Thoughts before the US NFP release
I have been calling for a US dollar correction since just before Christmas, after the dollar spiked higher on the FOMC meeting. However, with the holiday season being what it is, the lack of movement confused me as to whether it would ever happen.
On Tuesday it appeared I was wrong and the sideways movement we had seen for two weeks was enough to unwind overbought conditions. This set us up for a resumption of the dollar bull trend.
At last, however, the correction has happened. This presents opportunities to buy the dollar at great levels today, expecting the dollar bull trend to resume sooner rather than later. Meanwhile today’s US nonfarm payrolls (NFP) is another key factor to consider.
USD/JPY and AUD/USD
USD/JPY is coming to the end of the correction phase now (which we predicted in an earlier article this week). The good support at 115.15/10 has held perfectly so far this week.
We want to try long positions from here down to strong support at 114.75/65. We can expect a low for the correction here so this should be an excellent buying opportunity. However, with the NFP release today we need wide stops below 113.90.
If we do, as expected, reach a bottom today the bull trend should resume. In this case you should hold long positions over the days and weeks ahead to take full advantage.
A weekly close below 114.00, however, is a short-term sell signal and targets 113.50, then 113.10/00.
AUD/USD is staging a good recovery and I hope we can target important longer-term resistance at 7380/90 for an excellent selling opportunity. A high for the recovery is expected here as long as we don’t get any huge surprises to the downside on the NFP number today.
The longer-term bear trend should resume from here. However, if we do see an unexpectedly weak NFP and we push higher through 7440, we should target 7465 before quite strong resistance at 7500/05.
EUR/USD and gold
EUR/USD, I hope, can target an excellent selling opportunity at 1.0640/50. Although you may want to scale into short positions on the approach in case we don’t quite make it that far before the bears take over again. Short positions need wide stops on NFP day, above 1.0710.
A weekly close above 1.0710 on a very weak NFP would however be a buy signal. This would carry over to next week targeting 1.0755/60, then 1.0820/25.
Gold hit important resistance at 1180/82 and topped just below 1185. I feel confident this will mark a high for the recovery in the bear trend. Short positions need stops above the December high at 1187/88.
A break higher on a weak NFP would however be a buy signal of course. This would initially target quite strong resistance at 1199/1200.
Technical Analyst & Trader
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