Yesterday the ADP non Farm employment change was released and it was robust that February’s reading recording an impressive 265K jobs against a consensus of 187K jobs. It exceeded last Month’s reading by a clean 20K jobs. While last month’s reading predicted a slow down, development is to the upside. It should be remember that while other economic data released are important, the Fed plays and tracks with two big influencers-Inflation and Labor development in their monetary policy developments. Jobless claims and ADP appeared to be diverging and while this is unusual, Friday’s NFP should be a cliff hanger for the USD and especially the stock market which strives when Labor conditions improves. ADP was hinting and is directly proportional to NFP, and it’s indicative that we should at least prepare for some sort of USD liftoff tomorrow but first we should hear the outcome of Trump and Xi meeting today. We all know from the campaign trails how Trump always referred to China as currency manipulators and how he will impose heavy taxes on Chinese goods unless they allow market forces to take its course. He said the same against Japan but he flipped and lowered his tone after his meeting with Abe. Should Trump reverse his previous stance, the stock market should rally. It’s the combination of all these that makes my view bullish for the USD atleast in the meantime and I’m selling the NZD.
In the weekly chart, price action is at the support trend line. Notice how the support trend line has been in place since the beginning of last year and that is where reversal candlestick forms-check out the 12.03.2017 and 17.01.2016 candlesticks. From analysis, it looks likely that this level will be breached. In the daily chart, price action failed to breach the daily resistance trend line at 0.7020 and has since trended lower heading towards the support trend line at 0.6920 and probably lowers if analyzed from the weekly chart.
Today, I will trade this pair as follows with entry in the 1HR chart:
Stop Loss: 0.6990
Take Profit: 0.6890
Watch out for Jobless claims later in the NY Session. Expectation is for a contraction of people claiming benefits to 250K from 258K recorded last. The lower the figure the better for the USD and if it actually do, NFP reading should be higher since they are inversely related.
Have a good trading day.