The Euro (EUR) rallies against the US Dollar (USD) on Friday after the US Nonfarm Payrolls (NFP) report disappointed with just 22K jobs added in August, far below the 75K expected and July’s 79K (revised from 73K).

The Unemployment Rate rose to 4.3% from 4.2%, while Average Hourly Earnings rose 0.3% MoM and 3.7% YoY, in line with forecasts. EUR/USD surged over 40 pips to trade around 1.1740, up nearly 0.70% on the day.

The softer jobs data highlighted ongoing weakness in the US labor market, reinforcing expectations that the Federal Reserve (Fed) will cut rates at its September 16-17 meeting. While markets are already pricing in a 25 basis point (bps) cut, the weak headline payrolls print is likely to fuel speculation over the possibility of a larger 50 bps move to counter slowing growth.

US Treasury yields tumbled in response, with the 10-year falling to 4.09% and the rate-sensitive 2-year dropping to 3.50%, both at their lowest levels since April 7. The sharp decline in yields reflected mounting expectations of deeper Fed easing, adding further pressure on the Greenback.

The US Dollar Index (DXY), which tracks the Greenback against six major peers, weakened sharply after the release, slipping below 98.00 to trade near 97.65, down nearly 0.65% on the day. The index is hovering near the lower end of the narrow range established since August.

Meanwhile, EUR/USD is also testing the upper end of its recent range near 1.1730. A breakout above this level could open the way toward the July 24 high at 1.1789, while immediate support is seen at 1.1700 and the 50-day SMA at 1.1666.