USD/JPY: Trading the US ADP NFP August 31 2011

The ADP Private Sector Job Indicator is a significant index which estimates the change in employment figures. It is an important indicator of job creation, which in turn impacts on consumer spending and economic growth.

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

Published on Wednesday at 12:15 GMT.

Indicator Background

Together with the Non-Farm Payrolls report, which comes out later this week, the ADP Report provides a snapshot of job creation, which is a leading indicator of the US economy.

The past two readings for the ADP index were higher than forecast, with the August 3 reading coming in at 114K, despite a forecast of only 101K. The forecast for the August 31 reading is 102K.

It should be noted, however,  that these figures are much lower than those recorded in the first six months of 2011, indicating that the US economy is fragile and still trying to find its footing. The unemployment rate in the US    remains stubbornly high, with the most recent figure  standing at 9.1%.

Sentiments and levels

The ADP Report has a tendency to rapidly change the direction of the USD, so if this week’s reading exceeds the market’s expectations, that could bode well for the USD/JPY. Thus, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom:    79.30, 78.50, 78.20, 77.50, 77.00, 76.25, 75.95.

5 Scenarios

1. Within expectations: 81K to 120K. In such a scenario, the USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 121K to 140K: An unexpected higher reading can send USD/JPY well above one resistance line.
3. Well above expectations: Above 140K: The chances of such a scenario are low. Such an outcome would prop up the USD/JPY, and a second resistance line might be broken as a result.
4. Below expectations: 60K to 80K: A smaller increase than forecast could cause the USD/JPY to drift and lose one level of support.
5. Well below expectations: Under 60K. Given  the high unemployment figures,  a poor reading for the ADP report  is a possibility. In this scenario, the USD/JPY will fall and could break a second resistance level.

For more about the USD/JPY, see the USD to JPY forecast.