Talking Points:

- USDJPY finding traction above ¥120.00 after holding support.

- EURUSD slightly lower after weaker September EZ CPI report.

- See the September forex seasonality report.

The end of month and quarter today, coupled with a major economic data release on the horizon - the September US Nonfarm Payrolls report on Friday - suggest that volatility over the next few days could run higher. With large price gyrations over the last three-months, asset managers looking to rebalance their portfolios could have a significant impact on flow for the remainder of the week.

See this week's DailyFX economic calendar for US data due the rest of this week.

Amid the portfolio rebalancing period will be the releases of several important US economic data releases that speak directly to the labor half of the Federal Reserve's dual mandate. The September US ADP Employment report today, the September US ISM Manufacturing report tomorrow, and the September US Nonfarm Payrolls report on Friday all carry enough heft to sway markets from their current levels.

If price dislocation is to occur, the two pairs we've been focusing on the past few days have been EURUSD and USDJPY. Both are forming triangles, although EURUSD's triangle is shorter-term in nature (encompassing price action since September 28) than USDJPY's triangle (encompassing price action since August 21).

Given the predominantly sideways moves that have taken place in both these pairs over the past few months (discounting USDJPY's slide at the end of August in favor of a longer-term perspective), neutral biases in both pairs ahead of this week's US economic data dump seems applicable. In both cases, the most important thing for traders to do is to identify their risk levels to prevent from getting into or out of a trade prematurely (timing) or with too great of a capital commitment (excessive leverage) - both are costly mistakes.

See the above video for the levels of importance in the EURUSD and USDJPY triangles, as well as technical considerations in AUDUSD and the USDOLLAR Index.

Read more: EUR/USD in Early Stages of ST Triangle; USD/JPY Rebounds at Support

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form