EURUSD loses ground ahead of NFP

Today, as standard at 14:30 CET, we will learn the October US labour market report. This is the last major release before the December FOMC meeting. Although it is of huge significance from the perspective of the US economy, markets are still living with the results of Tuesday's US mid-term elections. Following the elections, the AI sector fell sharply, and the VIX fear index jumped by around 18% in a week. In such an environment, the data could decide whether the Fed returns to rate hikes or takes into account tightening financial conditions.

Expectations:

• Non-farm Payrolls (NFP): consensus +70k vs +29k in September. Bloomberg Economics forecasts +63k, with a forecast range of 30–100k.
• Private sector: approx. +75k, with a further drop in public sector employment (approx. −12k).
• The ADP report showed an increase of 86k, which was above market expectations.
• Unemployment rate: 4.2%, unchanged.
• Average hourly earnings: +0.3% m/m (previously +0.1%), +2.9% y/y (previously 3.0%).
• Breakdown: job gains mainly in education and healthcare (approx. +43k), as well as in manufacturing and construction. Declines in retail and transport, and in sectors most exposed to AI, namely finance, information and professional services.
• Revisions: remain a significant risk. In the previous report, data for July and August were revised down by a total of 60k.

What could work in favour of today's report? The October data collection period was longer than September's, and the weather was exceptionally mild, which could have led to increased employment and artificially boosted the figure. The threshold at which unemployment remains unchanged is currently estimated at only around 50k jobs per month, so even if the result misses market consensus slightly, the labour market picture will remain strong, which could be key from the Fed's perspective.

What is the market pricing in?

The market has clearly pulled back from slightly higher Fed rate hike expectations. For December, it is pricing in around 0.7 of a hike, or roughly a 70% chance of a 25 bps move, compared to almost a full hike priced in a month ago. Through July 2027, it prices in a total of approx. 1.65 hikes, whereas on 9 October it was over 3. On the hawkish side remains John Williams of the New York Fed, who stresses that inflation is still too high.

Scenarios:

• Strong reading (above 100k, unemployment at 4.1% or lower): In this case, the market would return to pricing in a full hike in December, which could lead to a pullback in TNOTE (rising yields), which in turn could trigger another, even small, wave of dollar strengthening.
• Reading around consensus (60–80k): neutral for market pricing. The market will focus on wages and revisions.
• Weak reading (below 30k or unemployment rising to 4.3%): would argue for a pause in December. Given current sentiment, however, it does not necessarily have to weaken the dollar, as weak data could heighten growth concerns and sustain demand for cash.

EURUSD: dollar gains despite falling yields

An unusual setup is visible in the currency market. US bond yields are falling sharply, and 10-year Treasury note futures (TNOTE) have been rising dynamically since September. Under normal conditions, lower yields would weaken the dollar, but demand for liquidity is currently dominating. Stock market sell-offs and inflows into money market funds mean investors currently prefer to hold cash in dollars. In addition, the euro is weighed down by weak European data: retail sales in the euro area fell by 0.7% m/m in September, a clearly negative surprise.

From a technical standpoint, EURUSD has been moving in a downward channel since February 2026. The latest rebound attempt stalled at the 1.1250 resistance, and the pair pulled back towards 1.1176, below the 25-period simple moving average (1.1191). The rate is now testing the lower boundary of the channel. The key immediate support is the 50% retracement of the last major upward wave near 1.1128. A break below this level would open the way towards the 1.0980–1.1080 zone, a broad support area around 1.10. On the upside, resistance at 1.1250 remains key. Only a move back above this level, followed by the 50-period SMA (approx. 1.1293), would challenge the downtrend.

A strong NFP report that revives pricing for a December rate hike could quickly push the pair down towards 1.1130. Conversely, a weak reading combined with a stabilization in stock markets would give the euro a chance to return towards 1.1250.