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 12:15 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 has been sliding of late, missing expectations for the past two releases. The February reading dropped to 139 thousand, well short of the estimate of 159 thousand. The markets are expecting a strong turnaround  for the March release, with an estimate of 192 thousand?  Will the indicator meet or beat this rosy prediction?

Sentiment and Levels

The unpopular sales tax hike is here and the BOJ will not hesitate to take action if deemed necessary. Pressure from the government to push inflation and growth higher could prod the BOJ into action, and this could certainly weaken the Japanese yen. In the US, the rate hike genie is out of the bottle  and the Fed tightening is not that far in the distance. US employment data has been solid, and another  decent Non-Farm Payrolls would be enough to give the dollar another boost. So, the sentiment  is bullish on USD/JPY towards this release.

Technical levels from top to bottom: 105.44, 104.80, 103.77, 102.74,  102 and 101.20.

5 Scenarios

1. Within expectations: 187K to 197K: 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: 198K to 205K: A reading above expectations would signal economic expansion, and could push the pair above one resistance level.
3. Well above expectations: Above 205K: A sharp rise in employment numbers could propel USD/JPY upwards, and  a second  resistance level  could be broken.
4. Below expectations: 179K to 186K: A weak reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below 179K: Such a scenario would be bearish for the dollar, and USD/JPY could break two below a second support level.

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

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