Dollar Posting Small Gain Following ADP Employment Data
The U.S. Dollar is posting a small gain versus the Euro and
British Pound this morning following a private employment report showing an
increase of 42,000 jobs. Prior to the report, economists were looking for an
increase of 40,000.The June report was
revised to show an increase of 19,000 jobs versus a previous report of a 13,000
Todayâ€™s report covered the private sectors; Fridayâ€™s U.S.
Non-Farm Payrolls Report will analyze both private and public sectors.
Pre-report guesses for Fridayâ€™s number is expected to show a drop of 65,000 to
Traders are now waiting for the release of Julyâ€™s ISM
non-manufacturing index which comes out at 9 a.m. Central time. This report
should shed further light on the U.S. economy.
After a strong run due to better than expected economic
reports, the Euro is under pressure this morning following a European services
report which showed a rise to 55.8, but fell short of the estimate of 56.0.
The British Pound is also facing selling pressure this
morning because of an unexpected decline to 53.1 from 54.4 in the U.K. July
services PMI index. Economists had been looking for an increase to 54.5.
The strength in the gold market this morning may be an
indication that investors are preparing to shed risk. This could put pressure
on the commodity-linked currencies throughout the day.
The U.S. Dollar was under pressure against most majors on
Tuesday on speculation the Fed will consider renewing its quantitative easing
program following next weekâ€™s FOMC meeting on August 10. Another round of weak
economic data also contributed to the weakness in the Greenback which drove the
Dollar to its lowest level since April against some of the currency pairs.
The Dollar opened lower and remained under pressure
throughout the New York session, pressured by weak U.S. consumer spending news,
a drop in home sales and a bigger than expected decline in factory orders.
The Greenbackâ€™s early morning weakness began following the
release of a bearish article by the Wall Street Journal. According to the WSJ,
the Fed will consider using cash from maturing mortgage-bond holdings to buy
new mortgage or Treasury Bonds instead of allowing its portfolio to shrink.
Insiders believe the Fedâ€™s decision will be heavily weighted by this Fridayâ€™s
U.S. Non-Farm Payrolls Report.
Some investors are questioning whether the Fed will
follow-through on this symbolic event. The market has already pushed Treasury
yields and mortgage yields to historic lows. Those traders who follow the
interest rate differential believe the Dollar will continue to remain under
pressure until interest rates begin to go up. Others believe that eventually
the weakening U.S.
economy will spread globally, triggering a flight to safety rally into the
The Euro and British Pound remained strong throughout the
day ahead of the Bank of England and European Central Bank policy meetings on
August 5.Both central banks are
expected to keep interest rates unchanged.
The BoE will report on the effects of the new austerity
measures and tax hikes on current monetary policy. The big issue will be
whether these reforms curtail growth. The ECB is likely to issue a statement on
the state of the Euro Zone following the recent aid package to countries facing
sovereign debt issues. Recently strong economic reports have surprised
investors, many of whom believed the economy would slow down due to financial
Technically, the strong close in the Euro has the market in
a position to test a long-term downtrending Gann angle from the 1.5144 top at
1.3394. Sellers may step in at this level. The British Pound tested a .618
retracement level at 1.5967. Buying seemed to dry up as the market neared this
level indicating this market may have reached an overbought point.
Speculation that the weak U.S. economy will adversely affect
the Canadian economy helped the USD CAD gain ground on Tuesday. The Dollar/CAD
traded in a tight range, indicating it may be going through a transition
period. Although no bottoming signal has been given, the inability to break
this currency pair in the wake of bearish U.S.
economic news may be a sign of either a shift in risk sentiment or position
squaring ahead of this Fridayâ€™s U.S.
and Canadian employment data.
The Dollar lost ground to the Japanese Yen despite news that
Japanese Minister Yoshihiko Noda said on Tuesday that excessive, disorderly
moves in the foreign exchange market were undesirable and that too strong a Yen
hurts exports and households. Market participants have heard this line before
which may be the reason for the reaction. This form of verbal intervention
didnâ€™t work in the past to slow down the strength in the Yen and is not
expected to do so now. It seems that only an actual intervention will force the
Finally, last night the Reserve Bank of Australia voted to leave interest
rates unchanged at 4.5%.The main reason
for this action was inline growth and inflation. The Aussie surged initially on
the news but pulled back from its highs throughout the session. The consensus
is the RBA is very content with keeping borrowing costs at current levels until
the economic outlook become clearer.
Technically, the closing price reversal may be a sign of a
top. The market will have to confirm the pattern with a break through
.9070.This could start a 2 to 3 day
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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