US ADP jobs report overview

Wednesday's US economic docket features the release of the ADP report on private-sector employment for March, due at 12:15 GMT. Estimates point to an addition of 200K private-sector jobs during the reported month, down from 245K in February. 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.

As Matías Salord, news Reporter at FXStreet, explains: All the economic numbers have the potential to influence market expectations on Fed’s monetary policy, which are steady regarding the very short-term but fluctuate sharply considering what could happen from the third quarter onwards. Recession fears and recent banking developments have led markets to price in rate cuts later in 2023. The economic outlook is uncertain and even the Fed does not know what it will do. The forward guidance is vague. This week’s economic data could help to shed some light but it won’t bring clarity.

How could the data affect EUR/USD?

Ahead of the key release, the US Dollar (USD) stages a modest recovery from its lowest level since early February touched this Wednesday amid an intraday uptick in the US Treasury bond yields. That said, firming expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle act as a tailwind for the Greenback. The disappointing release of the ADP report will reaffirm market bets and prompt fresh selling around the buck, which, in turn, supports prospects for an extension of the EUR/USD pair's upward trajectory witnessed over the past three weeks or so.

Conversely, a stronger reading is unlikely to impress the USD bulls ahead of the official jobs report. This, along with the prospects for additional rate hikes by the European Central Bank (ECB), suggests that the path of least resistance for the EUR/USD pair is to the upside. Hence, any immediate market reaction is more likely to remain limited.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook for the major and writes: “EUR/USD trades within the upper half of the ascending regression channel coming from mid-March and the Relative Strength Index (RSI) indicator on the four-hour chart stays below 70, suggesting that the near-term bullish bias stays intact.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, 1.1000 (psychological level, upper limit of the ascending channel) aligns as key resistance ahead of 1.1035 (multi-month high set in early February).”

“In case EUR/USD falls below 1.0950 (mid-point of the ascending channel), it could extend its correction toward 1.0900 (lower limit of the ascending channel, 20-period Simple Moving Average (SMA) on the four-hour chart) and 1.0850 (50-period SMA),” Eren adds further.

Key Notes

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

  •  EUR/USD Forecast: Euro could test 1.1000 on weak US data

  •  EUR/USD may break 1.10 at any time but could struggle to rally much further – ING

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.