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EUR/USD Drops Below 1.115 as a Hot US Jobs Report Sends the Dollar Soaring

Kaleb Zieme
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Intro

EUR/USD fell nearly 0.6% on Friday, slipping below 1.115 and erasing all of its gains for the week, after the October US jobs report came in far hotter than anyone expected. The US economy added 165,000 jobs last month — more than two and a half times the 65,000 economists had forecast — and traders rushed to price in a Federal Reserve rate hike in December. The dollar surged, the euro tumbled, and the pair is now staring at its October lows.

A jobs report that changed the December picture

The numbers from the Labor Department, released at 8:30 a.m. EST on Friday, beat expectations on almost every line. Nonfarm payrolls rose 165,000 in October against a consensus of just 65,000, and the private sector accounted for almost the entire increase at 159,000 jobs. September's gain was revised up to 60,000 from 29,000, and the combined revision across the prior two months was +84,000. The unemployment rate fell to 4.1% from 4.2%, even as labour-force participation rose to 61.9%. Average hourly earnings rose 0.4% on the month and 3.1% from a year ago — both above forecasts. The one soft spot was underemployment: the U6 rate rose to 7.9% from 7.6% as more people worked part-time for economic reasons.

The market reaction was immediate. The US Dollar Index (DXY) surged 0.77% to 102.26, its biggest daily percentage gain since June 17, while the euro was on pace for its biggest daily drop since October 1. At the time of writing, EUR/USD traded around 1.1132, down 0.77% on the day. The US 2-year Treasury yield rose 4.5 basis points to 4.52%, and the 10-year reached 4.868%. The dollar gained almost everywhere: sterling tumbled 0.71% to $1.3355, and USD/JPY rose 72 pips to 158.38.

The key shift is in rate expectations. After the report, traders priced roughly an 80% chance of a December Fed hike, up from about 67% a day earlier, according to the CME FedWatch Tool. The report gives the Federal Reserve latitude to keep raising rates, and the market heard it loud and clear. The University of Michigan's consumer sentiment index added to the dollar's case, rising to 51.0 in November from 48.0, against expectations of 48.0.

The euro's own problems

It was not only a dollar story. Eurozone retail sales fell 0.7% month over month in September, against a 0.1% decline expected and a 0.1% increase previously — a clear negative surprise that followed a 2% drop in August. And the European Central Bank sounded cautious: chief economist Philip Lane said on Friday that inflation needs to return to target within a year or two, while noting that financial conditions have already tightened.

From a technical standpoint, EUR/USD has been moving in a downward channel since February 2026. The latest rebound attempt stalled at 1.1250 resistance, and the pair has now pulled back below the 25-period simple moving average at 1.1191. The swing area between 1.1152 and 1.1160 is the line in the sand: stay below it, and the October lows are the next target.

  • EUR/USD: ~1.1132, down 0.77% on the day, below 1.115
  • DXY: 102.26, up 0.77% — biggest daily gain since June 17
  • NFP: +165,000 vs 65,000 expected; September revised to 60,000
  • Unemployment: 4.1% (from 4.2%); participation 61.9%
  • Wages: +0.4% m/m, +3.1% y/y — both above forecasts
  • December Fed hike odds: ~80%, up from ~67%
  • Eurozone retail sales: −0.7% m/m in September vs −0.1% expected

What traders are watching next

This was the last major US release before the December FOMC meeting, which is why the move was so sharp. The pair now trades with a clear bias: below the 1.1152–1.1160 swing area, sellers are in control and October's lows come into view; a recovery back above that zone would be needed to argue the dollar's rally has run its course. Watch the Fed speakers in the coming days — any pushback against the 80% hike pricing would be the euro's best hope — and the next round of eurozone data, which needs to stop disappointing for the single currency to find a floor.

For the full jobs-report breakdown, including the sector detail behind the 165,000 gain, read our Economic News desk's report on the US jobs report smashing forecasts: https://zimbuck.com/blogs/1523/US-Jobs-Report-Smashes-Forecasts-165-000-Jobs-Added-as. And if you want to understand how to read releases like this one before they move the market, our guide to reading a forex economic calendar (https://zimbuck.com/blogs/1451/How-to-Read-a-Forex-Economic-Calendar-CPI-NFP-and) walks through NFP, CPI and central-bank decisions step by step. XTB's market analysis of the day's EUR/USD move is here: https://www.xtb.com/int/market-analysis/news-and-research/eurusd-loses-0-6 — and more discussion can be found on the Zimbuck News page at https://zimbuck.com/pages/zimbucknews and in the Zimbuck Market News group at https://zimbuck.com/groups/zimbuckmarketnews. Join the discussion on Zimbuck, the finance social platform for traders and investors, at https://zimbuck.com.

This article is market news and general information only. It is not financial advice. Always do your own research before making any investment decision.