The direction of the U.S. Dollar on Wednesday will be determined by the ADP Employment Report. This conclusion is being supported by both fundamental and technical factors.
Fundamentally, a weaker than expected report will sent demand for risky assets plummeting while driving up the lower yielding U.S. Dollar and Japanese Yen. How much below the consensus and how close to the low end of the range will determine how much upside momentum will be generated for this two safe haven markets. Pre-report guesses are for a consensus of plus 60,000 jobs. This falls in the middle of a 23,000 to 100,000 range.
A report above the consensus will be bearish for the U.S. Dollar and fuel demand for higher yielding assets especially the commodity-linked currencies. How much these currencies rally will be dictated by how close to the upper end of the range is the actual number of jobs added.