U.S. Dollar Direction Determined by ADP Report

The direction of the U.S. Dollar on Wednesday will be determined by the ADPEmployment Report. This conclusion is being supported by both fundamental andtechnical factors.

The direction of the U.S. Dollar on Wednesday will be determined by the ADPEmployment Report. This conclusion is being supported by both fundamental andtechnical factors.

Fundamentally, a weaker than expected report will sent demand for riskyassets plummeting while driving up the lower yielding U.S. Dollar and JapaneseYen. How much below the consensus and how close to the low end of the rangewill determine how much upside momentum will be generated for this two safehaven markets. Pre-report guesses are for a consensus of plus 60,000 jobs. Thisfalls 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 fueldemand for higher yielding assets especially the commodity-linked currencies. Howmuch these currencies rally will be dictated by how close to the upper end ofthe range is the actual number of jobs added.

Technically, almost all of the major Forex markets are sitting on majorretracement zones. This indicates that there is balance and that the ADP reportcould be the catalyst to upset this balance.

The Euro, for example is sitting on a 50% price at 1.2171. Holding thisretracement level is essential to the start of another leg up in this market, butwithout 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 NewZealand Dollar, but the price levels are different. Holding .8469 will bebullish for the Aussie, but a bearish ADP number could trigger a decline to.8378. The Kiwi is approaching itsretracement level at .6865. Bad newsfrom ADP will trigger an acceleration down to .6796

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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