Summary:
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ADP employment change: 163k vs 195k exp and 217k prior (revised from 219k)
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Lowest reading in 11 months and 3rd miss in the last 4
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USD drops to daily lows following the release
A weaker than forecast private jobs figure from the US may have lowered expectations for Friday’s NFP report while pushing the USD to its lowest point of the day. The ADP employment change for August fell to 163k - well below the 195k expected and the 217k seen last time out (this itself was revised marginally lower from 219k).
The USD is trading lower on the day against most of its peers with only the SEK showing any real declines against the buck. Source: xStation
You have to go back to September 2017 to find a worse reading for this employment indicator and this was largely due to the impact of hurricanes Harvey and Maria which created a short term loss of jobs in the areas affected. While the ADP is not normally by itself a major market mover, it can help frame expectations for the more widely followed NFP due to the fairly strong historic correlation between the two.
Due to the historical correlation between the two, the ADP is often seen as an early insight into the NFP release. Today’s miss may be seen to lower expectations a little for Friday’s more widely followed number. Source: XTB Macrobond
The data will have done little for the US dollar which was already giving up ground against most of its peers before the release, and has since fallen to its lowest level of the day. Wednesday’s session showed a bearish engulfing candle on D1 and when you also consider the wicks above the last two closed D1 candles it is apparent that some selling pressure is occuring around these levels. The bigger picture sees the USDIDX trade around the 23.6% fib of the large advance from 88.17 to 96.88. Further declines from here could target the 38.2% at 93.56 and 50% at 92.53 whilst a break of recent highs around 95.69 would allow longs to make another attempt at the 2018 peak of 96.88.
The USDIDX is back around the 23.6% fib level of the larger advance with the last two closed candlesticks indicative of selling pressure. Source: xStation
