A raft of top-tier economic data due over the remainder of the week spells the potential for volatility in the FX space that may herald breakouts from recent trading ranges. Headlining the heavy docket is the critical US payrolls data due on Friday with the FOMC rate decision, and Q1 US GDP figures on Wednesday offering some noteworthy interim event risk.
US Dollar Primed For Lift-Off
A hawkish lean from the Federal Reserve and upside surprises to the policy-shaping pieces of economic data could offer the US Dollar a lifeline. The greenback has struggled as US 10 year yields have failed to lift-off with the Fed offering timid talk on potential rate rises in the world’s largest economy. However, as the US recovery continues, an upbeat outlook from the central bank could help bolster expectations for an eventual rate hike, which would be positive for the reserve currency. More on the implications of the events for the US Dollar here.
Capitalizing On Market Volatility
Rates decisions, jobs data and GDP figures are generally considered as some of the highlights on the economic calendar, given the possibility of a surprise outcome to push prices beyond key technical levels. Traders can often capitalize on this type of price action by utilizing breakout strategies which are designed to capture a continued acceleration past a point of support or resistance.
Identifying Breakout Points
The DailyFX Support and Resistance Wizard makes traders’ jobs easier by automatically applying to charts the critical levels where buyers and sellers are likely sitting. These can then be used to identify potential ‘breakout points’ ahead of the release of market-moving news events. This time-saving tool is utilized below to highlight potential trading opportunities on some of the majors.
GBP/USD At A Critical Juncture Near 1.6845
The Pound is perhaps the prime candidate for a breakout as the currency awaits a catalyst to push prices beyond the crucial 1.6845 mark. A dovish lean from the Federal Reserve alongside disappointing US data prints could see GBP/USD clear nearby resistance levels. This would leave the pair primed for a run on the 1.7000 handle (identified below).
USD/JPY Poised For Break Of Recent Range
The Yen has kept traders in suspense as prices remain coiled within the recent trading range identified on the daily chart below. While the 102.80 mark continues to keep prices capped, the 102.05 support level has put a floor under the pair. USD/JPY has historically offered some of the highest volatility as the upshot of US payrolls data surprises, suggesting a break of this recent range looks imminent.
AUD/USD Buyers Resolve At 0.9205 To Be Tested
The Australian Dollar has continued to pull back from its 2014 highs with a series of lower lows and lower highs on the daily signaling the emergence of a downtrend. Traders will be eyeing the critical 0.9205 mark as a potential breakout point ahead of the key pieces of upcoming event risk on the US dollar side of the equation.
NZD/USD 0.8513 Mark Keeps Bears At Bay
The Kiwi continues to be supported at the critical 0.8513 mark as noted on the daily below. A nudge from the upcoming US data may catalyze a break which would open the door to an extended drop to the next key level at 0.8430.
Trading News Events
The volatility surrounding news events offers a range of other strategies that traders can employ, particularly for those that are focused on day trading. Additional useful tools and articles that can help with trading the news can be found below.
Please note some of the premium tools highlighted in this article are accessible at no charge if certain criteria are met. For further information please email firstname.lastname@example.org.
Written by David de Ferranti, Market Analyst
To receive David’sanalysis directly via email, please sign up here
Contact and follow David on Twitter: @DaviddeFe