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Abstract: The ADP employment report shows that the number of private employees increased by 113,000 in October, which was lower than the market expectation of 135,000, but higher than the (uncorrected) 89,000 recorded in September. The report did not trigger major market actions. Today, the Federal Reserve will announce its interest rate decision, and it is almost certain that the policy of suspending interest rate hikes in September will continue.

Fundamentals

The ADP private sector employment growth in the U.S. in October was lower than expected, with an increase of 113,000 jobs instead of the expected 135,000. The breakdown by industry shows that the number of commodity production jobs increased slightly by 6,000, while the number of service jobs increased by 107,000. When considering the scale of enterprises, small enterprises contributed 19,000 jobs, medium-sized enterprises contributed 78,000 jobs, and large enterprises added 18,000 jobs.

There is a remarkable trend in the field of wages. The salary of employees staying in their current posts increased by 5.7% year-on-year, the lowest growth rate since October 2021. On the other hand, the salary of employees who quit jobs increased by 8.4%, which was the least significant. These are the figures since July 2021.

Nela Richardson, the chief economist of ADP, said: "We didn't see a specific industry leading the way in recruitment in October. In addition, the sharp increase in wages we observed in the post-pandemic stage seems to be weakening. "

She further added: "The October data provides a comprehensive view of the employment sector. Despite the slowdown in the job market, it is still strong enough to maintain strong consumer spending. "

According to market observation, the employment of private enterprises in the U.S. in October was much lower than expected, but this probably underestimated the health of the labor market, because the labor market is still tense.

The ADP report released on Wednesday showed that the number of private enterprise employees increased by 113,000 in October, instead of the expected 135,000. The lower-than-expected growth may reflect the strike of United Automobile Workers (UAW) against the three major automakers, which may weaken employment in manufacturing. The government reported last week that at least 30,000 UAW members took part in the strike during the investigation in October.

Despite the fact that the Fed has raised rates by 525 basis points since March 2022, the labor market remains strong.

According to CME "FedWatch", the probability that the Fed will keep the interest rate unchanged in the range of 5.25%-5.50% at this meeting is 97.6%, and the probability of raising interest rates by 25 basis points to the range of 5.50%-5.75% is 0%. The probability of keeping interest rates unchanged by December is 69.1%, the probability of raising interest rates by 25 basis points is 29.3%, and the probability of raising interest rates by 50 basis points is 3.6%.

Technical Analysis

As major economic events will be announced one after another, the AUD, relative to risk-sensitive assets, has not fallen with the strong rise of the USD, but has risen together with the USD.

The AUDUSD continues to trade in a range on Wednesday, remaining neutral to positive during the session; a limited recovery would put the AUDUSD in a corrective mode in the 1D timeframe, but would not trigger a reversal scenario, as the outlook remains bearish; meanwhile, the 0.6400 resistance level is intact. If the current positive momentum continues to be strong, we would categorize this performance as a return to the demand zone (0.6400); new weakness may return when the price completes the test of the demand zone; a break below the previous low of 0.6270 would be the primary target for bears.

On the downside, a break below 0.6270 would resume the decline initiated from 0.7156, targeting the 0.6195 range, close to the 0.6169 medium-term support.

From a larger perspective, the downward trend from 0.8006 (the high in 2021) may continue. A decisive break above 0.6169 would target the 61.8% Fibonacci retracement at 0.6021 of the range from 0.8006 ~ 0.6169 ~ 0.7156. It is recommended to go short at the highs with a return of the demand area of 0.6400.

Trading Recommendations

Trading direction: Short

Entry price: 0.6400

Target price: 0.6195

Stop loss: 0.6501

Deadline: 2023-11-15 23:55:00

Support: 0.6285, 0.6272, 0.6200

Resistance: 0.6365, 0.6398, 0.6452