Talking Points:

- This morning’s Non-Farm Payrolls report came-in below expectations, printing at +146k v/s the expectation of +190k.

- This produced a quick blip of weakness in the U.S. Dollar – but buyers showed up at support to push prices right back up to resistance.

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Coming into this morning’s Non-Farm Payrolls report out of the United States – a glimmer of hope had developed for U.S. Dollar bulls as the Greenback continued to respect the support that was established earlier in the week. Prices had trickled up to the first resistance level we had looked at in yesterday’s article, but as the actual data came-in quite a bit below expectations, sellers came back to take DXY prices from resistance almost directly to that same area of support.

This morning’s Non-Farm Payrolls number came in at +146k versus the expectation of +190k. This was led by large losses in the retail sector, and this constitutes a rather large miss on the headline number. Looking inside of the report isn’t quite as bad, as the unemployment rate remained steady at 4.1% and Average Hourly Earnings printed in-line with expectations at .3% or 2.5% annualized. But it was the miss on the headline number that really seemed to grab attention from market participants, as the U.S. Dollar posed a round trip from resistance to support on this morning’s data.

U.S. Dollar via ‘DXY’ 30-Minute: Resistance Pre-NFP (Red), Support Check After the Print (Blue)

US Dollar 30 Minute

Chart prepared by James Stanley

We looked into the Dollar’s trend yesterday, and after a brutal 2017 the New Year isn’t shaping up to be much different. After gapping-lower to start the week ahead of New Year’s Day, the Greenback has been unable to recover despite the continued build of support around 91.75. We’re nearing some interesting support territory – as 91.37 is the 50% retracement of the 2014-2017 major move, and this area appeared to assist in setting the low in DXY last September. That low from September constitutes a three-year low, and that remains at 91.01.

U.S. Dollar via ‘DXY’ Daily: Longer-Term Support Structure Below Near-Term Support

U.S. Dollar Daily Chart

Chart prepared by James Stanley

EUR/USD

On the polar end of the spectrum from the persistent weakness showing in the U.S. Dollar has been strength in the Euro. The single currency closed out 2017 in a rather positive fashion, and against the U.S. Dollar, we finally saw the pair re-engage with the psychological resistance level of 1.2000. This is a very pertinent observation, as 1.2000 seemed to be like a line-in-the-sand for resistance when EUR/USD started to test in August/September of last year. Buyers were unable to hold the line of support, and after the ECB extended their QE program into 2018 at their October meeting, a bit of weakness developed as EUR/USD finally broke below support.

But that weakness was short-lived, for all of about two weeks; and that’s when a red-hot GDP report out of Germany brought bulls back to the pair. In short order, prices had already moved back above that key support zone that runs from 1.1685-1.1736; and within a couple of months, 1.2000 was back on the table.

EUR/USD Daily: 2017 Weakness Short-Lived (in Red), Prices Re-Engage 1.2000

EUR/USD Daily

Chart prepared by James Stanley

In yesterday’s article, we looked at a couple of areas of potential support for bullish continuation strategies in EUR/USD. The first of those levels came into play this morning ahead of NFP, and after a quick burst of strength up to the previous high around 1.2081, price action settle back down towards 1.2050. This keeps the door open for bullish strategies in the pair as we move towards next week. Traders would likely want to get a bit more selective around exposure given that we’re going into a weekend, but with prices remaining above the key psychological level of 1.2000 in EUR/USD, the bias would definitely appear to remain to the up-side. A re-test of the psychological level itself at 1.2000 could be an interesting area to investigate top-side exposure in EUR/USD.

EUR/USD Four-Hour: Testing ‘S2’ Support, Eyes on 1.2000 Major Psychological Level

EUR/USD Four Hour

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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