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ADP Misses, Trade Deficit Widens – USD unmoved

Market Analysis

USDJPY, Daily              

US reported a $40.7 bln trade deficit in August, 3.0% wider compared to the -$39.5 bln shortfall in July (the deficit was a hefty -$44.7 bln in June). Exports rose 0.8% to $187.9 bln, while imports bounced 1.2% to $228.6 bln. Excluding petroleum, the deficit was -$35.3 bln from -$34.6 bln (revised from -$34.5 bln). The real trade balance was -$57.5 bln from -$58.2 bln (revised from -$58.3 bln), with exports rising 1.8% and imports up 0.8%. The trade balance with Canada widened to -$1.1 bln from -$0.7 bln, and was -$33.9 bln with China, versus -$30.3 bln. The erosion in the deficit won’t do the GDP outlook any favours.

U.S. ADP private payrolls increased 154k in September, a bit shy of expectations, following a revised 175k gain in August (revised from 177k). Jobs in the service sector added 151k, while the goods producing sector saw a modest 3k rise. Construction also added 11k, while manufacturing was shed 6k. Professional and business services employment rose 45k, with financial firms adding 11k, with trade and transportation adding 15k.

There was little dollar reaction to the trade report, where the deficit widened marginally, though the greenback has edged up from its post-ADP lows. EURUSD is back under 1.1210 after topping near 1.1220, as USDJPY recovered from 102.86 lows, now back over 103.00 and GBPUSD having fallen to new lows of 126.83 is trading at 1.2735.

The strong move in the USDJPY yesterday through the 102.00 level, 20 and 50 DMA suggest further strength ahead. 103.00 now becomes the next key pivot and psychological area, a close over 102.98 today and this will complete seven straight session gains for the pair. A retrace to the 102.70 – 102.50 area is possible before a further move higher with support now provided around 101.60 – 101.70.



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Stuart Cowell

Market Analyst


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