The direction of the U.S. Dollar on Wednesday will be determined by the ADP Employment Report. This conclusion is being supported by both fundamental and technical factors.
Fundamentally, a weaker than expected report will send demand for risky assets plummeting while driving up the lower yielding U.S. Dollar and Japanese Yen. How much below the consensus and how close to the low end of the range will determine how much upside momentum will be generated for these two safe haven markets. Pre-report guesses are for a consensus of plus 60,000 jobs. This falls in the middle of a 23,000 to 100,000 range.
A report above the consensus will be bearish for the U.S. Dollar and fuel demand for higher yielding assets, especially the commodity-linked currencies. How much these currencies rally will be dictated by how close to the upper end of the range is the actual number of jobs added.
Technically, most of the major Forex markets are sitting on major retracement zones. This indicates that there is balance and that the ADP report could be the catalyst to upset this balance.
The Euro, for example is sitting on a 50% price at 1.2171. Holding this retracement level is essential to the start of another leg up in this market, but without a bullish ADP number, don’t expect this price level to hold. Instead, look for a possible break to 1.2102 if the report comes out bearish.
The fundamental catalyst is the same for the Australian Dollar and New Zealand Dollar, but the price levels are different. Holding .8469 will be bullish for the Aussie, but a bearish ADP number could trigger a decline to .8378. The Kiwi is approaching its retracement level at .6865. Bad news from ADP will trigger an acceleration down to .6796.
Local:312-896-3920
Toll Free: 800-971-2440
Email: Info@BrewerFX.com
Website: www.BrewerFX.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
