ADP National Employment report shows U.S. Private employer unexpected eliminated 33k jobs in June.
The ADP report increases the odds of a surprise downside in Thursday’s non-farm payroll numbers.
The report has increased the odds of the Fed rate cut three times this year.
CME Fed watch is pointing at 74.2% and 71.6% probability of no rate change in July and September.
Fed Chair Powell has said he wants to see more data before a move.

US interest rate probabilities

US IR probabilities show about 74.2% and 71.6% no rate change in July and September, respectively.

US 10-year yields technical view

US 10Y yields formed a double top formation between April 2024 and January 2025 by failing to break 4.74% and 4.81%.
10Y yields are targeting 4.10% in the coming weeks.

Technical analysis perspective

Nonfarm Payrolls

Nonfarm payrolls failed to move above 317k (QoQ) from January 2004 resulting in a drop to <100k.
NFP move from 57K (QoQ) to 309K in January 2006 before heading lower <100k.
After 4 rejections of crossing above 310 – 330 K from January 2004 to January 2006, NFP dropped significantly lower to -820K (QoQ) in January 2009.
A similar scenario occurred April 2014 to January 2019 resulting in a sharp drop in job numbers to -1.41M (QoQ).
The same scenario is in the making where NFP failed to rise above 310 in Jan 2024 and again in October 2024.
Setting up a stage for a dip below 100K for the next couple of months before getting into a negative job creation.

Comparison between US NFP and interest rate

Since April 1990 whenever US NFP < 60k has triggered a sharp decline in the interest rate.

Comparison between US NFP, interest rate and recession

Since April 1990 whenever US NFP < 60k has triggered a sharp decline in the interest rate followed by recession.

A word of wisdom

“The market can remain irrational longer than you can remain solvent” is a quote by economist John Maynard Keynes that emphasizes the unpredictable nature of financial markets. The quote means that investors should not bet against the market, even when they believe it is mispriced or irrational, because it is difficult to predict when the market will correct itself.

Author

Ali Merchant, CMT

TwT Learning

Ali Merchant is a seasoned financial market professional with expertise in Technical Analysis, Treasury & Capital Markets, Trading, Sales, Research, Training, & Fund Management, He has been trading FX, FX options, US stock

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Key statistics

Key highlights