EUR/USD forecast: Mixed NFP keeps dollar under pressure as focus turns to ECB

The US dollar was already down on the day when the US jobs report was released. It then fell further as traders reacted to the rise in the unemployment rate to its highest level since 2021, even if the headline jobs growth beat expectations slightly. Still, the jobs report was not as bad as some had feared, and this limited the impact of the data. Next up is the release of CPI on Thursday, which is when we will also hear from the European Central Bank, keeping the EUR/USD forecast in sharp focus.

 

US dollar reacts to mixed jobs report

 

• NFP for November was mixed: The US added 64,000 new jobs in November, beating estimates of around 50,000. But that’s where the good news ends. Unemployment rate rose to 4.6%, reaching its highest level since September 2021. It was from 4.4%, more than 4.5% expected. Average hourly earnings were just +0.1% m/m vs. +0.3% eyed, which along with a pickup in the unemployment rate points to disinflation.

 

• Meanwhile, the October payrolls report showed a massive 105,000 drop compared to a 25,0000 drop expected, although this was entirely due to the federal government job losses of 162,000 in October – due to the government shutdown.

 

• Retail sales: 0.0% vs. +0.1% eyed, but core sales +0.4% vs. +0.2% expected.

 

Today’s US data releases were overall weaker than expected, although not as bad as some had feared either. The market was pricing in just shy of 50% chance of a March cut before the jobs report, but in the immediate aftermath of the report that was up to around 60%. At the time of writing, US rate futures still saw two cuts in 2026 after the jobs and retail sales data, pricing around 58 bps of easing next year.

 

EUR/USD forecast: ECB next key risk event

 

Ahead of Thursday’s ECB meeting, attention today turned to the eurozone PMIs, following some encouraging industrial production data released yesterday. There had been hope that the figures would show a further improvement in European industrial sentiment, with lower energy prices continuing to support the eurozone’s terms of trade, now close to the best levels seen in almost four years. In that sense, the backdrop remains fundamentally euro positive.

 

However, the data disappointed slightly. The composite PMI slipped from 52.8 to 51.9 in December, with manufacturing output once again contracting. Even so, this level is still consistent with respectable eurozone GDP growth in the fourth quarter of 2025.

 

After peaking in the summer, Manufacturing PMI resumed its decline after August and fell back to 49.2 this month. Services followed a different trajectory, bottoming out in May and remaining comfortably above the 50 threshold, at 52.6 in December.

 

As the year draws to a close, the growth picture looks familiar. Germany and France continue to lag slightly, while the rest of the eurozone—where PMI details are less granular—appears more resilient.

 

Despite ongoing global uncertainty, the eurozone economy has managed to stay afloat throughout the year. While a sharp acceleration in growth seems unlikely, a gradual improvement over the course of 2026 remains our base case, which is why we maintain a bullish EUR/USD forecast next year.

 

Technical EUR/USD forecast and levels to watch

 

 

The bullish trend on the EUR/USD chart looks to have remained intact following the release of the jobs report earlier today. We expect support levels to hold heading into the ECB meeting, with the first line of defence now seen around 1.1725/30 area. Below that lies the most important short-term support zone between 1.1650 to 1.1680ish. Nothing significant below that until 1.1500 now. On the upside, 1.1800 remains a key objective for the bulls. Above it, the September high of 1.1919 then the 1.20 handle.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R