Euro tests $1.155 as ADP miss weakens dollar

The euro extended its recovery to test $1.155 resistance on 5 August after ADP data showed US private payrolls rose just 44,000 in July, well below the 75,000 consensus, sending the dollar lower across major currency pairs.

"Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market," Nela Richardson, chief economist at ADP, said. "Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions."

The ADP miss followed JOLTS data showing job openings fell 178,000 to 7.359 million at the end of June. Healthcare and education accounted for 36,000 of the new jobs, while goods-producing industries lost 3,000 positions. Wage growth for job-switchers accelerated to 7 percent, the fastest pace since August 2025.

The dollar's retreat reflects traders pricing a more dovish Federal Reserve path, with the official BLS employment report due 7 August expected to show 83,000 nonfarm payrolls added, up from 57,000 in June. A stronger-than-expected print could reverse the euro's gains and push the pair back toward $1.134.

The euro has broken above its 50-day moving average, with the relative strength index climbing to 63 from below 50, indicating momentum has turned positive. A confirmed breakout above $1.155 could send the pair toward $1.161, last seen on 16 and 17 June, with the 200-day moving average near $1.163 as the next area of resistance. The pair also appears to be breaking above a downtrend that has persisted since late January, suggesting the longer-term weakness may be passing.

The euro therefore appears well positioned to extend its recovery and erase much of the decline recorded between mid-June and the end of June. However, EUR/USD could begin to consolidate just below the 200-day moving average, with the 78.6 percent Fibonacci retracement level acting as final resistance. If it holds, the euro could move back toward the $1.134 region, according to technical analysis from Michael Kramer, founder of Mott Capital Management.

Hiring concentrated in services as goods sector contracts

The ADP report showed services added 47,000 positions, while goods-producing industries lost 3,000 jobs. Trade, transportation and utilities shed 8,000 jobs, and natural resources and mining lost 6,000. Manufacturing added just 2,000 jobs, and construction employment increased by 1,000. Businesses with fewer than 20 workers added 27,000 jobs, the largest share of new hiring, while those with 20-49 workers lost 4,000 employees. Despite the slowdown in hiring, wage growth for workers who stayed with their employers held at 4.4 percent annually.

The July ADP reading marked the smallest monthly gain since January, continuing a year in which labor market growth has remained modest after little progress in 2025. Layoffs remain historically low, indicating employers are retaining workers despite weaker recruitment activity. The report reinforces the view that the labor market is slowing gradually rather than entering a downturn.

US jobs report remains the key risk

The main risk to the euro's recovery is a stronger-than-expected US employment report on 7 August. Economists surveyed by Dow Jones expect 83,000 nonfarm payrolls added in July, up from 57,000 in June, with the unemployment rate forecast to remain at 4.2 percent. The dollar's weakness extended beyond the euro, with GBP/USD, USD/CAD, and USD/JPY all moving against the greenback as traders recalibrated expectations for Fed policy.

Financial markets continue to price in the possibility of another rate increase later this year if inflation fails to ease, even as most Fed officials have expressed confidence in the labor market. The ADP report's concentration of hiring in healthcare and education, which added 36,000 jobs, points to relative earnings stability in those sectors even as the broader labor market cools. The move also has implications for equity markets and Treasury yields, as traders adjust their expectations for future Fed policy actions.

The dollar's decline against the euro comes as the pair approaches a critical technical juncture. If the euro breaks decisively above $1.155, the next targets are $1.161 and the 200-day moving average near $1.163. However, the 7 August employment report could determine whether the breakout is sustained or fails, with a strong print likely to restore dollar strength and push EUR/USD back toward the $1.134 region.

This article is for informational purposes only and does not constitute investment advice.