Dollar Shrugs Strong ADP Job Data, Markets Mixed

Market overviews

Markets turned mixed as traders await FOMC minutes. The much stronger than expected US private job data provides little inspiration to the markets. Dollar pares back some gains but remain the second strongest for the week next to Sterling. Yen is also recovering but remains the worst performing, followed by Canadian. Euro is mixed together with commodity currencies.

Technically, Gold is regaining some buying after brief pull back. With 1789.31 support intact, rise from 1752.32 is still in favor to continue. Break of 1831.66 will resume this rally towards 1877.05 resistance. Such development, if happens, could be accompanied by some weakness in Dollar, in particular against Sterling and commodity currencies.

In Europe, at the time of writing, FTSE is up 0.20%. DAX is up 0.69%. CAC is up 0.67%. Germany 10-year yield is down -0.0111 at -0.128. Earlier in Asia, Nikkei rose 0.10%. Hong Kong HSI dropped -1.64%. China Shanghai SSE dropped -1.02%. Singapore Strait Times dropped -0.56%. Japan 10-year JGB yield dropped -0.0024 to 0.087.

US ADP employment grew 807k in Dec, broad-based gains

US ADP private employment grew 807k in December, much better than expectation of 358k. Looking at some details, small businesses added 204k jobs. Medium businesses added 214. Large businesses added 389k. By sector, goods-producing jobs grew 138k. Service-providing jobs grew 669k.

“December’s job market strengthened as the fallout from the Delta variant faded and Omicron’s impact had yet to be seen,” said Nela Richardson, chief economist, ADP. “Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth. December’s job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year. While job gains eclipsed 6 million in 2021, private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels.”

From Canada, building permits rose 6.8% mom in November, versus expectation of 1.5% mom. New housing price index rose 0.8% mom in November versus expectation of 0.7% mom.

Eurozone PMI composite finalized at 53.3, weakest growth since Mar

Eurozone PMI Services was finalized at 53.1 in December, down from November’s 55.9. PMI Composite was finalized at 53.3, down from November’s 55.4, lowest since March.

Looking at some member states, Ireland PMI composite dropped to 9-month low at 56.5. France dropped to 55.8. Spain dropped to 55.4, an 8-month low. Italy dropped to 54.7. Germany dropped to 49.9, an 18-month low.

Joe Hayes, Senior Economist at IHS Markit said:

“The accelerated expansion in output we saw in November unfortunately turned out to be brief. Amid a resurgence of COVID-19 infections across the euro area, growth slowed to the weakest since March in December. In Germany, where measures to combat COVID-19 have been more stringent than other monitored euro area countries, levels of economic activity broadly stagnated in December. Nonetheless, slower growth was seen across the board.

“There was also little to cheer with regards to inflation. Although there was a marginal easing of price pressures, we’re still in excessively hot territory – increases in both input and output costs were the second-quickest on record… As euro area nations deal with the latest developments in the pandemic, it’s clear that risks to the economy are now greater as tighter restrictions to curb the spread of COVID-19 are more likely than they have been recently.”

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3473; (P) 1.3515; (R1) 1.3570; More…

Intraday bias in GBP/USD remains on the upside with focus on 1.3570 support turned resistance. We’re seeing corrective fall from 1.4248 as complete with three waves down to 1.3158, after hitting 1.3164 medium term fibonacci level. . Sustained break of 1.3570 resistance will further affirm this bullish case and target 1.3833 resistance next. However, break of 1.3375 will turn bias back to the downside for 1.3158 low again.

In the bigger picture, focus remains on 38.2% retracement of 1.1409 to 1.4248 at 1.3164. Sustained break there will argue that whole rise from 1.1409 has completed at 1.4248, after rejection by 1.4376 long term resistance. That will revive some medium term bearishness and and target 61.8% retracement at 1.2493. However, strong rebound from current level will revive argue that up trend from 1.1409 is still in progress, and probably ready to resume.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Monetary Base Y/Y Dec 8.30% 9.30%
05:00 JPY Consumer Confidence Dec 39.1 40.9 39.2
08:45 EUR Italy Services PMI Dec 53 53.7 55.9
08:50 EUR France Services PMI Dec F 57 57.1 57.1
08:55 EUR Germany Services PMI Dec F 48.7 48.4 48.4
09:00 EUR Eurozone Services PMI Dec F 53.1 53.3 53.3
13:15 USD ADP Employment Change Dec 807K 358K 534K 505K
13:30 CAD Building Permits M/M Nov 6.80% 1.50% 1.30%
13:30 CAD New Housing Price Index M/M Nov 0.80% 0.70% 0.90%
14:45 USD Services PMI Dec F 57.5 57.5
15:30 USD Crude Oil Inventories -2.7M -3.6M
19:00 USD FOMC Minutes