers, and Japanese wage data.
