U.S. employment data is about to be released, traders hold their breath in anticipation

At 13:30 Beijing time on Thursday, the U.S. Bureau of Labor Statistics (BLS) will release the delayed September Non-Farm Payrolls (NFP) report. This data is crucial for the direction of the US dollar exchange rate, and the market is paying close attention.

Employment Market Recovery Signals Spark Expectations

U.S. employment data will become the next key market focus. Economists generally expect September non-farm employment to rebound significantly from August’s 22,000, adding approximately 50,000 jobs. At the same time, the unemployment rate is expected to remain steady at 4.3%, while the closely watched Average Hourly Earnings (AHE) are projected to grow 3.7% year-over-year, consistent with last month.

TD Securities analysts offer a more optimistic forecast, suggesting that employment growth in September could rebound to 100,000, with private non-farm employment increasing by 125,000, while government employment may decrease by 25,000. They also expect the month-over-month growth in average hourly earnings to slightly decline to 0.2% (3.6% YoY).

Fed Rate Cut Expectations Fluctuate Again

The timing of the U.S. employment data release is special because it could directly influence the Federal Reserve’s decision on interest rate cuts in December. Recently, market confidence in further easing by the Fed has noticeably declined. According to CME Group’s FedWatch tool, the probability of a rate cut in December has fallen from 65% earlier to 33%, reflecting policymakers’ concerns that lowering borrowing costs might weaken efforts to combat inflation.

October economic data also confirms this cautious attitude. Automatic Data Processing (ADP) reported that in October, private sector employment increased by 42,000 jobs, exceeding expectations by 25,000. However, Challenger, Gray & Christmas data shows that announced layoffs surged by 183.1% month-over-month, marking the worst October in over 20 years. Additionally, the Institute for Supply Management (ISM) Manufacturing PMI for October was 48.7, below the expected 49.5.

Data Quality Will Determine EUR/USD Movement

The recent strength of the dollar has caused the EUR/USD currency pair to fall back below the key 1.1600 level. September’s non-farm employment figures will be a critical factor in determining the pair’s direction.

If non-farm employment falls below 50,000 and the unemployment rate unexpectedly rises, it will confirm a soft U.S. labor market, significantly boosting market expectations for a December rate cut by the Fed. Under such circumstances, the dollar will face strong selling pressure, and EUR/USD could rebound to 1.1700.

Conversely, if non-farm employment shows a significant increase and the unemployment rate remains at 4.3% or further declines, strong employment data will undermine expectations of rate cuts and support the dollar’s rise. In this case, EUR/USD may continue its downward trend, testing below 1.1400.

Technical Signals Have Been Sent

Dhwani Mehta, Chief Analyst at FXStreet Asia, pointed out that EUR/USD closed below the 21-day Simple Moving Average (SMA) of 1.1574 on Wednesday, strengthening the downward momentum. The 14-day Relative Strength Index (RSI) on the daily chart remains below the midline, increasing the likelihood of further bearish movement.

If the downtrend continues, the next support level is at the November 5 low of 1.1469. If broken, the 200-day SMA at 1.1395 will come into focus. Conversely, the buyers’ defensive line is at the psychological level of 1.1350.

Any rebound needs to be confirmed technically above the 21-day SMA (1.1574). To reverse the bearish trend, the next bullish target is around 1.1650, where the 50-day and 100-day SMAs converge. If the price continues to rise and breaks through this zone, it could reach the round number of 1.1700.

Although September’s data is somewhat lagging, it may still be the last comprehensive employment report the Fed can analyze before its December monetary policy meeting. Therefore, market reactions following this U.S. employment data release are worth close attention.