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Equity Markets Trade Flat Ahead of ADP Report

James Hyerczyk from ForexHound.com at 12/02/09


Traders will be focusing on the U.S. ADP Report this morning.  The report is expected to show that the pace of jobs loss in the U.S. is slowing, bringing the economy closer to sustaining its current recovery.  The early estimate is for a job loss of 150,000 versus a loss of 203,000 in October.  A stronger than expected report will lead to an increase in risk appetite which should pressure the Dollar and help to rally stock indices.  Later this afternoon, traders will react to the Fed’s Beige Book. 


An increase in demand for higher risk assets should send the stock indices higher.  Chart watchers should note that the December E-mini S&P 500 is still holding the November top at 1112.25.  A break-out over this level should send the index soaring to a possible test of major 50% resistance at 1122.00.  A break back under 1102.25 will be the first sign of weakness.  A close under 1089.50 will be bearish. 


The rise in higher yielding assets pressured the Treasury markets yesterday with the March Treasury Bonds taking the hardest hit. Yields for both March Treasury Bonds and March Treasury Notes rose as these two instruments are being forced to compete with the higher yields investors are getting in the equity markets.  The chart indicated that March Bonds would break to at least 121’06.  This area was tested overnight.  Over the short-run, 120’24 is a possible target by December 7th.


For a second consecutive day, the Japanese Yen is under pressure after a Bank of Japan official expressed his concern about the rise in the currency.  Despite official denials, the BoJ seems ready to intervene if the Yen continues to appreciate too much.  The Bank of Japan and the Japanese government want to avoid currency volatility.  They both feel that that economic growth cannot be sustained if the Yen is fluctuating too much.


This morning, the basket of currencies is trading steady to better.  Last week’s low at 74.27 is still holding.  A break through this level is likely to trigger a further decline to the April 2008 bottom at 73.67. 


The December Euro is trading flat.  Traders are being a little hesitant about getting aggressively long at $1.51 ahead of the ADP Report.  Support is coming from the news that the Dubai credit crisis is stabilizing and remains a local rather than global issue.


The December British Pound overtook a key retracement level at 1.6646 last night.  This price is now support along with 1.6575.  A failure to hold these levels will be a sign that a secondary top is forming


The December Swiss Franc is trading in a tight and narrow range overnight with a slight bias to the downside.  The Swiss Franc is trading at close to par with the Dollar on the news that the country emerged from its recession


The Dollar is trading a little better versus the Canadian Dollar overnight on light volume ahead of today’s U.S. employment report.  Yesterday, the Canadian Dollar rose on the news that Russia was adding the currency to its Forex reserves. 


February Gold continues to soar to the upside.  Perceptions that the Dollar will weaken, and renewed central bank buying is helping to boost this metal.  News that gold producers have lifted hedges is providing additional support. 


March Crude oil is trading under pressure following the American Petroleum Institute Report showing that inventories rose 2.9 million barrels rather than drop by the estimated 1.3 million barrels.  Higher equity markets and a weaker Dollar could trigger a rally today, but traders will take most of their cues from today’s EIA oil inventory report. 

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