Today has been a quiet one in the European session, as markets lacked the appetite to really make any moves, awaiting the FED meeting later today, which is expected to produce a 75 bps rate hike. EUR/USD has been on a decline since last Thursday, following the ECB meeting which also produced a 75 bps hike, but didn’t help the Euro much, as rumours pointed to a slowdown in the coming meetings.

EUR/USD H1 Chart – Is the Retrace Complete?

The stochastic indicator is overbought and turning lower

Today we saw a slight retrace higher on the H1 chart, but that seems to be over, as the stochastic indicator is already overbought and now the price is reversing down. We decided to open a sell forex signal on this pair, after the US ADP employment claims report, which came in positive.

US ADP Employment Report for October 2022

• ADP October employment +239K vs +195K expected
• Prior was +208K (revised to +192K)
• Forecasts ranged from 150-230K
• Annual pay up +7.7% vs +7.8% prior

This survey has been relaunched and is no longer designed to predict non-farm payrolls. Instead, its aim is to offer a corollary survey of the US jobs picture. The US dollar has strengthened on the data with USD/JPY up to 147.30 from 147.10 with 10-20 climbs elsewhere. S&P 500 futures fell to -5 from +1.

The Fed won’t like to see the uptick in jobs growth in October, especially after yesterday’s strength in job openings. That said, Fed members know that employment is a lagging indicator so I doubt it changes their messaging about where rates will be in March 2023.

“This is a really strong number given the maturity of the economic recovery but the hiring was not broad-based,” said Nela Richardson, chief economist, ADP. “Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.” Along those lines, 210,000 of the jobs were in leisure and hospitality with most other categories declining.