Stocks Trading Flat Ahead of ADP Employment Report

James Hyerczyk from ForexHound.com at 02/03/10

U.S. stocks markets are trading flat ahead of this morning’s ADP Employment Report. Expectations are for this report to show that 30,000 jobs were lost during the last month. This is better than the 84,000 lost in December. Today’s ISM Non-Manufacturing Index Report should be a market mover today. Traders are looking for this index to cross over the important 50 barrier. A number higher than 50 indicates upside momentum.

The March E-mini S&P 500 is on target to test a major retracement zone at 1109.25 to 1118.25. A retracement to 1084.00 must hold if tested. The March E-mini Dow has an upside target of 10341. Look for support on a pullback to 10130. The March E-mini NASDAQ is lagging behind the two other markets. This markets needs to regain 1774.50 to show strength.

April Gold surged overnight to $1126.40 before backing down. This price was inside of a retracement zone at $1120.50 to $1131.40. A weaker Dollar is necessary for this market to continue its rise. If the Dollar strengthens, then look for a pullback to $1100.40.

March Treasury Bonds are under pressure overnight as traders await today’s ADP Report and the Treasury refunding announcement. A good employment number will pressure bonds along with the news that more supply is hitting the market. The bigger picture still indicates that March Bonds are finding resistance inside a major retracement zone at 118’24 to 119’24. Continuing to close under 118’24 indicates weakness that could trigger a break back to 116’06.

Demand for higher yielding assets and a weaker Dollar is helping to support March Crude Oil. Today’s petroleum inventory report should be a market mover. Traders are looking for an increase in supply, but could be surprised because of the recent pick-up in manufacturing. A new main range at 84.45 to 72.43 has been formed which could trigger a retracement to 78.44. 

An increase in demand for risk is putting pressure on the U.S. Dollar overnight. Tensions have been easing all week on speculation the European Union will accept the latest proposal by Greece to shore up its budget deficit. In addition, talk is circulating that the E.U. and the International Monetary Fund are likely to rescue Greece should the situation warrant such moves.  Asian traders like the news and are boosting demand for higher risk assets and higher yielding currencies.

Thin trading conditions continue to highlight the Forex markets ahead of tomorrow’s Bank of England and European Central Bank policy announcements. Trading is expected to continue to be muted following these two central bank meetings as traders will then begin adjusting positions in front of the U.S. Non-Farm Payrolls Report.

Because of the light trade, today’s U.S. economic reports are likely to have greater impact on the Forex markets. Today’s ADP Employment Report is expected to show a loss of 30,000 jobs following a decline of 84,000 in December.  This report will be followed by the ISM Non-Manufacturing Index. Traders will be looking for positive momentum from this report. The preliminary guess is for a figure of 51. This will put this index above the key 50 area.

Other potential market moving reports are the Treasury refunding announcement and the weekly petroleum report. Both reports could trigger movement in the Forex markets if they are out of line with expectations. Interest sensitive markets will react to the refunding announcement. The Canadian Dollar is likely to react to the crude oil figure.

The March Euro is trading higher overnight. Traders have been supporting this market since news broke that Greece had reached a budget solution. Today, the European Union will release its opinion on Greece’s budget proposal. In addition, traders are reacting positively to the strong possibility the IMF will rescue the Greek economy if necessary. On Thursday, the European Central Bank is expected to announce that interest rates will remain steady.

Technically, a new short-term range has been formed at 1.4194 to 1.3852. Last night, this market stopped rallying at 50% of this range at 1.4023. Overcoming this level could trigger a further rally to 1.4063.

The March British Pound spiked to the upside last night on the news that U.K. consumer confidence rose more than expected. Speculators have also been driving this market higher on the notion that the Bank of England members will provide a more hawkish opinion on the economy in tomorrow’s policy statement.

Technically, the British Pound started higher, but pulled back. The charts indicate that 1.6153 is the next upside target. 1.5960 is pegged as a possible downside target.

The March Japanese Yen is trading mixed in light trading. Some traders expect this pair to rally on increased demand for higher yielding currencies. Others are looking for more downside pressure on speculation the Bank of Japan is unlikely to intervene to prevent the Yen from appreciating. The next upside target is 1.1108. On the downside, this pair could find support at 1.0950. What this market wants is clarity at this time.

The strengthening Euro is taking the pressure off the Swiss National Bank to intervene. This is contributing to the strength in the March Swiss Franc. The short-term range is .9647 to .9397. Last night’s test of 50% of this range at .9522 encouraged profit-taking and led to a small overnight break. Traders will be watching the news from the European Union today regarding the Greece budget situation. Any positive news which drives the Euro higher is likely to be bullish for the Swiss Franc.

Higher stock, gold and crude oil prices should continue to support the Canadian Dollar. Gold, however, is trading inside of a retracement zone which could limit gains. Today’s crude oil inventory report is expected to show a rise which could pressure oil prices. The March Canadian Dollar is trading tentatively this morning as traders await this report. Technically, the main range is .9780 to .9326. The first upside target today is downtrending Gann angle resistance at .9520. Short-term overbought conditions could drive this market back down to .9405.