US Dollar, USD, EUR/USD, GBP/USD, USD/CAD Talking Points:
- It was a busy morning in the USD, with a very negative NFP report showing +235k v/s the +750k expectation.
- Next week is quiet on the USD but expect posturing ahead of the September FOMC rate decision. Elsewhere, ECB and BoC rate decisions can keep FX majors on the move. Monday is a US holiday so early-week liquidity may be lower.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
Well it was a busy morning around the US Dollar and the focus now begins to shift towards next week’s drivers, and there’s not much for US data on the upcoming economic calendar. The big event for next week will likely be the ECB. Later in the month, on September 21-22, we’ll go through the next FOMC rate decision and USD will again be center-stage, with the big question as to whether the Fed feels that its appropriate to start dialing in details of an upcoming tapering program.
Given this morning’s NFP print, the overwhelming expectation is for the Fed to be passive and dovish. It’s been somewhat of the bank’s defining characteristic ever since Covid came into the equation and with Covid numbers shooting higher throughout the US combined with continued weakness in the labor market, it feels as though there’s scant expectation for the US Central Bank to pose any actual changes anytime soon.
With that said, the US Dollar is getting a bit of a bounce after the release of non-manufacturing ISM numbers, which printed with a small beat above the expectation. Also of importance, the USD is bouncing after coming very close to a really big zone of support, spanning from 91.82-91.93. This is the same zone that caught the low back in late-July and early-August, running between two confluent Fibonacci levels that’s currently holding the two-month-low in the currency.
US Dollar Four Hour Price Chart
USD Support, EUR/USD Resistance
Helping with that bounce in the USD is EUR/USD reacting to a really big zone of resistance. This is the 1.1885-1.1900 zone that I looked at yesterday, but there’s another zone of interest just a bit higher from 1.1965-1.2000.
The big item on the economic calendar for next week is the European Central Bank rate decision, set to take place on Thursday. Will Euro bulls be able to drive into that rate decision? And perhaps more importantly, will they be able to push beyond the 1.2000 psychological level in the pair?
EUR/USD Four-Hour Price Chart
GBP/USD: Cable Gains Towards Key Fibo Level
I had looked at GBP/USD earlier this week as prices were setting up in an ascending triangle. That formation began to give mid-week and yesterday saw prices break out to a fresh two-week-high. Just above is a key Fibonacci level at 1.3879, and this level had previously set lower-high resistance after being prior support. This presents topside breakout potential into next week, particularly for those looking at bearish continuation in the USD.
GBP/USD Four-Hour Price Chart
USD/CAD Finally Gives up Trendline, Finds Support 1.2500
Curiously, USD/CAD held support earlier in the week even as the US Dollar was diving-lower. USD/CAD bears finally got some run on Thursday ahead of NFP, helping to push prices below the bullish trendline that originated in June. This morning brought some additional run-lower, with price action pushing down to the 1.2500 psychological level.
This can be followed in a couple of different ways and there is some CAD risk on the calendar for next week, specifically on Wednesday and Friday. Wednesday is a Bank of Canada rate decision and Friday is jobs numbers: This can keep CAD on the move.
For those that are looking to fade USD-weakness and/or CAD-strength, USD/CAD can present reversal potential provided a hold of 1.2500 through next week’s open. For those that are looking for bearish continuation in USD/CAD, there’s two ways to proceed forward: Either way for a breakdown below the psychological level or, alternatively, look for a bounce to sell into a lower-high. Such potential exists around 1.2565, as shown below.
USD/CAD Eight-Hour Price Chart
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.