The February ADP employment report is expected to show that the economy lost another 630,000 non-farm private jobs. The report has improved as an indicator for the U.S. Non-farm payroll report due out on Friday and thus may have a greater impact on price action. The mounting job losses have been a main source of risk aversion in addition to the banking troubles.
[B]Fundamental Outlook[/B]
The February ADP employment report is expected to show that the economy lost another 630,000 non-farm private jobs. The report has improved as an indicator for the U.S. Non-farm payroll report due out on Friday and thus may have a greater impact on price action. The mounting job losses have been a main source of risk aversion in addition to the banking troubles. Once traders see past the issues of the financial system, weaker earnings lie ahead as the U.S. consumer continues to retrench. Therefore, another month of massive job losses could add the prevailing risk aversion in the market place and fuel bullish dollar sentiment. Of course there is the risk that the greenback trades on the fundamental impact of the weak labor market on the U.S. economy which would validate the bullish Euro/US dollar technical outlook.
[B]Technical Outlook [/B]
The EURUSD is marking time but there are signs of strength such as today’s outside day that suggest the EURUSD is preparing for a significant rally. The best count treats the consolidation since late January as a triangle, which would place the drop from that triangle as wave 5 in the 5 wave decline from the December high. Under this count, a low is in at 1.25 and price is headed higher in order to more fully correct the decline from 1.47. If 1.25 is broken, then there is the possibility that the decline from 1.33 is an ending diagonal as wave 5. Reward to relative risk is high for bulls at this point, irrespective of which count is correct.
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[I]To discuss this report contact John Rivera, Currency Analyst: [email protected][/I]