ADP: Expanding triangle formation I don't have a price target for ADP but it is interesting to see the resistance at $140 and the lower lows with a negatively diverging MACD. This is ultimately a bearish pattern.
ADP
Statistic from ADP:reason to be worried for buyers of the dollarToday's statistics on the US labor market may well disappoint. At least, this is indicated by data on the level of employment in the private sector from ADP. With an average forecast of experts in +190K, in fact the figure was +177K. Overall, there is nothing terrible in this figure. By itself, it is very, very good. The problem is that the States have become a hostage of excellent data. Markets have become too accustomed to numbers of + 200K and above. Accordingly, any negative deviation from the forecasts may be interpreted by participants of financial markets as the beginning of problems in the US economy, with all the ensuing consequences: a decrease in GDP growth rates, an end to the Fed's rate increase phase, and so on.
Just in case, let's remind you that today is published a whole block of data that includes not only the number of new jobs created outside agriculture, but also the rate of unemployment, and, which is no less important, in the conditions of the active phase of the FED interest rate increase - the average hourly earnings:
Pre-Forecast
15:30 USA 3 NFP (June) 223K 190K
15:30 USA 3 Average hourly earnings (m / m) (June) 0.3% 0.3%
15:30 USA 3 Unemployment rate (June) 3.8% 3.8%
As can be seen, the forecasts are rather optimistic and, in some cases, even aggressive, and therefore the chances that they will not come true fully or partially are high.
Thus, we see on the horizon a potential fundamental threat to the dollar.
In addition, purely technically, if you look at the graph of the Dollar Index, you can see its inability to overcome the key resistance 95 and can see signs of a possible correction: consolidation at the top, the formation of reversal graphical patterns, candlestick signals, trend indicators enter into a neutral negative state (see KenJi and TDI indications), etc.
Total, dollar sales continue to look more promising than its purchases.
Data from ADP send negative signals to the dollarTraditionally, on the eve of the release of official statistics on the labor market in the United States, unofficial data on the number of new jobs created in the US by ADP are published (note that data from ADP cover only the private sector, state enterprises are not included in it).
The ADP report reflects the level of employment Data are received from approximately 500,000 US legal entities. And although the level of correlation between ADP and NFP data is not very significant (about 30-40%), nevertheless, ADP data are an important indicator, especially on the eve of the main data block.
The data published today turned out to be worse than the forecasted values and much lower than the indications of the previous period. The growth rate was 178 K (forecast 190 K, the previous 204 K). In general, the figure is excellent, but the fact of its lagging behind the market expectations sends a negative signal to the dollar and adjusts to a negative mood on Friday, when the NFP figures will be published. Another alarming signal for the dollar was a significant negative revision of the April values from 204K to 163K.
It is also worth noting that the data on US GDP, also published on Wednesday, was below forecasts.
In total, we consider today's data as a reason for the start of dollar sales. Recall also that for two months in a row the data on the NFP are worse than forecasts, which is quite an alarming signal for dollar buyers.
Stronger ADP...EURUSD for a short retraceVolatility ahead. In addition to the uncertainty on the USD arising from the trade war (increased tariffs), and change of personnel in the White house, from today till Friday, we see several economic data release and policy decisions which could surprise the market and also bring about higher volatility.
Tonight, we have the USD ADP NFP, which is released 2 days ahead of the Govt NFP release on Friday evening.
This is data is likely to bring some short term volatility to the USD, with anticipation that data released to be better than forecasted, close to previous month.
If EURUSD breaks below 1.2400 a quick sell towards 1.2350 could be viable.
EURUSD - Broke supportThe price of EURUSD broke support after the ADP release, Next local support found at 1.1175. Breaking below it could send the price down to the trend line (blue one on the char).
Dollar Data Dependant The USD sell off as traders set a chain of profit taking after 2 weeks rally due to various factors:
- Greece uncertainty of exiting the EZ make holding USD worthwhile
- US Economic data has been promising with CPI much higher
- Hawkish comment from Yellen
- That view is changing with 5th of June looming for a potential deal and no Grexit
A lower USD potentially because:
- Euro rally with Bund unable to find support and Grexit averted
- Unwinding of USD/JPY longs
- Commodities currencies caught bids
- A worse than expected US economic data
A higher USD potentially because:
- Grexit so USD safe haven currency
- Better than expected US economic data that imply a September rate hike
- Hawkish comment from Fed members
Technically:
- Heavy band of resistance between 96.63 and 97.73
- Heavily biased for more downside with a possible AB - CD playing out
Consolidation next on US dollar indexExpect some consolidation
Forming a potential H & S?
Will wait for confirmation
Daily RSI has rooms to fall
Data Dependant on ADP & Non Farm Payroll
Previous yellow box was a bullish wedge
Forecast next yellow box is a bearish wedge?
