Dollar Mildly Lower after Disappointing ADP Employment
Dollar weakens mildly in early US
session after disappointing ADP employment report, but the move so far is limited.
The ADP report, which is usually used as a preview of the NFP, increased 57k jobs only, much lower than expectation of 100k. The US calendar is pretty light today with only Fed’s beige book left. Though, Fed Moskow’s speech on economic forecasts for 2007 will be watched. After all, traders are still cautiously awaiting main events of ECB meeting tomorrow and NFP on Friday.
Before that RBNZ, will announce rate decision in the coming Asia session and is widely expected to raise rate by 25bps to 7.5%. Despite being on hold in Jan, the accompanying statement delivered a strong message that further tightening is on the way. RBNZ is expected to remain hawkish after this hike as strength in household demand is still considered a serious threat to inflation in medium term by Bollard. However, with current fragility in NZD/JPY, further sell off could be triggered in the cross if RBNZ opt to delay the hike or back off from the hawkish stance. This could, in turn, trigger broad based yen strength again, after finishing these two day’s consolidation. Hence, this is a risk to watch out for.
The euro zone data calendar today was also light, with only Jan German factory orders which slipped 1.0% mom on the back of a 0.7% month-ago rate of growth in Dec. Despite the moderation in the Jan data, orders remain strong and point to further expansion in Germany’s manufacturing sector. Meanwhile, Aussie rebounds further today, riding on the much stronger than expected GDP report released earlier.
USD/JPY
Daily Pivots: (S1) 115.61; (P) 116.17; (R1) 117.13;
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USD/JPY retreats mildly in early US session but still outlook remains unchanged as USD/JPY is basically still bounded in tight range. As discussed before, a short term low should be formed at 115.13 with 4 hours MACD above signal line and RSI recovered from oversold region. Hence, further recovery is still in favor as long as USD/JPY stays above 116.03 minor support. But still upside of this recovery is expected to be limited by 117.80 cluster resistance (38.2% retracement of 122.17 to 115.13 at 117.82) and bring fall resumption. Below 116.03 will indicate recovery from 115.15 has completed and should bring retest of this low. Break will confirm recent fall from 121.61 has resumed for 114.41 support.
In the bigger picture, sustained break of mentioned medium term rising channel support (108.99, 114.41, 117.87, lower channel at 116.74 now) confirms that the whole medium term up trend form 108.99 has already completed at 122.17. With the corrective nature of the rise from 108.99, this will swing favors back to the case that such medium term rally is merely part of a large scale consolidation that started at 121.38, with first leg completed at 108.99 and second leg completed at 122.17. The current fall should then represent the third leg of such consolidation and deeper decline should at least be seen to below 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02) first. Break will encourage with further medium term weakness to retest 108.99 (06 low).
On the upside, sustained break of 117.80 will indicate the fall from 122.17 could have already completed. In such case, short term outlook will be turned neutral and expect some choppy consolidation to follow. But still, another fall is in favor after finishing such consolidation.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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