Wednesday, November 4, 2015

A Single Currency final reversal? | Yesterday’s fall was on ADP jobs and Yellen comments

The EURUSD pair seems to have broken to the downside out of the upward trending channel it has been in since towards the end of the first quarter of the year. This development has motivated chatter on the newswires regarding the possibility that the Euro could approach parity with the US dollar at some stage in the not-so-distant future. Technically, this possibility is supported by the occurrence of the fall in the Euro-dollar pair it experienced in the second half of 2014 and the first quarter of 2015. Then, it went from 1.40 down to 1.05, a move that amounted to a full 25% reduction. If that were to be repeated this time round, or anything like it, the result could see the Single Currency at around 0.80 to the US dollar.

Yesterday’s fall was on ADP jobs and Yellen comments

The fall that occurred yesterday was all in the New York session, when at the start of which the ADP private payroll services company jobs report came in slightly better than expected. This is often (but not always) seen by the markets as a leading indicator of what the official (and crucially important) Non-Farm Payrolls report will contain when it comes out tomorrow (Friday).

Then, at her appearance before the banking regulatory committee of the US House of Representatives, Janet Yellen, Chair of the Federal Reserve, gave what many believe to be the best hint yet that core interest rates will finally rise at the December meeting of the Federal Reserve FOMC. According to the Dow Jones Newswire, she said that the Fed expects “… the economy will continue to grow at a pace that's sufficient to generate further improvements in the labour market and to return inflation to our 2 per cent target over the medium term, and if the incoming information supports that expectation, then our statement indicates that December would be a live possibility”, She did add: “But importantly, we've made no decision about it." However the words quoted were enough to accelerate the fall that had already started.

The actual Non Farm Payrolls report tomorrow will be eagerly awaited.

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