EUR/USD: Trading the ADP jobs report October 2013


The ADP Non-Farm Employment Change measures the change in the number of employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar.

Here are the details and 5 possible outcomes for EUR/USD.

Published on Wednesday at 12:15 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, publication of employment data, such as the Non-Farm Employment Change, is highly anticipated by the markets, and the indicator can have a strong impact on the direction of EUR/USD.

ADP Non-Farm Employment Change was last released in the first week of October, during the government shutdown. That release pointed to a drop to 166 thousand, well below the  estimate of 177 thousand. The markets are bracing for a weak reading of just 151 thousand in the upcoming release. If the indicator fails to beat the estimate, we could see the US dollar lose some ground.

Sentiment and Levels

Weak US numbers, notably poor employment data,  and the inconclusive agreement on the fiscal crisis is already priced in, especially against the euro. Further disappointing US indicators could weaken the dollar, but against the euro the move could be overdue, and EUR/USD could be overbought.

The dollar remains under strong pressure from the high-flying euro and the pound, and this is beginning to make policymakers at the ECB uneasy. Adding the tighter credit conditions in the old continent, falling inflation and a slide in German business confidence, we could see a nice correction now, with a helping hand of ECB comments. So, the sentiment has turned bearish on EUR/USD towards this release.

Technical levels from top to bottom: 1.4036, 1.3940, 1.3870, 1.3800, 1.3710 and 1.3650.

5 Scenarios

  1. Within expectations: 147K to 155K: In this scenario, EUR/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations: 156K to 161K: A reading above expectations would signal economic expansion, and could push the pair above one resistance level.
  3. Well above expectations: Above 161K: A sharp rise in employment numbers could propel EUR/USD upwards, and a second resistance level could be broken.
  4. Below expectations: 141K to 146K: A weak reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below 141K: Such a scenario would be bearish for the dollar, and EUR/USD could break a second support level.

For more on the eruo, see the EUR/USD forecast.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.


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