09.01.202500:28 Forex Analysis & Reviews: EUR/USD: Weak ADP Report and a Bold CNN Leak

The ADP report did not meet expectations; however, the dollar remained stable, even against the euro. Sellers of EUR/USD are once again trying to consolidate around the 1.02 level amid increased risk-off sentiment and strong data indicating growth in jobless claims. While the disappointing ADP report made things more challenging for dollar bulls, it did not significantly change the overall situation. The U.S. Dollar Index is holding near the 109 mark, and EUR/USD is trading between the 1.02 and 1.03 levels. The outlook for the pair remains bearish, suggesting that any corrective rebounds could present opportunities to initiate short positions.

According to ADP, U.S. private-sector employment grew by only 122,000 in December, falling short of analysts' expectations of 140,000. A spokesperson noted that the labor market is transitioning to "more modest growth rates" in hiring and wage increases as 2024 concludes.

Following the report's release, the downward momentum in EUR/USD faded, with traders retreating to the 1.03 figure. Earlier, sellers had pushed the pair to a new weekly low of 1.0274.

Despite this "tactical retreat," there's no evidence of a broader reversal. Buyers were unable to mount even a moderate correction due to two several reasons. Firstly, historical discrepancies between ADP figures and official Nonfarm Payrolls persist. For instance, last month's Nonfarm Payrolls showed an increase of 227,000, while ADP reported 146,000. Traders, therefore, hesitate to overreact to the ADP report alone.

Secondly, the weekly U.S. jobless claims published on Wednesday indicated a different trend. Initial claims increased to just 201,000, marking a near 12-month low and continuing a decline for the second consecutive week. In comparison, claims had risen to 220,000 at the end of December and 211,000 the week before.

The JOLTS data released on Tuesday indicated a notable rise in job openings for November, reaching 8.098 million, which surpassed the expected figure of 7.70 million.

Despite the disappointing ADP report, market expectations for Federal Reserve policy remain unchanged. Traders continue to anticipate a nearly 100% chance that the Fed will maintain its current policy stance this month and a 60% probability of holding steady at the March meeting (according to CME FedWatch).

The dollar's strength is bolstered by a risk-off sentiment associated with potential aggressive policies from President-elect Donald Trump, whose inauguration is just 12 days away. According to CNN, Trump is contemplating declaring a state of economic emergency to justify implementing sweeping tariffs. Although he has not confirmed or denied this, he previously mentioned the idea in November after his election.

Trump has proposed several measures, including a 10% tariff on goods from China, a 25% tariff on products from Mexico and Canada, and a threat to impose broad tariffs on European goods unless the EU increases its imports of U.S. oil and gas. According to CNN sources, Trump's team is exploring other legal avenues to justify these tariffs. However, if those efforts fail, he may declare an economic emergency.

Unsurprisingly, these prospects have unsettled the markets, leading to increased demand for the safe-haven U.S. dollar.

The overall situation still favors a bearish outlook for the EUR/USD pair, despite concerns raised by the ADP report. Any corrective price surges present opportunities to initiate short positions.

From a technical standpoint, EUR/USD buyers were unable to break even the intermediate resistance level of 1.0340 (Tenkan-sen line on the D1 timeframe). The pair remains positioned between the middle and lower lines of the Bollinger Bands and below all Ichimoku indicator lines. The initial (and primary) bearish target is 1.0260 (the lower Bollinger Band line on D1). A break below this level would pave the way for sellers to target the 1.02 figure.