Talking Points in US Dollars:
- The US dollar fell back to the 90.00 level after the release of non-farm wages.
- This was another disappointing US NFP post, and it pushes attention to the Federal Reserve’s upcoming policy meeting on June 15-16, and it should be a big Fed meeting because it’s a quarterly meeting which provides updated forecasts and guidance.
- The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.
This was another disappointing NFP release in the United States and it apparently takes some pressure off the Federal Reserve just weeks before a very big meeting.
The tension is driven by how ‘transient’ inflation might be. In the first quarter, market participants started to get angry, as observations of markets like wood or copper raised inflationary fears. US Treasury rates started to rise in response, and then in April and May the inflation statistics started showing some pretty big jumps.
The big question, then, is whether these inflation impressions did anything to force the Fed on a faster timeframe for political normalization, and this morning’s NFP impression is just another element in the camp. calm down.
But make no mistake, this subject is far from decided. And with the magnitude of the impact of dollar declines on the currency in the first two months of Q2, the possibility remains for some dollar strength as we move towards this next key FOMC decision on rates. .
The weekly chart below provides some context as the last few weeks have seen support in a really key area. This is the same price zone that came into play to hold lows in early January, ahead of the first quarter rally that ended on the last day of the last quarter.
Weekly Price Table in US Dollars
Graphic prepared by James stanley; USD, DXY on Tradingview
Taking a step back highlights the downside potential of the issue. It was the same chart I used in the second quarter technical forecast for the USD. But it also helps categorize the strength of the last quarter as a corrective move in terms of a sell-off.
Monthly price table in US dollars
Graphic prepared by James stanley; USD, DXY on Tradingview
EUR / USD returns to range
As the strength of the USD showed ahead of the NFP, the EUR / USD plunged below a large support point which had helped hold down the lows over the past two weeks. This zone is around a few longer term Fibonacci levels ranging from 1.2134 to 1.2167.
After the NFP printed and the dollar started to fall, the EUR / USD has moved back above this support area and as of this writing is hanging on to the top of the area around 1.2167. Key here will be to watch for this low from Friday to continue until Monday, when there is still a possibility that prices will move back into the range ahead of this FOMC rate decision. Friday’s low is just above the handle of 1.2100, but bonus points if Monday’s low can stay above the Fibonacci level of 1.2134, which would equate to a low of short term.
Four-hour EUR / USD price table
Graphic prepared by James stanley; EURUSD on Tradingview
GBP / USD maintains support, range remains
The GBP / USD pair also remains attractive. I had covered this in Wednesday’s webinar, looking at the similarities between cable and EUR / USD.
Pre-NFP price action was key here. Because while EUR / USD pushed to a new low, GBP / USD remained strong around the 1.4100 support. Range resistance is closer, but there is also potential for a breakout to the upside, as I discussed in that same webinar on Wednesday.
For the GBP / USD pair, a hold above Friday’s low through Monday also keeps the door open for bullish scenarios in the pair, perhaps creating an even more attractive backdrop than that displayed in EUR. / USD.
Four hour GBP / USD price chart
Graphic prepared by James stanley; GBPUSD on Tradingview
USD / CAD sellers still show fatigue
The USD / CAD has been one of my favorite bearish patterns on the USD for a while, triggered by the BoC’s announcement in April about the prospect of post-pandemic policy. This exposed the CAD to some aggressive force, and when it mated to a Fed backed USD which has so far refused to do so, the pair’s prices fell to a new low. six years.
But as I warned at the opening last week, sellers were starting to show fatigue and a big point for a possible about-face appeared on the chart. This is the psychological level of 1.2000, which almost came into play this week if sellers weren’t stopped by a few pips. This happened after another resistance visit to the “r1” level that I had highlighted; But this low now opens the door to a potential short term bullish breakout in this same area of 1.2143.
The bigger question in USD / CAD is what happens once the buyers are able to cause a bullish breakout? Will sellers leap ahead of a 1.2000 revisit? Or will the sellers continue to be timid, allowing a combination of reversal strategies and short squeezes to deepen the retracement.
To learn more about psychological levels, check DailyFX Education
Four hour USD / CAD price table
Graphic prepared by James stanley; USDCAD on Tradingview
AUD / USD for USD strength scenarios
AUD / USD is an area that could remain just as interesting if the USD rises for a prolonged period. The pair had spent most of the past six weeks in a range until this week, price action fell to a new monthly low. Similar to EUR / USD above, NFP volatility has helped the pair push back above support, and prices are currently holding on to this area. But, the difference between that and EUR / USD was the dominant trend, and this may help keep AUD / USD as a candidate for bullish USD strength scenarios in the run-up to the FOMC move on. June rates.
Four hour AUD / USD price chart
Graphic prepared by James stanley; AUDUSD on Tradingview
— Written by James stanley, Senior strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX