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Trade Setups in AUD/USD, EUR/USD, USD/JPY Ahead of NFPs

Trade Setups in AUD/USD, EUR/USD, USD/JPY Ahead of NFPs

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD pivots back above $1.1800; still in trend structure.

- USDJPY triangle yet to see bullish resolution - caution needed.

- See the DailyFX Economic Calendar for Friday, January 9, 2015.

This week has already produced quite a bit of volatility in the major US Dollar pairs, and traders should be alert this morning for at least one more wave of volatility. The December US Nonfarm Payrolls report this morning offers up the most data from the world's largest economy, at a time when there appears to be a widening gap between its near-term growth prospects and those of the rest of the world.

Needless to say, the recent risk rally as well as US Dollar rally is heavily reliant on this Nonfarm Payrolls report coming in at or above expectations, to at least keep the party going. A strong US NFP report here will underscore the growing divergence in monetary policy between the Fed and other central banks, mainly the BoJ and the ECB.

The fear for a weak figure is that an overloaded short Treasury position in futures markets could prompt a wave of short covering, sending yields lower and dragging the buck down in the process.

See the above video for technical considerations in EURUSD, AUDUSD, and USDJPY.

Read more: USD Strength Persists Post-FOMC Despite Potential Headwinds

--- Written by Christopher Vecchio, Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.