Forex: Euro Halts Three-Day Rally, U.S. Dollar Benefits From Safe-Haven Flows

Talking Points

Japanese Yen: Benefits From Risk Aversion
Pound: BoE Sees “Substantial Headwinds”
Euro: Manufacturing, Services Slows More-Than-Expected
U.S. Dollar: Existing Home Sales, Leading Indicator on Tap

Dismal data coming out of the Euro-Zone pushed the single-currency to a low of 1.3311 during the overnight trade, and the exchange rate may continue to push lower throughout the day as investors scale back their appetite for risk. The EUR/USD halted the three-day rally, with the daily relative strength index pulling back from overbought territory, and we may see the exchange rate fall back towards the 200-Day SMA at 1.3208 going into the end of the week to test for short-term support. As the RSI falls from a high of 74, the downturn in the oscillator suggest that a corrective retracement will unfold going into the following week, and a break below the 200-Day moving average is likely to expose the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120-30.

Meanwhile, the economic docket showed manufacturing and service-based activity in the Euro-Zone grew at a slower pace in September, with the composite index falling back to 53.8 from a revised 56.2 in July amid forecasts for a 55.7 print. At the same time, a spokesman for the European Commission talked down fears surrounding Greece and said that there is “no discussion” of providing addition funds to the ailing economy” during a press release in Brussels. The commission went onto say that it expects borrowing rates for Greece to normalize by the end of its three-year program, but the austerity measures taken on by the government is likely to weigh on the recovery as policy makers withdraw fiscal support. As the rebound in economic activity cools, managing the downside risks for the region will certainly become an increasing challenge for the European Central Bank, and the uncertainties surrounding the growth outlook could weigh on the exchange rate over the medium-term as the Governing Council expects to see an “uneven” recovery.

 The British Pound held within the previous day’s range, with the exchange rate rising to 1.5305 during the European trade, and the currency may hold steady throughout the day as price action fails to hold above the 38.2% Fibonacci retracement from the 2009 low to high around 1.5700. As the GBP/USD carves a near-term top, the exchange rate my work its way back towards the lower bounds of its recent range going into the end of the week, which lies around 1.5300. Nevertheless, Bank of England Chief Economist Spencer Dale said the U.K. faces “substantial headwinds” as the banking sector remains fragile, and went onto say that the economic recovery needs to be sustainable during an interview with the Western Mail. As policy makers hold a cautious outlook for the region, we are likely to see the BoE maintain the expansion in monetary policy throughout the remainder of the year, but the stickiness in price growth could spur interest rate expectations as inflation continues to hold above the government’s 3% limit.

The greenback bounces back against most of its major counterparts, while the USD/JPY fell back from a high of 84.66 ahead of the U.S. trade, and the dollar may continue to gain ground throughout the day as it benefits from safe-haven flows. Nevertheless, the economic docket is expected to show existing home sales in the world’s largest economy increase 7.1% in August following the record-pace of contraction during the previous month, while the leading indicator is projected to tip 0.1% for the second consecutive month in August. As risk sentiment continues to dictate price action in the currency market, the data could stoke a rebound in market sentiment as the outlook for future growth improves.

 

 

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Forex: Euro Carves Near-Term Top, U.S. Dollar Benefits From Safe-Haven Flows

Talking Points

Japanese Yen: Strengthens Across the Board
Pound: Remains Range Bound Ahead of BoE Minutes
Euro: ECB Says Rates “Appropriate”
U.S. Dollar: Industrial Production, NAHB Housing Index on Tap

The Euro slipped to a low of 1.3830 during the overnight trade as policy makers in Europe held a cautious outlook for the region, and the single-currency may trend lower throughout the day as investors scale back their appetite for risk. European Central Bank President Jean-Claude Trichet said that the Governing Council remains “cautious” on the recovery during a conference in Marrakech, Morocco, and warned that excess volatility in the currency market could have an adverse effect on economic stability as it bears down on global trade. Mr. Trichet argued that the euro-area needs “more ambitious” reforms as the governments operating under the fixed-exchange rate system struggle to manage their public finances, and went onto say that most members of the ECB agrees with continuing its asset purchase program as the economic outlook remains clouded with uncertainties.

At the same time, Governing Council board member Ewald Nowotny voiced his support to maintain the emergency programs during an interview with an Austrian newspaper and said that the extraordinary measures will help to “correct imbalances in the capital markets” as the global financial system remains fragile. As European policy makers retain a cautious outlook for the region, we may see the ECB maintain the expansion in monetary policy throughout the beginning of 2011, and the soft tone held by the central bank could drag on the exchange rate as investors weigh the outlook for future policy. As the EUR/USD struggles to hold above 1.3900, the 61.8% Fibonacci retracement from the 2009 high to the 2010 low, we may see a corrective retracement unfold this week as the daily relative strength index finally falls back from overbought territory, and the exchange rate may work its way back towards the 50.0% Fib at 1.3500 to test for near-term support.

The British Pound slipped to a low of 1.5837 on Monday to maintain the narrow range from the previous week, and the GBP/USD may continue to trend sideways over the next 24 hours of trading as investors wait for the Bank of England policy meeting minutes due out on Wednesday at 8:30 GMT. We expect to see an 8-1 vote count amongst the MPC as board member Andrew Sentance sees scope to start normalizing monetary policy, but the central bank may hold a dovish tone for future policy given the substantial amount of slack within the real economy. However, a three-way split within the central bank is likely to trigger a selloff in the British Pound as market participants speculate the BoE to expand monetary policy further, and lead the GBP/USD to retrace the advance carried over from the previous month. Nevertheless, the economic docket showed home prices in the U.K. increased at the fastest pace in eight months, with the Rightmove index jumping 3.1% in October following the 1.1% in the previous month, and the stickiness in price growth could lead the BoE to maintain a neutral policy stance going into the following year as it aims to balance the risks for the economy.

The greenback continued to bounce back against most of its major counterparts, while the UJSD/JPY slipped to a low of 81.12 as the Japanese Yen strengthened across the board, and safe-haven flows are likely to dictate price action throughout the day as the economic docket remains fairly light for Monday. Industrial outputs in the world’s largest economy is forecasted to expand 0.2% for the second consecutive month in September, while the NAHB housing market index is projected to increase to 14 in October from 13 in the month prior, but the dollar may show little reaction to the economic developments as risk trends continue to dictate price action in the foreign exchange market.

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Forex: U.S. Dollar Mix On Thin Trading, Euro Holds Tight Range

Talking Points

Japanese Yen: Mixed Against Majors
Pound: U.K. Banks Raise Borrowing Costs
Euro: Holds Narrow Range For Third Day
U.S. Dollar: ECB Trichet, Fed’s Yellen on Tap

 

The Euro fell back from a high of 1.4006 during the overnight trade to maintain the narrow range from the end of the previous week, and the exchange rate may hold steady throughout the day as the economic docket remains fairly light for Monday. The EUR/USD was unphased by the comments from the European Central Bank as price action held within a 90pip range, but the speech by central bank President Jean-Claude Trichet scheduled for 16:00 GMT could spark increased volatility in the exchange rate as investors weigh the outlook for future policy. ECB board member Guy Quaden said the Governing Council may decide to normalize monetary policy further in the first quarter of 2011 as he expects the region to grow at a “slower, more moderate pace,” and went onto say that current policy remains “appropriate” during an interview with Bloomberg News.

 

At the same time, Governing Council member Lorenzo Bini Smaghi held a hawkish tone during an interview with Market News International and said “some inflationary pressures” are becoming apparent, led by higher energy costs, and the central bank may look to reestablish its exit strategy going into the following year as they maintain their one and only mandate to ensure price stability. ECB President Trichet may talk up the likelihood for a rate hike in the beginning of 2011 as the outlook for growth and inflation improves, and hawkish comments from the central bank head could drive the EUR/USD higher going into the end of the year as market participants speculate the Federal Reserve to increase quantitative easing at its next rate decision in November. However, as the recent rally in the euro-dollar remains overbought, with the daily relative strength index holding at 77, a corrective retracement may unfold in the days ahead, which could lead the pair to test 1.3500, the 50.0% Fibonacci retracement from the 2009 high to the 2010 low, for near-term support.

 

The British Pound bounced back from a low of 1.5913 during the European trade, with price action holding above the 10-Day moving average at 1.5850, and the GBP/USD may continue to trend higher over the near-term as it maintains the rally carried over from the previous month. As a result, the pound-dollar may make another run at 1.6000 later today as it retraces the overnight decline, but a shift in market sentiment could push the exchange rate lower as the U.S. dollar appears to be regaining its footing against its major counterparts. Meanwhile, a report by the Bank of England showed commercial lenders in the U.K. raised the cost of two-year fixed mortgage rates with a 25% deposit in September to 3.79% from 3.74% in the previous month, and the central bank is likely to maintain a dovish outlook for future policy as household and businesses continue to face tightening credit conditions. The BoE minutes due out later this month is likely to show the majority of the MPC vote to maintain its current policy in October, but a three-way split within the central bank could trigger a selloff in the British Pound as investors speculate the board to expand QE in the coming months.

 

U.S. dollar price action was slightly mixed overnight, with the USD/JPY slipping to a low of 81.71, and the greenback could face choppy price action throughout Monday’s trade as the U.S. bond market remains closed in observance for Columbus Day. With no scheduled event risks, risk trends are likely to dictate price action as the equities market are set to open their doors, but here could be a shift in market sentiment as members of the Fed are scheduled to speak throughout the day.

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Forex: Bearish U.S. Dollar Sentiment Carries Into October, Euro Extends Rally

Talking Points

Japanese Yen: Losing Ground Against Majors
Pound: Housing Withdrawals Fall Further in 2Q
Euro: Unemployment Pushes Higher in August
U.S. Dollar: Personal Spending, ISM Manufacturing on Tap

The Euro rallied to a high of 1.3763 during the overnight trade, and the single-currency may continue to push higher going into the end of the week as the bearish sentiment behind the U.S. dollar carries into October. After clearing 1.3500, the 50.0% Fibonacci retracement from the 2009 high to the 2010 low, the EUR/USD looks poised to test the 61.8% Fib around 1.3890-1.3900 as it maintains the advance from the previous month. With the 50-Day moving average (1.3011) approaching the 200-Day at 1.3185, a bullish crossover could lead the euro-dollar to retrace the decline from earlier this month as the greenback continues to weaken against its major counterparts. However, as the near-term rally remains overbought, with the daily relative strength index increasing to 77, we may see a corrective retracement play out in the days ahead.

Meanwhile, European Central Bank board member Ewald Nowotny said the Governing Council will purchase government bonds as long as “inefficiencies prevail” in the financial market, and went onto say that the current situation in some areas remain sensitive as the governments operating under the fixed-exchange rate system struggle to manage their public finances. Given the ongoing weakness within the real economy paired with the uncertainties surrounding the future outlook, the ECB may see scope to maintain the expansion in monetary policy throughout the beginning of 2011 as it holds a dovish outlook for inflation. Meanwhile, the economic docket showed unemployment in the Euro-Zone unexpectedly increased to 10.1% in August to mark the highest reading since June 1998, but the single-currency showed little reaction to the data as it benefits from the weakness in the greenback.

The British Pound pared the decline from earlier this week to reach a high of 1.5872 on Friday after closing above the 38.2% Fibonacci retracement from the 2009 low to high at 1.5700 during the previous day, but the GBP/USD may consolidate going into the following week as investors maintain a cautious outlook for the U.K. A report by the Bank of England showed home equity withdrawals tumbled GBP 6.2B in the second quarter after falling a revised GBP 5.3B during the first three-months of the year, and the ongoing weakness in the private sector could lead the MPC to expand monetary policy further in October as it aims to encourage a sustainable recovery. If we see a three-way split within the BoE, speculation for an expansion in quantitative easing would spark a bearish in the British Pound as investors weigh the prospects for future policy.

The greenback continued to weaken against its major counterparts, with the USD/JPY slipping to a low of 83.15, and the dollar may depreciate further in the following as the bearish sentiment carries into October. As market liquidity tends to taper off ahead of the weekend, the greenback may continue to trend lower throughout the day, but the event risk scheduled for the U.S. trade could spark increased volatility in the exchange rate as investors weigh the outlook for the world’s largest economy. Personal incomes are expected to increase 0.3% in August, with market participants forecasting a 0.3% rise in private spending, while the ISM manufacturing index is projected to fall back to 54.5 in September from 56.3 in the previous month. The mixed batch of data could spark choppy price action in the U.S. dollar, but the ISM report is likely to be the biggest market-mover of the day as manufacturing leads the economic recovery in the U.S.

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Forex: Bearish U.S. Dollar Sentiment Gathers Pace, Euro Breaks Narrow Range

Talking Points

Japanese Yen: Mixed Amongst Major Currencies
Pound: BOE’s Posen Sees Scope For Further Easing
Euro: ECB Says Rates ‘Appropriate’
U.S. Dollar: Producer Prices, Trade Balance on Tap

 

The U.S. dollar weakened further against its major currency counterparts, with the EUR/USD rallying to a high of 1.4121 on Thursday, and the bearish momentum behind the greenback may carry into the end of the week as investors expect the Fed to expand monetary policy further. As EUR/USD breaks out of the narrow range from earlier this week, we are likely to see the pair continue to retrace the decline from earlier this year, and euro-dollar looks poised to make a run at 1.4440-50, the 78.6% Fibonacci retracement from the 2009 high to the 2010 low, as price action holds steadily above the 61.8% Fib around 1.3890-1.3900. With the 50-Day moving average (1.3158) approaching the 200-Day SMA at 1.3165, the bullish crossover suggests that the exchange rate will continue to push higher throughout the month, but there could be a corrective retracement in the coming days as the recent rally remains overbought. Given the strong bearish sentiment underlying the greenback, we would need the RSI to fall back below 70 to see a pullback in the exchange rate, and the rally may carry into the following week as the index bounces back to 78.

 

Meanwhile, the European Central Bank reiterated that the interest rate is “appropriate” in its monthly report and went onto say that price growth remains contained as the ongoing slack within the economy bears down on inflation. At the same time, ECB board member Yves Mersch said that the recovery in Europe remains in-line with the central bank’s forecast and that the recent slew of soft data “does not warrant increased pessimism” for the region, but went onto say that it remains “too early to claim victory” as the economic outlook remains clouded with uncertainties. As the Governing Council maintains a neutral outlook for future policy, the ECB may look to reestablish its exit strategy going into 2011, which would instill a bullish outlook for the single-currency in the beginning of the following year as the Fed maintains a dovish stance.

 

The British pound rallied to a fresh monthly high of 1.6066 during the overnight, and the exchange rate is likely to push higher going into the end of the week as carves out a short-term bottom around 1.5700, the 38.2% Fibonacci retracement from the 2009 low to high. As a result, the GBP/USD looks poised to test the 23.6% Fib around 1.6230-40, and the pair may continue to retrace the decline from the beginning of this year as the rally gathers pace. Meanwhile, Bank of England board member Adam Posen said that the global economy needs increased monetary stimulus according to an article in the Handelsblatt newspaper, and Mr. Posen may push to expand policy further in the coming months given the substantial amount of slack within the real economy. As a result, the British Pound is likely to face increased volatility over the following week as the BoE is scheduled to release its policy meeting minutes on Wednesday, and a three-way split within the MPC could spark a sharp selloff in the GBP/USD as market participants see scope for the BoE to expand quantitative easing further over the coming months.

 

The greenback weakened against all of its major counterparts, with the USD/JPY tumbling to a fresh yearly low of 80.88, but the dollar is likely to face increased volatility going into the end of the week as the economic docket is expected to reinforce a mixed outlook for future growth. Producer prices in the world’s largest economy is forecasted to increase at an annualized pace of 3.7% in September after rising 3.1% in the previous month, while the trade deficit is expected to widen to -$44.0B in August from -$42..8B in the month prior. However, market participants may turn a blind eye to the economic developments as they look towards the Fed’s interest rate decision on November 3, and comments from the central bank are likely to play an increased role in dictating price action as investors weigh the prospects for future policy.

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Forex: Euro Under Pressure, U.S. Dollar Benefits From Safe-Haven Flows

Talking Points

Japanese Yen: Slightly Mixed Across the Board
Pound: U.K. Construction Expands At Faster Pace
Euro: Investor Confidence Improves Further
U.S. Dollar: Pending Home Sales, Fed Chairman Bernanke on Tap

As EUR/USD price action holds below the 61.8% Fibonacci retracement from the 2009 high to the 2010 low around 1.3880-90, a corrective retracement could unfold in the days ahead as the rally from the September remains overbought, and the daily relative strength index should fall back below 70 this week if we see the exchange rate work its way back towards the 50.0% Fib around 1.3500. The euro-dollar showed little reaction to the Sentix survey even though the report showed investor confidence increased to a three-year high of 8.8 in October from 7.6 in the previous month, and shift in market sentiment could drive the exchange rate lower throughout the day as risk trends continue to dictate price action in the currency market. However, if the euro-dollar is able to find short-term support around the 50.0% Fib, there could be a phase of consolidation over the coming weeks given the uncertainties surrounding the economic outlook, and the EUR/USD may trend sideways before we see another breakout in the exchange rate.

Meanwhile, Ireland’s central bank lowered its growth forecast for the region and expects GDP to expand 0.2% this year amid an initial forecast for a 0.8% rise, while the growth rate is anticipated to increase 2.4% next year versus earlier projections for a 2.8% expansion. The central bank went onto say that the recovery in Europe remains “uneven” as the rebound in economic activity appears to be tapering off in the second-half of the year, and went onto say that the outlook remains clouded by high uncertainties as the governments operating under the single-currency struggles to manage their public finances. In addition, the economic docket showed producer prices in the Euro-Zone increased at an annual pace of 3.6% in August after expanding 4.0% in the previous month, and the slower pace of inflation paired with the slowing recovery could lead the Governing Council to maintain a dovish policy stance going into 2011 as it aims to balance the risks for the region.

The British Pound bounced back from a low of 1.5748 during the European trade as U.K. policy makers held an improved outlook for the region, but the GBP/USD is likely to trade within the narrow range carried over from the previous week as price action struggles to hold above 1.5900. Chancellor of the Exchequer George Osborne said the economy has “moved out of the danger zone” during an interview with BBC Radio, while former Bank of England Deputy Governor John Gieve talked down speculation for a further expansion in quantitative easing and said interest rates will have to rise going forward according to an article in the Guardian newspaper. As investors mull over the outlook for future policy, the GBP/USD is likely to hold steady ahead of the BoE interest rate decision later this week, but the central bank may refrain for releasing a policy statement like we’ve seen for the past few months.

The greenback bounced back against most of its major counterparts, with the USD/JPY rallying to a high of 83.86 overnight, but the dollar is likely to face increased volatility later today as the economic docket is expected to reinforce a mixed outlook for the world’s largest economy. Pending home sales in the U.S. is forecasted to increase 0.9% in August following the record 20.1% drop in the previous month, while factory orders are projected to fall 0.4% during the same period after tipping 0.1% in July. In addition, Fed Chairman Bernanke is scheduled to speak regarding the economy later today, and comments from the central bank head could shake up the majors as investors weigh the prospects for future policy.

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EUR/USD: Trading the Change in Orders for U.S. Durable Goods

Trading the News: U.S. Durable Goods Orders

Why Is This Event Important:

Fading demands for U.S. durable goods are likely to reinforce a weakened outlook for future growth as private consumption accounts for more than two-thirds of the economy, and the data could weigh on the dollar as investors weigh the prospects for a sustainable recovery. However, as market sentiment continues to dictate price action in the currency market, a rise in risk aversion could spur a bullish reaction in the greenback as it benefits from safe-haven flows.

What’s Expected:

Time of release:09/24/2010 12:30 GMT, 8:30 EST

Primary Pair Impact :EURUSD

Expected: -1.0%

Previous: 0.3%

Will This Be Market Moving (Scenarios):

Demands for U.S. durable goods are forecasted to contract 1.0% in August following the 0.3% rise in the previous month, while orders excluding transportation equipments are projected to increase 1.0% after unexpected tumbling 3.8% in July. The mixed batch of data could spur choppy price action in the U.S. dollar as the economic outlook remains clouded with uncertainties, and the ongoing weakness in the private sector could lead the Federal Reserve to expand monetary policy further over the coming months in order to stem the downside risks for growth and inflation.

The Upside

Retail spending in the U.S. expanded for the second consecutive month in August, with business production increasing for the last six-months, and firms may increase their rate of investments throughout the remainder of the year as policy makers anticipate the recovery to gather pace 2011. An unexpected rise in the headline reading is likely to encourage an improved outlook, which could lead the U.S. dollar to recoup the losses from earlier this year.

The Downside

However, the uncertainties surrounding the economic outlook paired with cautious tone held by the central bank could discourage private consumption, and a downturn in business investments is likely to weigh on the recovery, which could stoke increased selling pressures on the U.S. dollar. As a result, a dismal durable goods orders report could lead the EUR/USD to pare Thursday’s decline and lead the exchange rate to retrace the sharp decline from April.

How To Trade This Event Risk

Trading the given event risk clearly favors a bearish outlook for the greenback, but an enhanced report could set the stage for a long dollar trade as growth prospects improve. As a result, if demands for U.S. durable goods contract less that 0.5% of unexpectedly increases in August, we will need to see a red, five-minute candle subsequent to the release to establish a sell entry on two-lots of EUR/USD. Once these conditions are fulfilled, we will place the initial stop at the nearby swing high or a reasonable distance, and this risk will generate our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to preserve our profits.

On the other hand, the ongoing slack within the real economy paired with the uncertainties surrounding the outlook for future growth could stoke a drop in private consumption, and a sharp decline in business investments could drag on the exchange rate as the prospects for a sustainable recovery deteriorate. Therefore, if demands fall 1.0% or greater from the previous month, we will look to sell the greenback, and will utilize the same setup for a long euro-dollar trade as the short position laid out above, just in reverse.

Potential Price Targets For The Release

Impact that U.S. Durable Goods Orders report has had on USD during the last month

 

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

Jul 2010

08/25/2010 12:30 GMT

3.0%

0.3%

+20

+37

 

July 2010 U.S. Durable Goods Orders

 

Demands for U.S. durable goods increased 0.3% in July amid forecasts for a 3.0% expansion, while orders excluding transportation unexpectedly slipped 3.8% after rising a revised 0.2% in the previous month. The breakdown of the report showed orders for non-defense capital goods excluding aircrafts, which acts as a gauge for business investments, slipped 8.0% after increasing 3.6% in the previous month, and conditions may deteriorate further in the second-half of the year as the private sector activity remains weak. The data reinforces a weakened outlook for the world’s largest economy and the slower pace of consumption is likely to weigh on the recovery as private sector spending remains one of the leading drivers of growth. As a result, the Federal Reserve is widely expected to maintain the expansion in monetary policy throughout the remainder of the year and may see scope to support the real economy going into 2011 as it aims to encourage a sustainable recovery.

 

 

What To Look For Before The Release

 

Traders with access to market depth information via the FXCM Active Trader Platformmay use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:

Bullish Scenario:

If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the EUR against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release.

Bearish Scenario: 

If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the EUR against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on EURUSD ahead of the data release.

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U.S. ADP Employment Change Unexpectedly Drops 39K in September

The ADP employment change in the world’s largest economy unexpectedly fell 39K in September after climbing 10K the month prior amid expectations of a 20K rise. The data does not bode well for Friday’s Nonfarm payrolls release as economists as of late are forecasting for no change in payrolls, while the unemployment rate is forecasted to advance to 9.7 percent from 9.6 percent.

 

Today’s decline in the ADP employment report marks the first drop since January of this year as the reading for August was revised to the upside. Also worrisome is the fact that the release does not include the effects of federal hiring/firing. This is concerning because census workers declined about 65,000 between the weeks of August and September. Going forward, traders will shift their focus to the monster.com report for further insight on the labor market in the U.S. ahead of Friday’s highly anticipated release.

 

Indeed, there was little reaction following the ADP report, but looking ahead, market participants are sure to keep a close eye on the EURUSD, USDJPY, and AUDUSD as these pairs remain at critical levels.

 

 

EURUSD Daily Chart

Source: FXCM’s Strategy Trader – Prepared by Michael Wright

 

The EURUSD continues to maintain its ascending channel but as of late, the pair is at the crossroads of the 61.8 percent Fibonacci retracement on the December 3rd 2009 to June 7th downswing. Failure to close above this level paired with a break below the narrow range may lead the pair to retest 1.3500 in the near term.

 

 

USDJPY Daily Chart

Source: FXCM’s Strategy Trader – Prepared by Michael Wright

 

After the Bank of Japan intervention, the USDJPY has returned to the 83 level and now looks poised to continue its southern journey, with the pair likely to test 82.50 by the end of the week as traders continue to seek safety amid uncertainty in the global markets.

 

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