US Dollar, NFP Talking Points:
– This Morning’s Non-Farm Payrolls report was released to a strong beat on the headline number as +312k jobs were added in December versus the expectation of +173k. Average Hourly Earnings came in strong, as well, showing at .4% for the month of December to mark a 3.2% annualized clip; beating the expectations of .3% and 3.0%, respectively. Labor force participation improved, and this pushed the unemployment rate higher from the multi-decade lows of 3.7%, coming in at 3.9% for the month of December.
– The week is not yet over as Jerome Powell and Janet Yellen are set to take the stage a little later this morning. Next week’s economic calendar is relatively light, however, and this will likely keep the focus on macro-related themes of risk aversion.
– DailyFX Forecasts have been published for Q1, 2019 on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.
NFP Beats, US Dollar Pushes Up to Test Resistance at Prior Support
This morning’s Non-Farm Payrolls report out of the United States was released to a large beat of the expectation on the headline number, as +312k jobs were added last month in the US versus the expectation of +173k. This was partially offset by an unexpected rise in the unemployment rate to 3.9% from a prior multi-decade low of 3.7%, but Average Hourly Earnings came-in strong, showing continued strength in wage gains as December saw a .4% increase in AHE to make for an annualized 3.2% clip.
The net response was a quick jump in the Greenback after prices had slid-lower over the past two days; and resistance is coming in around the 96.47 Fibonacci level that had previously helped to hold support earlier this week. The week is not yet done, however, as a speech from Chair Powell and Former FOMC Chair, Janet Yellen will be in focus later this morning. This will likely keep risk markets on the move after a busy start to the New Year.
US Dollar Four-Hour Price Chart
Next Week’s Economic Calendar
For the first full trading week of 2019, the economic calendar is relatively light. This can keep focus on macro themes after the burst of volatility to start the New Year, with traders hovering around risk markets to see whether continuation shows in this most recent bout of risk aversion. Of note, Japan re-opens after being closed for this week; and as noted yesterday, Japan’s Ministry of Finance has spoken up regarding the surge in the Yen, threatening intervention if needed.
This will likely be the focus in the early part of next week, and Wednesday brings the highlight of next week’s economic calendar with a rate decision out of the Bank of Canada. Expectations are for a hold at this rate decision after Poloz denoted slowing growth at the Bank’s December meeting: But a surge in the Canadian Dollar this week could keep USD/CAD of interest as the bullish trend that drove the pair throughout Q4 has finally found some element of pullback.
DailyFX Economic Calendar: High-Impact Events for the Week of January 7, 2019
USD/CAD Tests Fibonacci Support at Prior Resistance, Tests Below Trend-Line
The bullish theme in USD/CAD ran in a fairly clear manner through most of Q4. A bullish trend-line held support for the bulk of the period, save for a test below in early-December. But as last month saw the US Dollar struggle and begin to turn-lower, USD/CAD continued to push higher; eventually finding some resistance around the 1.3650 level which marked fresh 18-month highs. Bulls put up a valiant effort, pushing at that resistance for over a week as the door opened into 2019; but over the past two days prices have been pulling back.
In yesterday’s webinar, I looked at the trend-line test along with a deeper level of support that could keep the topside of the pair interesting. The trend-line did not hold the lows, so now the focus is on the Fibonacci level at 1.3423; which is the 78.6% retracement of the 2017-2018 major move and this is a level that had previously helped to hold the highs last month. Below this area is another spot of confluent support, as the range from 1.3361-1.3385 offers three different longer-term Fibonacci levels of interest.
USD/CAD Eight-Hour Price Chart
EUR/USD Works into Ascending Triangle
There isn’t much to update on EUR/USD, as the pair continues to work within a consolidation formation that’s been brewing for a almost a couple of months now. Horizontal resistance can be seen at the 1.1500 psychological level, which helped to hold the highs in both November of last year and January of this year; while support has come in at a series of higher-lows, indicating the waning drive of bears. A topside break through 1.1500 can re-open the door for bullish strategies in the pair.
EUR/USD Eight-Hour Price Chart
Chart prepared by James Stanley
USD/JPY: 110.00 Re-Test in Store?
USD/JPY came into the year screaming lower as risk aversion ruled the day. As discussed yesterday, this ‘melt up’ scenario in the Yen created some very sharp moves on the charts, and traders would likely want to wait for some element of pullback to show before looking at themes of continuation.
Two of the three potential resistance areas discussed on USD/JPY have come into play. The area around 107.89-108.00 helped to hold the highs through most of yesterday’s US session; and the deeper zone that runs from 108.47-108.70 came into play overnight, helping to hold another short-term higher-high on the chart.
The big question now is whether buyers defend higher-low support, which can keep the door open for a further retracement up to the 109.67-110.00 zone; or whether sellers come in to push lower for a re-test of 107.00 ahead of the weekend. On the below hourly chart, I’ve drawn-in a short-term ascending triangle formation. This will often be approached in a bullish fashion with the expectation for the drive that’s brought buyers in at higher-lows to continue through the horizontal resistance that’s been holding the highs. This can keep focus on that deeper zone of potential resistance.
USD/JPY Four-Hour Price Chart
GBP/JPY Strings Together Gains After 500+ Pip Bounce from the Lows
The dangers of chasing were on full display in GBP/JPY this week, as a fast and heavy move ran into an aggressive retracement that’s continued to show some impact. I had looked at short-term setups for the topside of the pair yesterday, looking to use a Fibonacci level as a basis for working with support at prior resistance. That theme has held into this morning and bulls aren’t yet showing signs of letting up.
This can be a dangerous market to be working with, particularly if holding risk over the weekend, as both the UK and Japan have big issues to contend with that could see headline volatility prod outsized moves when markets re-open next week. In the UK, Brexit continues to loom large and the vote in Parliament is expected for the week of January 14th; and in Japan, markets are likely in for headlines similar to what was noted above, discussing the prospect of intervention or BoJ response to this week’s volatility surge.
GBP/JPY Hourly Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
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