USD/JPY: Trading the ADP Non-Farm Employment Change

The ADP Non-Farm Employment Change measures the change in the number of employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar.

Here are the details and 5 possible outcomes for USD/JPY.

Published on Wednesday at 13:15 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus publication of employment data, such as the Non-Farm Employment Change, is highly anticipated by the markets. Traders should note that the ADP indicator is released two days prior to the official government publication of Non-Farm Employment Change.

The indicator showed almost no change in November, coming in at 203 thousand. This easily surpassed the estimate of 180K. The market forecast for December stands at 194 thousand. Will the indicator repeat and beat the market forecast this month?

Sentiment and Levels

The Fed has finally started the long-awaited QE taper, which is dollar-positive. Further scaling down by the Fed is expected early in 2014, so the yen could  remain under strong pressure.  As well, the Bank of Japan has indicated it will continue its current aggressive monetary program, which could lead to further weakening of the Japanese currency. The yen crashed in 2013, losing about 17% of its value, and the currency enters 2014 vulnerable to further declines. So, the sentiment is bullish on USD/JPY towards this release.

Technical levels from top to bottom: 108.38, 106.66, 105.70, 104,  102.50 and 101.44.

5 Scenarios

1. Within expectations: 189K to 199K: In this scenario, USD/JPY could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: 200K to 210K: A reading above expectations would signal economic expansion, and could push the pair above one resistance level.
3. Well above expectations: Above 210K: A sharp rise in employment numbers could propel USD/JPY upwards, and a second resistance line could fall.
4. Below expectations: 178K to 188K: A weak reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below 178K: Such a scenario would be bearish for the dollar, and USD/JPY could break  below a second  support level.

For more on the yen, see the USD/JPY forecast.

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