USD/JPY and USD/CAD are consolidating on Wednesday as traders wait for the preliminary ADP private-sector employment report. USD/JPY has recovered toward 158.00 after last week's steep drop, while USD/CAD holds above 1.4000 after a similar rebound. Both pairs' next move hinges on whether US data confirms or undercuts the case for a more dovish Federal Reserve.
USD/JPY has clawed back toward 158.00 after losing more than 500 pips over several trading sessions following last week's Federal Reserve meeting. USD/CAD, meanwhile, is holding a rebound off the 1.4000 level. Both pairs are now in a holding pattern ahead of Wednesday's ADP private-sector employment report.
ADP report sets the tone
Forecasts point to ADP job growth slowing to 68,000, down from 98,000 in the previous month. A weaker-than-expected print could add pressure on the dollar as markets price in a more dovish stance on interest rates from the Federal Reserve. A stronger report, however, could support the currency ahead of the official labor market data later this week.
Traders are also watching services-sector activity. Markets expect the preliminary S&P Global Services PMI to improve to 53.6. The ISM Non-Manufacturing Index is forecast to rise to 54.5, and strong readings there could partly offset any ADP weakness and point to continued resilience in the largest part of the US economy.
USD/JPY tests the recovery
After testing key support at 155.30, buyers pushed USD/JPY back toward 158.00 while forming a doji candlestick, a pattern that may signal fading bearish momentum. A break above yesterday's high could extend the corrective move toward 158.70–159.40, though weaker US employment data could trigger a renewed downward move.
USD/CAD eyes further recovery
USD/CAD retested key support around 1.4000 last week, forming a bullish harami pattern after the rebound. That leaves room for a move toward 1.4130–1.4170, though weaker US data could send the pair back to test 1.4000.
The ADP figures and services-sector data are the main drivers for the dollar today. If they confirm the US economy's resilience, USD/JPY and USD/CAD could extend their recovery from last week's dollar correction.
Weaker data could instead strengthen bets on a more accommodative Fed and let sellers regain control. Either way, investors are likely to hold off on firmer conclusions about the labor market until the official Nonfarm Payrolls report lands later this week.
Source: ActionForex
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