EUR/USD Daily Technical Analysis – March 09, 2017
We had mentioned in our forecast yesterday that the ADP employment report had become a non-event in recent months as the report was usually on expected lines and there was not much deviation from the expected numbers and hence there was not much to look forward to. We had also said that if there is a huge deviation, then we could be in for some decent volatility and thats what we got yesterday as the EUR/USD remained steady till the release of the report.
EUR/USD Gets Hit
The report came with the employment numbers about 50% more than the expected value and this gave a huge boost for the dollar. The ADP is generally considered as a precursor for what is to come in the NFP report on Friday and with Yellen making it clear that unless the data is extremely poor, we are almost sure to get a rate hike in March. With such a good ADP employment report, it is more or less confirmed that there is going to be a rate hike in March and this has helped to strengthen the dollar even further.
The market has begun to price in a rate hike and we believe that the hike is already priced in by 100% and that is the reason why we are seeing the EUR/USD under pressure and dipping towards 1.0500 as of this writing. We have the ECB rate and the press conference later on in the day which could add to the volatility in the pair.
But the dollar bulls need to keep in mind that with the rate hike almost fully priced in, the danger is now to the downside. If the NFP numbers come in slightly bad or if the Fed does hike rates but is not equally bullish in the statement and conference that accompanies the rate announcement, that we could have a case of buy the rumor and sell the fact and this is likely to then reverse the existing dollar strength. So, it is important for the EUR/USD bears to keep an eye on that and not get carried away and ensure that they trade carefully with correct stop losses.