Markets focus on ADP

Forex News and Events

Starting day for U.S. jobs data (by Yann Quelenn)

Here we are. After the important Fed decision to hold the rates two week ago, traders have been awaiting data which would support a further rate hike this year. Today, the ADP employment change will be released, which has often proved a good indicator of U.S. non-farm payrolls, despite a few spectacular misses over the last few years. The data is expected to remain unchanged from prior read of 190K.

Traders will closely scrutinize this data as discussions of a possible year-end rate hike keep going, although markets are now pricing a March 2016 first rate hike. We also consider that the Fed is clearly dovish, despite Fed members insisting that a rate will still come before year-end. By maintaining the zero interest-rate policy, the Fed has proven that the monetary policy divergence between central banks does not exist anymore. All central banks are dovish. The global outlook is negative, in particular, the lingering low commodities prices, which will increase downside, pressure on inflation.

Inflation is indeed the key issue if we read Fed minutes. Yellen in a recent speech admitted that: “nominal interest rates cannot go much below zero”. In other words, the FOMC won’t be able to push real federal fund rates below the maximum deflation level. Therefore, The Fed has no room to act. This may lead to a loss of confidence in the central bank. We are definitely awaiting a QE4 announcement

Weak UK GDP read (by Peter Rosenstreich)

The shine has clearly faded from the UK economy, indicating further downside in GBPUSD. Despite hopes and predictions of lower trade exposure to Asia’s economic slowdown, and against the backstop of a strong global service sector, the UK economy is displaying signs of slowdown. GDP Q2 final estimates were revised lower to 2.4% from 2.6% yoy with the quarter on quarter read unchanged at 0.7%. Expectations for a BoE rate hike have now been pushed to November 2016.
While the data remains marginally buoyant, primarily due to housing market fortitude, forward expectations have decreased meaningfully. Yesterday’s, mortgage approvals surged to 71.0k, following an upwardly revised read of 69.0k in July (highest level since Jan 2014) and Nationwide House prices increased by 3.8% yoy as inventory concerns increase. Yet consumer confidence slipped to 3 from 7 and tomorrow’s manufacturing PMI is expected to fall to 51.3 from 51.5 with risk skewed to the downside. Finally, lingering concerns of a “Brexit” have advanced in recent weeks due to Europe’s confusing policy towards the refugee crisis and the Labor Party's confirmation of their non-commitment to staying in the EU. Elsewhere, BoE governor Carney has provided little clarification on the here and now but rather is more focused on tomorrow's issues. Instead of focusing on monetary policy strategy, the governor discussed the financial market’s relationship to climate change. Obviously this did little to stem the GBP sell-off. While distant rate hike expectations could provide room for a mid-term bounce in the near term, bearish pressure should remain. For GBPUSD, the trader’s breach of September’s 1.5170 low indicates an extension of current weakness. GBPUSD traders should remain bearish, standing ready for a test of the 1.5086 support (Fibo 61.8% retracement).

Gold - Long-Term Bearish

The Risk Today

Yann Quelenn

EUR/USD has shifted into a consolidation pattern. Hourly resistance can be found at 1.1330 (21/09/2015 high). Hourly support lies at 1.1087 (03/09/2015 low). Stronger support lies at 1.1017 (18/08/2015 low). In the longer term, the symmetrical triangle from 2010-2014 favored further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). We remain in a downside momentum.

GBP/USD has broken hourly support at 1.5136 (25/09/2015 low). Stronger support can be found at 1.4960 (23/04/2015 low). Hourly resistance can be found at 1.5659 (27/08/2015 high). In the longer term, the technical structure looks like a recovery. Strong support is given by the long-term rising trend-line. A key support can be found at 1.4566 (13/04/2015 low).

USD/JPY is moving sideways. The pair is still moving around the 200-day moving average. Hourly support is given at 118.61 (04/09/2015 low). Stronger support can be found at 116.18 (24/08/2015 low). Hourly resistance can be found at 121.75 (28/08/2015 high). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 118.18 (16/02/2015 low).

USD/CHF is still holding below resistance at 0.9844 (25/09/2015 low). The technical structure still shows an upside momentum. We remain bullish in the medium-term. In the long-term, the pair has broken resistance at 0.9448 suggesting the end of the downtrend. This reinstates the bullish trend. Key support can be found 0.8986 (30/01/2015 low).

Resistance and Support: