Whose employment data do you trust more? ADP or ISM

Depending on your answer, it may give you a better expectation for NFP on Friday

Jobs 3

On Monday, the ISM Manufacturing PMI for July was worse than expected at 58.5 vs 60.6 in June.  Although the headline number was lower, brought down primarily by the New Orders and Prices Paid components, the Employment component was stronger than expected and increased from 49.9 to 52.9! Today, ISM released then Non-Manufacturing PMI for July.  The headline number was strong at 64.1 vs 60.5 expected and 60.1 in June.  One of the reasons for this increase was due the Employment component, which rose to 53.8  vs 49.4 expected and 49.3 last.  Therefore, both the ISM Manufacturing AND Non-Manufacturing PMIs had strong Employment components.

Also today, ADP released their private Employment Change for July.  According to ADP, +330,000 private  jobs were added to the economy, the lowest print since February.  This was vs an estimate of +695,000 and June’s print of +680,000.  Unsurprisingly, leisure and hospitality led the way with new jobs.  Restaurants, nightclubs, hotels, and airlines have all seen higher demand for services, and the need for jobs to provide these services are reflected in this data. 

What are economic indicators?

So, the ISM data shows an increase in jobs for both Manufacturing and Non-Manufacturing.  ADP shows a decrease in jobs from June (by a lot!), although the leisure and hospitality led the way.  Whose data do you trust more?  Depending on your answer, it may give you a better expectation for NFP on Friday.  Current expectations for Non-Farm Payrolls on Friday are +885,000 jobs to be added to the economy for July vs 850,000 in June. (See out NFP Preview).

What are non-farm payrolls?

In addition, on Thursday the US releases Initial Jobless Claims for the week ending July 31st.  Expectations are for 384,000.  However, recall that for the last two weeks, the prints were higher than expected at 419,000 and 400,000 respectively. Expectations were for the mid/upper 300,000s for both weeks.  Tomorrow’s number will be closely watched as Non-Farm Payrolls “whispers” may begin to change.

US Dollars (DXY) were sold today after the worse than expected ADP print.  Although this hasn’t been a good indicator of NFP by itself, traders still went with the “Sell Dollars” theme, as they hoped this would indicate monetary stimulus for longer.  However, after the stronger than expected ISM Non-Manufacturing PMI, the DXY was bought as traders feared stimulus would be lifted sooner than later.  It seems like the markets don’t know the right answer!

Source: Tradingview, Stone X

As EUR/USD makes up a majority of the DXY, the pair did the exact opposite.  EUR/USD went bid after the ADP release and sold off after the ISM Non-Manufacturing PMI release.  At the top, price formed a nice evening star formation with the RSI in overbought territory.  This gave traders a warning signal that price direction may be changing.

Source: Tradingview, Stone X

On a 240-minute timeframe, EUR/USD sold off aggressively in mid-June but failed to climb above 1.2000 since, putting in a high of 1.1976 on June 25th.  The pair had been moving lower in an orderly channel during the month of July, reaching a low of 1.1750.  However, on July 28th, EUR/USD broke above the top trendline of the channel but could not stay above the 61.8% Fibonacci retracement level from the June 25th highs to the July 20th lows. The most recent bar on the 240-minute timeframe is a bearish engulfing candlestick, an indication of a possible move lower.  Support is at the downward sloping top trendline of the channel near 1.1820, then horizontal support at 1.1770.  Resistance isn’t until today’s highs at 1.1900, just ahead of the highs of July 30th at 1.1909.  If EUR/USD breaks above there, price can travel all the way up to the 1.1975 June 25th highs.

Source: Tradingview, Stone X

With stronger ISM Employment data and weaker ADP Employment data, it will be tough for traders to make a “guesstimate” of Friday’s NFP print.  Throw in weaker Initial Jobless Claims, and “whispers” may begin, which are different from the current expectation of +895,000.

Learn more about forex trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.