Big miss for ADP Employment Change; weather cited

The ADP Employment Change showed that the US economy added 106,000 private sector jobs in January. Expectations were for 178,000 jobs to be added. This was the lowest print since January 2021! However, this print should be taken with a grain of salt as ADP noted that the extreme weather that hit much of the country effected that data. December’s print was revised higher from 235,000 to 253,000. Although there is no correlation between the ADP Employment Change and Non-Farm Payrolls, one must consider that weather may have impacted the January NFP as well, which will be released on Friday. Expectations are for a NFP print of +185,000 vs a December reading of +223,000. Traders will be paying just as much attention to the Average Hourly Earnings, which was revised lower in November from 0.6% to 0.4%. Decembers print was 0.3% vs an expectation of 0.4%. If the trend continues, January’s Average Hourly Earnings may be lower than the 0.3% expected. It should also be noted that the Q4 2022 Employment Cost Index fell from 1.2% to 1.0%. Will a lower increase in jobs and a lower increase in wages (up to this point) affect the language used in the FOMC statement?

Everything you wanted to know about the Federal Reserve

GBP/USD has been had been moving higher since making all-time lows on September 26^th, 2022. The pair then moved higher in an ascending wedge formation. As GBP/USD reached the apex and a high of 1.2447 on December 15^th, 2022, it broke lower to 1.1956. However, in early January, the pair could not break through the confluence of horizontal support, the psychological round number support at 1.2000, and the 50-Day and 200-Day Moving Averages. GBP/USD went back to test the recent highs and is trading within that range currently.

Source: Tradingview, Stone X

Trade GBP/USD now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, GBP/USD is trading just above horizontal support near 1.2300. If the Fed signals it still considers the jobs market to be strong and wages to be high (along with general inflation), GBP/USD should move lower. The next level of support is the low from January 24^th at 1.2263. Below there, price can move to the 50 Day Moving Average at 1.2185 (see daily), then the lows from January 12^th at 1.2084. However, if the Fed signals that its interest rate increases have worked and that it may pause in March, GBP/USD could move higher. The first level of resistance is the downward sloping trendline dating to January 23^rd near 1.2410, then the highs from January 23^rd at 1.2447. Above there, price can move to the highs of May 27^th, 2022, at 1.2667.

Source: Tradingview, Stone X

Will the weather effect from today’s ADP Employment Change have the same effect on January’s NFP report? And if it does, will the Fed and traders ignore it? The wage increase component will also be important. The Fed wants to see slowing wage increases, slowing job increases, and a higher Unemployment Rate to make sure interest rates are having the desired effect on inflation. Has that been shown over the last couple days and months in the jobs data? Watch the Fed’s statement and Fed Chairman Powell’s press conference to find out!

Learn more about forex trading opportunities.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.