EUR/USD forecast boosted by ailing US labour market signs

The US dollar took a tumble earlier after the ADP weekly jobless report showed a further deterioration in US labour market, with private employers shedding an average of 11,250 jobs in the week ending 25th October. The data suggests that the labour market continued to struggle. Additionally, sentiment among US small businesses eased in October to a six-month low due to a deterioration in earnings and less optimism about the economy. With the US government about to re-open, we will likely gather more evidence of an economy running on empty. That should cement expectations about a further rate cut in December and re-affirm our bullish view on the EUR/USD forecast.

 

ADP report shows big job losses in October

 

Earlier, the ADP confirmed what many analysts had predicted following the recent announcements of large layoffs at a few large companies. Still, the scale of the drop was a bit of a surprise and that caught FX trader by surprise as the US dollar took a quick dive. With rising concerns that the labor market could be weakening further, up went traders’ expectations of another 25 basis point rate cut in December.

 

The ADP stating that “for the four weeks ending Oct. 25, 2025, private employers shed an average of 11,250 jobs a week, suggesting that the labor market struggled to produce jobs consistently during the second half of the month.”

 

It will be interesting to know whether these jobs losses were directly motivated by AI, something which could become a reality soon given the pace at which the technology is improving and expanding.

 

Anyway, the long and short of it is that the data should see Fed officials grow more concerned about the labour market slowdown than Chairman Powell conveyed at the FOMC press conference a couple of weeks ago. That in turn should mean more rate cuts, especially if inflation cools further, which appears likely with a slowing economy.

 

 

Grim German ZEW reading

 

From the eurozone’s calendar, today’s data releases included the ZEW surveys in Germany. This showed a not-so-great reading of 38.5 vs. 41 eyed in the expectation index. Recent business data out of German has been far from great but the PMI data did show some signs of encouragement. Meanwhile, southern European countries like Spain have been growing decently. And, with lots of Germany fiscal spending to come, this should keep the EUR/USD forecast largely positive.

 

EUR/USD forecast: technical analysis and key level to watch

 

Following today’s gains, the EUR/USD has broken a short term bearish trend line, thus re-instating bullish technical EUR/USD forecast. The trend line had been in place ever since the exchange rate topped out at just shy of 1.1920 in mid-September. Since then, a series of short term lower lows were formed, which helped to form this trend line.

 

 

Despite the short term lower lows on the EUR/USD chart, we haven’t yet seen a major low low form on the higher time frames. The last significant low was made at just below 1.14 handle on the first day of August. That temporary break of the 1.14 handle paved the way for a sharp rally on that particular day, when a clear bullish signal was formed on the daily chart. Therefore, for as long as this level now holds as support, any short term weakness should be taken with a pinch of salt. That’s at least how I have been treating this recent pullback in the EUR/USD.

 

Anyway, in terms of the immediate term levels, the area between 1.1575 to around 1.1590 is now the first major support zone to watch now that we have broken out of this area. Below that, 1.1540ish the next level of interest followed by October’s low at just north of 1.1520. On the upside, the next potential short term resistance is seen around 1.1625, followed by 1.1660. The October high comes in just below the 1.1780 level followed by September and this year’s high of 1.1919.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R