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Talking Points:

- This morning’s Non-Farm Payrolls report out of the United States was not positive, as a headline print of +103k came-in far below the expectation of +188k. Average hourly earnings continued with consistency, printing at 2.7%, but this wasn’t enough to offset USD-weakness as Dollar bears came back with gusto.

- The initial reaction in the US Dollar was one of whipsaw, but bears came back in order around 19 minutes after the release, and have largely remained in-control ever since. This has helped to lead to support bounces from key areas in EUR/USD and GBP/USD, while USD/JPY is coming off of a failed test of March highs.

- Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

NFP Disappoints with +103k v/s Expectation of +188k

This morning’s NFP report out of the United States came-in below expectations, printing at +103k versus an expectation for +188k jobs to have been added to American Non-Farm Payrolls in the month of March. Also within the report was a 4.1% unemployment rate, matching last month’s figure but coming in a hair above the expectation of 4% flat. We also saw a bump to Average Hourly Earnings as wage gains came in right at the 2.7% expectation, increasing from last month’s 2.6% read.

All in all, this was a fairly downbeat release as the headline number came in well-below the expectation and that weakness wasn’t really offset by overt strength elsewhere in the report. Average hourly earnings remaining above 2.5% is something that could be construed as USD-positive as this feeds into inflation which, in-turn, drives the Fed’s expectations for future rate policy. But, is a relatively similar read of Average Hourly Earnings going to be enough to drive expectations for more rate hikes out of the Federal Reserve this year?

The big question at this point is whether we’re looking at two or three rate hikes out of the Fed for the remainder of this year. At that last FOMC rate decision in March, the median expectation was at two hikes for the rest of 2018; but given the outlay of the dot plot matrix, it appeared as though we were very close to seeing that median expectation bump-up to three more hikes. The next set of projections are due at the Federal Reserve’s rate decision in June, so we have some time to incorporate additional data before we get that next dot plot matrix.

In the US Dollar, a bit of short-term volatility has shown after the release. An initial move of weakness led into a quick bounce up to 90.50. That short-term high showed up approximately 18 minutes after the release, and from 8:49 and on, bears have been in control of the US Dollar.

US Dollar via ‘DXY’ One-Minute Chart: Whipsaw Around the Release Resolves in a Bearish Manner

us dollar one minute chart

Chart prepared by James Stanley

Bigger-Picture Bearish Resumption Potential?

On a longer-term basis, the big question is whether this week’s strength in the US Dollar might be able to continue to test points of resistance that had shown previously in Q1; or whether that bigger-picture dominant trend of USD-weakness is coming back. Earlier this week, we looked at DXY breaking above the 90.00 level, and this brought upon support tests in EUR/USD while USD/JPY broke above a bearish channel. With USD-weakness showing back up after this morning’s report, will the longer-term bigger picture trend be ready to resume downward?

US Dollar Four-Hour Chart: Is the Dominant Trend of Weakness On Its Way Back?

us dollar four hour chart

Chart prepared by James Stanley

EUR/USD Grinds at Support

In yesterday’s article we looked at an area of support on EUR/USD that comes-in from the mid-March swing lows. This area is around 1.2237, and this started to show as support yesterday morning as EUR/USD tested below the 2017 bullish trend-line. And while that support area might not be the cleanest, as we have multiple candlestick wicks that have tested below over the past 24 hours, that support has largely remained, begging the question: Will EUR/USD put in another test of 1.2300? And if so – will bears be able to hold the line as resistance again? If they’re not, the door could be soon opening to resumption of that longer-term bullish trend that’s spent much of the past few months in a range-bound fashion.

EUR/USD Four-Hour Chart: A Messy Test of Support at the Mid-March Lows

eurusd four hour chart

Chart prepared by James Stanley

USD/JPY Testing March Highs After Bullish Break of Bearish Channel

On a similar note, we had looked at USD-strength showing in USD/JPY in yesterday’s article, focusing-in on an area of potential resistance around 107.30. This area helped to catch yesterday’s high around 107.50 and since that inflection yesterday morning, price action has continued to taper-lower. This begs the question of whether or not we’re looking at a return of the predominant downside trend – or might we be headed for a deeper retracement. There’s really a case to be made on either side here as this week’s topside rip was nothing to summarily dismiss. If we do see higher-low support develop in the zone from 107.35-107.61, we could be looking at a continuation of strength up towards the 107.90-108.00 area.

USD/JPY Four-Hour: Thwarted at March Highs, Higher-Low Support Potential 106.35-106.61

usdjpy four hour chart

Chart prepared by James Stanley

GBP/USD Holds Support Zone

Also on the front of USD-weakness we’ve been following GBP/USD. Yesterday we looked at a test of a key support zone in the pair, and later we looked at the move in more depth in our NFP Preview webinar. This zone of support has helped to hold the lows and prices are now moving back above that 1.4000 psychological level, giving the appearance that bullish continuation may be in the cards, particularly with a backdrop of a weakening US Dollar.

At this stage, prices have already moved up to test another key zone that runs from 1.4067-1.4088. We had looked at this as a prior area of support, and earlier this week it showed a bit of resistance. This is a key zone to watch for next week. If bulls can’t resolve this area on the chart, we may be looking at a deeper support test before that longer-term up-trend is ready for resumption.

GBP/USD Four-Hour Chart: Bounce From 1.4000 Support Zone

gbpusd four hour chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

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