Dollar Consolidation Ahead of Crucial Employment Report
The US dollar has entered a consolidation phase after last week's sharp decline against most major currencies. The USD/JPY and USD/CAD pairs are showing a moderate recovery, but investors are waiting for fresh macroeconomic signals before making further moves.
The ADP employment report is the key event today, with forecasts suggesting that job growth will slow to 68,000 after 98,000 in the previous month. A weaker-than-expected report could increase pressure on the dollar and lead to a more dovish Federal Reserve stance.
Strong readings in US services sector activity indicators, such as the preliminary S&P Global Services PMI and the ISM Non-Manufacturing Index, could partly offset any weakness in the ADP report. However, market participants traditionally view the ADP report only as an early indicator ahead of the official Nonfarm Payrolls release.
The USD/JPY pair has been forming a 'doji' candlestick pattern after testing the key support level at 155.30. If the price breaks above yesterday's high, the corrective move could extend towards 158.70-159.40. Weaker US employment data could trigger a renewed downward move.
Today's events include the release of the ADP change in US non-farm private employment and the US Services PMI at 15:15 (GMT+3) and 16:45 (GMT+3), respectively. The USD/CAD pair is also expected to be influenced by weaker US economic data, which could trigger another test of the 1.4000 level.