Wednesday October 6, 2010 - 14:20:17 GMT
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U.S. Dollar Weakens after Lower than Expected ADP Report
The U.S. Dollar added to its already weak condition with
another break to the downside versus most major currencies after ADP reported
lower-than-expected jobs data.
Traders are reacting negatively toward the Dollar because
the report came out on the wrong side of zero. Economists had forecast an
increase of 20,000, the actual number was reported at -39,000.
The ADP report is disappointing but not unexpected given the
weakness in the economy. This report may also be suggesting the beginning of a
new contraction in the jobs market.
Based on the ADP number traders are looking for a loss of
about 10,000 jobs in this Fridayâ€™s Non-Farm Payrolls Report.
The EUR USD continued to inch toward the major Fibonacci
retracement level at 1.3896 overnight. Traders should watch for profit-taking
or a technical bounce if this area is tested today.
The Euro rallied following the release of the ADP report but
failed to take out the overnight high at 1.3880. This pattern suggests the pace
of the rally may be slowing, but does not indicate a change in trend is
The USD JPY sold off sharply after ADP released its jobs
data. The weaker-than-expected employment number weakened the Dollar against
the Yen because it supports the Fedâ€™s case for additional quantitative easing.
The Dollar/Yen plunged through the â€śintervention bottomâ€ť at
82.88, hitting stops down to 82.75. There was no sign of fresh shorting under
82.88. Bearish traders are likely to take a cautious approach as this currency
pair nears the psychological support level at 82.00. Some analysts have
identified this level as the line in the sand for the Bank of Japan.
Look for light selling pressure to continue down to 82.00 as
traders watch for signs of Japanese central bank activity. Bearish traders may
get a free pass during the New York
trading session since the BoJ last intervened during the Asian session. What is
clear is no one wants to get caught short during an intervention especially
those holding profitable positions.
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