EUR/USD fell below 1.1900 on Wednesday as the US dollar recovered after US Nonfarm Payrolls data. The pair traded at 1.1885, down 0.07%, after touching a daily low of 1.1833.
US payrolls rose by 130K in January, with private hiring at 172K and government payrolls down by 42K. The unemployment rate fell to 4.3%, below the Fed’s 2026 estimate of 4.5%.
Labor Market Revisions And Rate Expectations
Annual revisions showed earlier job growth estimates were overstated. The March 2025 level was revised down by 898K, and 2025 job growth was revised to 181K from 584K.
Rate expectations shifted after the data, with market pricing implying about a 95% chance of no March cut, based on Prime Market Terminal data. CBOT data showed money markets pricing nearly 51 basis points of easing by year-end.
Kansas City Fed President Jeffrey Schmid said inflation remained hot and warned that further cuts could prolong high inflation. In Europe, there were no major releases, and ECB officials have said inflation is controlled, while noting the euro’s strength was already factored in.
Ahead, the Eurozone calendar includes speeches by Mario Cipollone, Philip Lane and Joachim Nagel. The US schedule includes jobless claims for the week ending 7 February, housing data, and speeches by Lorie Logan and Stephen Miran.
Trading Focus And Key Levels
The market is reacting to the strong headline jobs number and the Fed’s firm stance, pushing rate cut expectations further out. We’ve seen bets for a March 2025 cut nearly evaporate, with futures markets now pricing in just a 5% chance. This move is understandable given that recent inflation data from January showed core prices were still running above 3%, giving officials no reason to ease policy.
However, we cannot ignore the massive downward revision to past job growth, which erased almost 900,000 previously reported jobs from 2024. Looking back at early 2024, we saw a similar, though smaller, revision of over 300,000 jobs which signaled a cooling trend that the market initially overlooked. This suggests the foundation of the US labor market is significantly softer than the latest headline figure implies.
This conflict between the strong current data and the weak historical revisions creates significant uncertainty, which is an opportunity for derivatives traders. We believe buying volatility on EUR/USD is an attractive strategy for the coming weeks. Implied volatility in the options market may not yet fully price in the risk that the market has misjudged the economy’s true strength, setting up a potential for profitable moves.
For a directional play, we are leaning towards a weaker dollar once the market narrative shifts from the single jobs report to the broader, weaker trend. A sustained move above the 1.1916 resistance level could be a trigger for long positions, potentially targeting the 1.2000 psychological barrier. Upcoming Initial Jobless Claims figures will be critical, as any number above the recent average of around 220,000 could accelerate this repricing.
Conversely, a break below the trend-line support near 1.1818 would invalidate this view for the time being. This would signal that the market is still committed to the hawkish Fed narrative, regardless of the underlying weakness. In that scenario, we would have to reconsider our position and look for support closer to the 1.1750 area.
