The US Bureau of Labor Statistics will release non farm payroll data for January 2025 on Friday, February 7, 2025. What role does the latest non farm payroll report play in shaping the current US dollar index (DXY) and overall market sentiment? The following is a specific analysis.

Non farm Employment Report Expectations

The general forecast for non farm employment in January is an increase of 169000 jobs, following a strong growth of 256000 jobs in December 2024. The recent employment data has been strong, with the US economy adding an average of 186000 jobs per month in 2024. This indicates that by 2025, the labor market will still remain healthy.

The unemployment rate is expected to remain at 4.1%, and wages are expected to increase by 0.3% this month (up 3.8% from the same period last year). However, employment growth may be higher than expected, with an expected increase of 175000 to 225000 new job positions.

As always, the average hourly wage indicator will play a crucial role. Any significant deviation from the 3.8% -4% range may lead to an increase in inflation expectations. This will have a chain reaction on the Federal Reserve's interest rate cut policy, which may lead to some fluctuations in the US dollar.

The future faces challenges, and people are concerned that the uncertainty of tariffs and concerns about economic growth may lead to cautious attitudes towards recruitment in the first half of 2025. We will wait and see whether these concerns will become a reality, whether the labor market will cool down, and whether recruitment numbers will decrease.

The Current Situation of the US Labor Market

The US labor market is gradually slowing down. A report from December last year showed that job vacancies decreased by over 500000, bringing the total to 7.6 million. Professional services and healthcare experienced the largest decline, while the leisure and hotel industries remained strong.

Recruitment has slowed down, and in some industries, layoffs are offsetting the impact of new hiring. However, wages have remained stable, with an average wage growth rate of 3.9-4.0% over the past five months, indicating that demand for workers remains stable.

However, in the recently released data, there have been some mixed signs, such as the employment sub indicators of the manufacturing and service PMI, both showing sustained recruitment momentum. The ISM Manufacturing Employment Index recently climbed to 50.3, indicating employment expansion, while the ADP Private Employment Report showed an increase of 183000 jobs in January.

Given the above situation and developments in geopolitics and trade, people may understand why tomorrow's report is so important.

Potential impacts and scenarios

The non farm payroll report plays an important role in shaping the US dollar index (DXY) and overall market sentiment. If the report shows strong data, especially with over 190000 new jobs, the US dollar may strengthen, especially as it approaches the support level of around 107.50. But if the report performs weakly, with less than 135000 new jobs added or wage growth below 0.2%, the market may expect the Federal Reserve to cut interest rates even more, which could weaken the US dollar.

For the stock market, strong employment data may raise concerns about persistent inflation in the future, which could slow down market gains. On the other hand, weak employment data may indicate a more relaxed monetary policy and more interest rate cuts in the future, thereby triggering market optimism.

Technical analysis of the US dollar index

The US dollar index and bulls were unable to start this week as price action has now reached a lower high point but has not yet achieved a lower low point. Will employment data help the US dollar index continue its recent decline, or will it bring new momentum to bulls?

Before 106.13 and 105.76 became the focus, the immediate support level was at 107.00.

Before the resistance levels of 108.49 and 109.52 become the focus, moving upwards from here will require breaking through the resistance level of 108.00.

support level

Resistance level