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US ADP jobs report overview

Wednesday’s US economic docket features the release of the ADP report on private-sector employment for April, due at 12:15 GMT. Estimates point to an addition of 148K private-sector jobs during the reported month as compared to the 145K in March. The data will provide fresh insight into the US labor market conditions and drive expectations for the official jobs report, popularly known as NFP scheduled for release on Friday.

According to Matías Salord, news Reporter at FXStreet: “A slowdown in the job market is expected as the impact of tighter monetary policy hits the economy. It won’t necessarily be bad news for the Fed. A tight labor market is not helpful in fighting inflation. The market’s reaction to ADP has been trending lower over the years. The response could be short-lived but is still a relevant macroeconomic report about a crucial market.”

How could the data affect EUR/USD?

Ahead of the US labor market data, the US Dollar (USD) is seen extending the overnight retracement slide from a three-week top amid concerns over the US debt ceiling and renewed fears of a full-blown banking crisis. The disappointing release of the ADP report will reaffirm market bets that the Fed will eventually pause its rate-hiking cycle sooner rather than later. This, in turn, would prompt fresh USD selling and allow the EUR/USD pair to build on its ongoing recovery momentum from over a one-week low touched on Tuesday.

Conversely, a stronger reading is unlikely to impress the USD bulls ahead of the official jobs report on Friday. Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines heading into the key event risk – the highly-anticipated FOMC monetary policy decision, due later during the US session. This, in turn, suggests that the immediate market reaction to a positive surprise is more likely to be muted.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook for the major and writes: “EUR/USD returned within the long-term ascending regression channel and closed the last four-hour candles above the 20-period and the 50-period Simple Moving Averages (SMA) on the four-hour chart, reflecting a buildup of bullish momentum. Additionally, the Relative Strength Index (RSI) indicator on the same chart is back above 50 after having spent the last couple of trading days below that level.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, 1.1050 (static level) aligns as interim resistance ahead of 1.1070 (end-point of the uptrend, mid-point of the ascending channel) and 1.1100 (psychological level, static level).”

“1.1000/1.0990 (psychological level, 100-period SMA) could be seen as the first support. A four-hour close below that area could discourage buyers and open the door for additional losses toward 1.0950 (Fibonacci 23.6% retracement) and 1.0920 (200-period SMA),” Eren adds further.

Key Notes

  •  US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

  •  EUR/USD Forecast: Euro bulls retain control as focus shifts to Fed

  •  EUR/USD climbs to weekly highs past 1.1040, focus remains on Fed

About the US ADP jobs report

The Employment Change released by the Automatic Data Processing, Inc, Inc is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. So a high reading is traditionally seen as positive, or bullish for the USD, while a low reading is seen as negative, or bearish.

Source: https://www.fxstreet.com/news/when-is-the-us-adp-employment-report-and-how-could-it-affect-eur-usd-202305031046