Dow Jones Moderately Lower After ADP Employment Report

On Wednesday, the Dow Jones Industrial Average closed slightly lower after the release of ADP employment report. The ADP report was positive, but a few items caused the Dow to finish lower.

The first of which is pause before this Friday’s non-farm payroll report. It seems that traders have paused a lot of buying of stocks in an effort to await for this data. This data is highly important because it is the last bit of data that the Fed will get before it decides if it will raise interest rates or not.

Private Sector Jobs

The report showed that employers added a total of 298,000 jobs for the month of February. This number was good for two reasons.

The first reason is that many analysts only expected the ADP number to grow by only 190,000 jobs. The second reason is January posted a smaller ADP number. There were about 246,000 jobs created.

This was a big shock to traders because the reported number came in much higher than anticipated. This was an overall positive boost for the Dow, because such a boost in employment is encouraging for the economy.

This report was probably a big reason why the Dow didn’t close any lower.

Non-Farm Payrolls

There is no doubt that the ADP report was highly positive. The problem is that it is not the only report set for release this week. On Friday, the U.S. government is set to release the non-farm payrolls report.

The Dow is currently in limbo as traders are awaiting for that data to determine how the Fed will respond with respect to interest rates. It makes sense, as buyers are holding back until they know whether the non-farm payroll numbers will be good for bad.

This means that the rest of the week traders will be cautious buying ahead of such an event. What this means is that the Dow may not gain as much until there is a clearer picture on what the Fed will do.

Stronger Dollar

As soon as the ADP payroll report was released the dollar started to get stronger. The dollar index, which tracks the dollar against a basket of six major currencies, rose by 0.28% to 102.09. In other words, the dollar index hit a 5-day high after the release of the report.

The USD/JPY pair traded to 114.74 yen, indicating a stronger dollar. The same is true about the dollar when compared to every other currency.

The dollar has been inching higher ahead of the Fed meeting, which is set to take place in about one week. The dollar has gained just about 2.5% over the past 5 weeks, as the Fed meeting gets closer.

The dollar is an important event for the Dow. That is because a stronger dollar would knock the Dow lower.

What Binary Options Traders Should Watch For

Traders should watch a few things…

The first item would be to see if the non-farm payrolls report on Friday comes out positive or not. That will be a good indication on whether or not the Fed would hike interest rates at the upcoming meeting.

Thereafter, traders will need to keep an eye on the dollar. The Dollar and DOW are correlated – if the dollar trades higher, the Dow tends to drop and vice versa. In order for the Dow to trade higher, the Fed would have to pull back on raising interest rates. If not, the Dow might have a tough time trading higher.