The night before the US employment report: Can non-farm employment numbers reverse the dollar's decline?

This Thursday at 13:30 Asia early morning, the U.S. Bureau of Labor Statistics will release the delayed non-farm employment data for September

The delayed September employment data from the U.S. Bureau of Labor Statistics (BLS) is about to be unveiled, and market traders are holding their breath for this key report that could change the fate of the dollar.

According to economist consensus forecasts, non-farm employment is expected to increase by 50,000 in September, a significant rebound from the sluggish performance of only 22,000 in August. Meanwhile, the unemployment rate is expected to remain at 4.3%, and the average hourly earnings, which measure wage inflation, are forecasted to grow by 3.7% year-over-year.

Why does this report affect global markets so much?

Why do dollar traders care so much about this data? The answer points to the Federal Reserve’s interest rate cut prospects in December. In recent weeks, market expectations for continued easing by the Fed have cooled significantly — the latest data from CME Group’s FedWatch tool shows the probability of a rate cut in December has fallen from 65% three weeks ago to 33% now.

TD Securities analysts offer a more aggressive forecast, suggesting non-farm employment could rebound to 100,000, with private sector jobs increasing by 125,000 and government jobs decreasing by 25,000. The expected unemployment rate remains at 4.3%, but the month-over-month growth in average hourly earnings may fall back to 0.2%.

Recent economic data supports this cautious outlook: a report from ADP on November 5th showed that private sector jobs increased by only 42,000 in October, beating expectations by 25,000 but still not strong; the ISM Manufacturing PMI fell to 48.7, well below the forecast of 49.5; and corporate layoffs surged by 183.1% month-over-month, reaching a 20-year high.

How will the non-farm employment data reshape the currency landscape?

The recent rebound of the dollar against major currencies has set the stage for this showdown. The EUR/USD pair recently broke below the 1.1600 level again, with strong downward momentum.

From a technical perspective, FXStreet’s Asian analysts note that EUR/USD has fallen below the 21-day simple moving average of 1.1574, and the 14-day Relative Strength Index (RSI) is also below the midline, signaling a clear bearish trend. If the current decline continues, the next support level is at the November 5th low of 1.1469. A further break below that would threaten the 200-day moving average at 1.1395.

Two major scenario scripts

Weak employment data scenario: If non-farm employment falls below 50,000 and the unemployment rate unexpectedly rises, it will confirm a soft U.S. labor market, reversing market expectations for a December rate cut by the Fed. The dollar could face selling pressure, and EUR/USD may rebound toward 1.1700.

Strong employment scenario: Conversely, if non-farm employment performs strongly and the unemployment rate remains at or below 4.3%, robust data will dispel recent market assumptions of a Fed rate cut, providing momentum for the dollar to rally. EUR/USD could continue downward, targeting below 1.1400.

Industry insiders believe that although this report is somewhat delayed, it is crucial for the Fed’s decision-making ahead of the December policy meeting — it may be the last comprehensive employment snapshot before that month.