EUR/USD steadies around d mid-1.0600s with eyes on US ADP Employment data

• EUR/USD pares the biggest daily loss in three weeks inside a 15-pip range.
• Market sentiment remains sour but a pause in bond selling seems to test bears.
• ECB’s Holzmann backs 50 bps rate hike, Fedspeak portrays hawkish concerns.
• US ADP Employment Change can renew DXY run-up if matches recently positive US data.

EUR/USD skates on thin ice as traders await early signals of Friday’s US NFP, namely the ADP Employment Change, amid sluggish markets. That said, the quote remains sidelined between 1.0645 and 1.0660, recently picking up bids from the bottom, during early Thursday morning in Europe.

Global markets remain dicey on Thursday even as growth fears join China-linked headlines. The reason could be linked to the cautious sentiment ahead of this week’s key data, as well as the US Treasury yields’ struggle to refresh its two-week high, down 1.2 basis points (bps) to 2.91% by the press time.

That said, the benchmark US 10-year Treasury yields jumped to the highest levels in a fortnight the previous day after strong US data joined comments from the Fed policymakers that portrayed the US central bankers’ likely aggression in lifting rates. It’s worth noting that fears of global growth and China-linked headlines are extra positive for the US dollar, due to its safe-haven appeal.

Fed’s monthly Beige Book and statements from St. Louis Federal Reserve Bank President James Bullard renewed recession fears the previous day. Also challenging the growth concerns were fresh headlines suggesting trade/political tensions between the US and China, as well as between China and Australia, not to forget fears emanating from the Russia-Ukraine crisis.

On the other hand, firmer US data also allowed Federal Reserve Bank of Richmond President Thomas Barkin to stay positive about the future rate hikes. The US ISM Manufacturing PMI for April rose to 56.1 versus the 54.5 expected and the 55.4 prior. Further, the US JOLTs Job Openings eased below 11.8 prior readings but matched 11.4 market forecasts.

Alternatively, no change in the Eurozone Unemployment Rate also exerted downside pressure on the EUR/USD prices even as comments from European Central Bank (ECB) Governing Council member Robert Holzmann defended bulls. The policymaker said that the record-high inflation print for the euro area supports the view that a 50 basis points rate hike will be needed.

Considering the sour sentiment and increasing odds of the Fed’s aggression in rate hikes, not to forget recently firmer US data, EUR/USD prices are likely to remain pressured. However, today’s US ADP Employment Change for May, expected at 300K versus 247K prior, will be eyed closely due to being the early signal for Friday’s US Nonfarm Payrolls (NFP). Additionally, the US Factory Orders for May, bearing forecasts of a 0.7% increase compared to 2.2% in previous readouts, could also entertain the pair traders.

Also read: US ADP Employment Change May Preview: The labor market recedes from center stage

Technical analysis

A clear downside break of a three-week-old support line, now resistance around 1.0750, directs EUR/USD towards the 21-DMA level surrounding 1.0600.