The U.S. February non-farm payroll report will be released at 21:30 Beijing time on Friday (March 6). Traders and economists expect the report to show 59,000 new jobs added in the U.S., with average hourly earnings rising 0.3% month-over-month (3.7% year-over-year), and the U3 unemployment rate remaining at 4.3%.

Non-farm payroll report overview

The situation in the Middle East is undoubtedly the most pressing issue for the market right now, but that doesn’t mean we should ignore “Level 1” economic reports, and the U.S. non-farm payrolls report definitely falls into that category.

Last month, U.S. labor market data was stronger than expected, with 130,000 new jobs added in January, the unemployment rate falling to 4.3%, and average hourly earnings rising strongly by 0.4% month-on-month. Market expectations for the February jobs report are more moderate, pointing to a return to the "low hiring, low layoffs" pattern of the past year or so.

The market generally expects this jobs report to show a "stable" trend, meaning moderate job growth, a stable unemployment rate, and continued gradual wage increases.

Given that inflation remains stubbornly above the Fed’s 2% target (not to mention that rising oil prices in March could push inflation up), it is almost certain that the Fed will keep interest rates unchanged at the end of this month; according to data from the CME Group’s FedWatch tool, the market currently predicts a 97% probability of keeping rates on hold.

More noteworthy is the outlook: Jerome Powell's last meeting as Federal Reserve Chairman will be held in April, and traders currently estimate only a 15% probability of a rate cut at that time.



Once Powell's term ends, Kevin Warsh, who is expected to become the next Federal Reserve chairman, may be more aggressive in implementing monetary easing policies. However, unless we see a stagnant job market or a significant drop in inflation, the current interest rate range of 3.50%-3.75% is likely to remain unchanged.

Non-farm payroll data forecast

Pay attention to reliable leading indicators to help predict the monthly non-farm payroll report:



Based on these data, leading indicators suggest that this month's non-farm payroll data may be higher than expected, but due to limited survey response rates, there is a significant degree of uncertainty.

Potential non-farm market reaction

From a technical perspective, after rising at the beginning of the week, the US dollar is currently trading near the top of its three-month range, making market risk skewed to balanced to slightly bearish before and after data releases. During Friday's Asian session, the US dollar index fluctuated narrowly around 98.95.



(US Dollar Index Daily Chart, Source: FX678)

Technical Analysis of the US Dollar – Taking the USD/JPY Exchange Rate as an Example

The USD/JPY pair is typically the currency pair that reacts most "purely" or logically to US data. During Friday's Asian session, the USD/JPY pair traded in a narrow range around 157.50.

From a technical perspective, USD/JPY traded in a range this week, testing a six-week high above 157 (157.94). Given the relatively gradual rise, the 14-day Relative Strength Index (RSI) remains in neutral territory, suggesting the exchange rate could move in either direction depending on the non-farm payroll report.

If the jobs report is stronger than expected, USD/JPY could break through 158.00 and challenge the 18-month high near 159.00; conversely, weaker-than-expected labor market data could cause the exchange rate to fall back below 156.00. However, traders may remain keen to buy on dips until a clear signal emerges regarding a solution to the US-Iran conflict.



(USD/JPY daily chart, source: FX678)

At 10:38 Beijing time, the USD/JPY exchange rate is currently at 157.52/53.