Mid-Day Report: Dollar Rebounds on Strong ADP Employment

Dollar recovers after US released solid employment data. The ADP employment report showed private sector jobs few 281k in June, much better than consensus of 205k and May’s 179k. That’s also the highest number since November 2012. That data provides some optimism for tomorrow’s NFP release, which markets expected to show 210k growth. US stocks futures are also lifted by the data and DOW and SP 500 would likely make new records highs today.

In Eurozone, French prime minister Valls urged ECB to bring down the “overvalued” euro, which is “bad for our industry and for growth.” And he noted that “monetary policy cannot go only through interest rate moves” and ECB could go further, including “buying assets on the markets”. Released from Eurozone, PPI dropped -0.1% mom, -1.0% yoy in May.

UK PMI construction surged to 62.6 in June, much better than expectation of fall to 59.7. The reading was also at a four month high. Markit noted that “the latest survey suggests that the U.K. construction sector has expanded by more than 1% over the second quarter of 2014.” And, “a key recent development across the construction sector has been the return to pre-recession rates of job creation, following a prolonged period of falling payroll numbers and cuts to operating capacity.”

Aussie retreated against dollar today after poor trade data. Australia reported AUD -1.91b deficit in May comparing to expectation of AUD -0.21b. Exports fell 0.5% mom and rose a mere 0.6% yoy. On the other hand, imports rose 1% mom and 4.4% yoy. Economists noted that the significant falls in hard commodity prices hurt exports and caused the ballooning in trade deficit.

Daily Pivots: (S1) 1.3669; (P) 1.3684 (R1) 1.3694; More….

EUR/USD’s retreat from 1.3700 extends lower today and intraday bias remains neutral. As long as 1.3575 support holds, we’d expect rebound from 1.3502 short term bottom to extend higher. Above 1.3700 will target 61.8% retracement of 1.3993 to 1.3502 at 1.3805 and above. Momentum is not strong enough to convince us that larger rally from 1.2755 is resuming. So, we’d be cautious on strong resistance from 1.3993 to bring reversal for sideway trading. Meanwhile, below 1.3575 minor support will turn bias back to the downside for 1.3476 key support.

In the bigger picture, overall price actions from 1.6039 is viewed as a corrective pattern. The choppy rise from 1.2042 is seen as a leg inside the pattern. Bearish divergence condition in daily and weekly MACD raises the chance that this leg is finished at 1.3993 already. Break of 1.3476 support will confirm this bearish case and should target 1.2755 and below. Meanwhile, break of 1.3993 is needed to confirm rally resumption. Otherwise, we won’t turn bullish even in case of strong rebound.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
23:50
JPY
Monetary Base Y/Y Jun
42.60%
48.30%
45.60%

01:30
AUD
Trade Balance (AUD) May
-1.91B
-0.21B
-0.12B
-0.78B
08:30
GBP
Construction PMI Jun
62.6
59.7
60

09:00
EUR
Eurozone PPI M/M May
-0.10%
-0.10%
-0.10%

09:00
EUR
Eurozone PPI Y/Y May
-1.00%
-1.00%
-1.20%

12:15
USD
ADP Employment Change Jun
281K
205K
179K

14:00
USD
Factory Orders May

-0.10%
0.70%

14:30
USD
Crude Oil Inventories

1.7M

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