03/10/'07 - ADP Nonfarm Employment Change

[B]Economic News


Since the beginning of the week the Greenback has rebounded after a sharp sell-off, which was prompted by an aggressive Federal Reserve interest rate cut last month and expectations of monetary consolidation. The moderate USD appreciation continues today as investors are seeking more clues on the health of the U.S. economy. Yesterday was also characterized by quite subdued trading as many investors sat on the sidelines before the release of the ISM Non-Manufacturing Index later in the session and the most anticipated and important jobs report this Friday. Last month’s U.S Pending Home Sales indicator dropped 6.5%, but the U.S equity markets showed little reaction to yesterday’s report. The EUR/USD dropped only 0.3% to 1.4173 at 7:30 a.m. in London from 1.4154 in New York yesterday. But that was no surprise at all. With Thursday’s ECB and BOE monetary policy meetings as well as Friday’s U.S non-farm payrolls report still due to be released, traders are expecting the news to shed more light on the current U.S economic situation. The ADP Nonfarm Employment Change is on tap today along with the ISM Non-Manufacturing Index. The Non-Manufacturing Index is expected to release at 55.0, just 0.8 points weaker then a previous month’s figure. On the contrary, the expectations for the ADP Nonfarm Employment Change release are currently standing at 53K, significantly higher than last month’s figure of 38K. Along with the economic data and positioning, market participants have also been taking notice ahead of the G7 meeting.

The following two day are expected to be quite volatile and full of sharp price movements. Beyond the expectations for volatility, Friday’s NFP will probably be more important than ever, as the greenback future is still very much unclear. A higher than expected release could be a great beginning for a much anticipated positive sentiment that might pull the US economy out of its dark corner.


There is a new stage in the EUR - USD complex relationship as Europe urges the U.S to curb greenback depreciation. The European Chief political spokesman added his voice to the list of demanders before the next G7 meeting in Washington, to make a greater effort of stopping the USD collapse. The European Financial leaders are afraid of the impact that high EUR may have on European exports which currently seem to be a vital ingredient in the local Euro economy. The major concern is a future recession in the Euro zone economy, because exporters are pressured to cut their prices on the demand that is coming from overseas consumers that prefer US goods due to the cheep dollar. This is causing the US goods demand to grow at the expense of the European one. We must say that the threat to the Euro zone is derived from future interest rate hike expectations and the ECB is more focused onlocal inflation risks. Today, there is no significant data expected from the Euro zone, when retail sales, German Services PMI are the only releases and both are forecasted to be slightly weaker compared to last month’s figure. The bottom line is that an upcoming EUR strengthening is more likely to take place due to the fact that internal economic powers will surely be more significant, than a potential USD application.


Carry trades are still the name of the game when it comes to Japan and the JPY is going through a neutral period as the price action is quite small in the USD/JPY and the trading range appears to be quite tight. Yesterday, the JPY saw little change against the greenback as it drifted from the 115.30 level to 115.60. It would be quite clear that the calm behavior we have seen from the JPY will not continue, as the packed US calendar will draw the attention of most traders. Today’s ADP, the ISM Non Manufacturing, and the Nonfarm Payrolls will no doubt take the USD/JPY out of its latest dead calm.

[B]Technical News


The pair is consolidating around 1.4150 after the drop from yesterday’s 1.4280 and is still seeking direction on the 15 minutes chart. The 4 Hour chart shows that there is still more room for the downtrend and the dailies are sending mixed signals with a slight bearish preference. Testing the 1.4100 level will be a key event for the pair.


The cable continues to have very choppy trading sessions with no specific clear direction. The volatility range is around 80 pips in width, and the movement is revolved around 2.0400. Both hourlies and dailies are floating on neutral territory, which means that traders must look for the entry point in the 15 minutes chart and try to take short term positions.


The trading range for the pair is getting tighter every day, and it appears to be looking for the break quite soon. The signals are showing that a break through the 116.00 level will validate the move as bullish, and will probably be strong. A breach through the 115.00 level will still keep the pair in a ranging mode.


The pair advanced 120 pips in the last 48 hours, and is showing that the momentum is still there although diminishing on the 4 Hour charts. The daily chart is showing that a test of the 1.1800 level appears to be very possible, and a breach will send the pair up further to 1.1830, which is a key resistance and a 23.6% Fibonacci level of the 1.2460/1.1630 move.

[B]The Wild Card

Crude Oil[/B]

The breach through the bottom barrier of the channel has created a bearish momentum that seems to have a lot of steam in it. The 1 Hour chart is showing strong consolidation in the 80.20 level, which mean that the further break down could be close. This could be a great opportunity for Forex traders to get into the downtrend on a very good entry point, as it not completed yet.