Wednesday October 6, 2010 - 14:20:45 GMT
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Weak ADP Report underpins December Treasury Bonds
December Treasury Bonds are trading higher this morning
after ADP employment services released a weaker-than-expected jobs outlook.
Investors were trading an increase of 20,000 jobs, the actual report showed a
decline of 39,000.
This not so great ADP report shows there is simply no upside
momentum in the jobs market. Treasury Bonds were being underpinned by the news
because it supports trader conviction that quantitative easing is coming from
the Fed. The number also reflects that while there is not a lot of firing going
on, businesses are not hiring.
Technically, the Dec. T-bond is nearing downtrending
resistance at 134â€™22. Uptrending Gann angle support is at 133â€™13.
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 December Euro 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 December Japanese Yen rallied sharply higher 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
The Yen rallied through the â€śintervention topâ€ť at 1.2077,
hitting stops up to 1.2108. There was no sign of fresh buying over 1.2077, only
short-covering. Bullish traders are likely to take a cautious approach as this
currency pair nears the psychological resistance at 1.2200. Some analysts have
identified this level as the line in the sand for the Bank of Japan.
Look for light buying pressure to continue up to 1.2195 as
traders watch for signs of Japanese central bank activity. Bullish 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 long during an intervention especially
those holding profitable positions.
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