## U.S. Labor Market Data Will Be a Key Driver for the Dollar's Future

The U.S. employment report has always been a key factor influencing global markets, especially as the Federal Reserve's policy stance shifts. This Thursday at 13:30 Beijing time, the U.S. Bureau of Labor Statistics will release the September non-farm payrolls data. This delayed report will provide traders with a crucial window to assess the health of the U.S. labor market.

## **Market Expectations and Data Outlook**

Economists generally expect September non-farm payrolls to increase by 50,000, a significant rebound from August's 22,000. The unemployment rate is expected to remain at 4.3%, while U.S. hourly earnings year-over-year growth is projected to stay at 3.7%.

However, TD Securities' analysis team offers a more optimistic forecast, suggesting employment growth could reach 100,000, with 125,000 new private sector jobs and a reduction of 25,000 in government employment. Regarding U.S. hourly wages, a slight month-over-month decline to 0.2% is expected, with a year-over-year growth rate of 3.6%, indicating potential easing of inflationary pressures.

## **Interaction Between Employment Data and the Dollar Outlook**

The recent rebound of the dollar against major currencies has already set the stage for this data release. The EUR/USD pair has fallen back below the key 1.1600 level, reflecting market expectations of a strong dollar.

If non-farm payrolls fall below 50,000 and the unemployment rate unexpectedly rises, it will confirm a weakening U.S. labor market, further boosting market bets on a December rate cut by the Fed. In this scenario, the dollar could come under selling pressure, and EUR/USD might rebound toward 1.1700. Conversely, if employment shows strong growth and the unemployment rate remains low or declines further, it will dampen rate cut expectations, supporting the dollar, and EUR/USD could continue to fall below 1.1400.

## **Shift in the Federal Reserve's Policy Stance**

The latest policy meeting minutes show that policymakers are cautious about further easing, concerned that lowering borrowing costs could undermine efforts to combat inflation. According to the CME FedWatch tool, the probability of a rate cut in December has fallen from 50% before the minutes' release to 33%, down sharply from 65% a week earlier.

This shift in policy stance means that strong employment data will further reduce rate cut expectations, providing support for the dollar.

## **Mixed Signals from Recent Economic Data**

October economic data in the U.S. presents a mixed picture. The ADP employment change report showed a private sector increase of 42,000 jobs, exceeding the 25,000 forecast. However, Challenger data revealed a month-over-month surge of 183.1% in planned layoffs, marking the worst October in over 20 years.

In manufacturing, the ISM Manufacturing PMI was 48.7, below the 49.5 forecast; while the Services PMI unexpectedly rose to 52.4, reflecting a significant increase in new orders. These figures highlight an uneven economic recovery.

## **Technical Analysis: Short-term Outlook for EUR/USD**

FXStreet analysts note that EUR/USD has broken below the 21-day simple moving average of 1.1574 on the daily chart. The Relative Strength Index (RSI) remains below the midline, signaling increased bearish momentum. Short-term support is at the November 5 low of 1.1469; a further break below could threaten the 200-day moving average at 1.1395.

If the downtrend continues, buyers' defense zone is around the psychological 1.1350 level. On rebounds, confirmation above the 21-day moving average is needed, with targets near 1.1650 (the intersection of the 50-day and 100-day moving averages). Further upward movement could reach the 1.1700 round number.

As the last comprehensive employment data available before the Fed's December meeting, the non-farm payroll report's importance is self-evident. Regardless of the final figures, they will have a profound impact on the future direction of the dollar and EUR/USD and other currency pairs.