Trade Setups in USD-pairs around September US NFPs
- ST EURUSD triangle begins to break lower; $1.1085 critical support.
Coming into today, the USDOLLAR Index is trading in an intraweek bull flag just below the early-September highs. With the help of a strong September US labor market report it could be well on its way back towards its 2015 highs. There doesn't appear much room for error for the US Dollar, now that markets (per the Fed funds futures contracts) have started to price out 2015 for the Fed to raise rates.
A miss on the solid but not spectacular forecasts - NFPs expected at +201K from +173K prior, and the UR at 5.1% unchanged - could more or less eliminate October and December as "live meetings" for rate hikes. However, there's a caveat. Attention to the prior data releases is important, especially for this release: over the past five years, August NFPs have enjoyed an average revision of +79K (the best for any single month during the year). A slight miss on the September figures coupled with a large upward revision could provide sufficient enough support to USD-pairs.
Not all USD-pairs are treated equally, especially around NFPs: EURUSD offers a bearish outcome; USDJPY offers trades in both directions; and AUDUSD may be best suited for a rally on a disappointing report.
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.
--- Written by Christopher Vecchio, Currency Strategist
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