US Dollar Talking Points:
- The US Dollar is bouncing from support this morning after yesterday’s sizeable pullback. Yesterday saw 50% of the prior bullish breakout erased, with price actionsupport coming into the currency around a key area on the chart at 96.00. This morning’s Non-Farm Payrolls report produced a beat on the headline number with a +250k print v/s a +190k expectation. The unemployment rate remained at 50-year lows of 3.7%, and Average Hourly Earnings came in hot at an annualized 3.1%.
- Next week brings a series of high-risk events, including US mid-term elections set for Tuesday. The following day brings FOMC, and while expectations for any actual changes at the bank are low, the statement will be parsed through for clues of response to the past month of weakness across US equities. This morning’s jobs report may make that difficult, however, as both job gains and wage growth have remained strong.
- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re 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.
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US Dollar Bounces From Support as NFP Beats Expectations
This morning’s Non-Farm Payrolls report came-in well-above expectations, printing at +250k for the month of October versus an expectation for +190k. The unemployment rate printed at the expectation and 50-year low of 3.7%, and Average Hourly Earnings printed at an annualized 3.1%, just a hair underneath the expectation for 3.2%.
The initial reaction in the US Dollar has been a continued bounce from the secondary support looked at in yesterday’s webinar, and that started to show about an hour-and-a-half ahead of the release. Yesterday’s pullback in DXY continued all the way down to the second zone listed in yesterday’s article, and that comes in around the 96.00 level as there are a series of Fibonacci retracements in close proximity of each other. The big question as we move towards this week’s close is whether buyers can hold support at this level, or whether we see a deeper test after the earlier-week bullish breakout has started to reverse.
US Dollar Two-Hour Price Chart: Bounce From Support Around This Morning’s NFP
Mid-Term Elections, FOMC Highlight Next Week’s Calendar
The Dollar will remain in focus in the coming week as a couple of key drivers are on the calendar. Tuesday brings mid-term elections, and this could carry a large bearing on the risk trade. And the following day brings the Federal Reserve for their November rate decision, and the statement will likely be finely examined to see whether the Fed poses any response to the pain seen in stocks in the month of October.
US Mid-Terms, FOMC Highlight Next Week’s Calendar
Can US Dollar Bulls Continue to Drive?
For next week the big question around the Dollar is whether buyers can continue to push prices higher. This week saw fresh one year highs print in the currency as the bullish breakout from October continued into the new month. But yesterday saw a very visible reversal that erased half of the prior two-week move. That support came in at a key area and thus far, it’s held. The key for this theme will be that support holding up through Monday as we get into next week’s calendar.
US Dollar Daily Price Chart: Can Dollar Bulls Hold the Line?
EUR/USD Softens at Resistance As USD Bounces From Support
The resistance zone that I’ve been following in EUR/USD came into play this morning ahead of NFP. The zone runs from the 50% marker of the 2017-2018 bullish move in EUR/USD at 1.1448 and runs up to the psychological level of 1.1500.
In the first half of October, this zone helped to hold the lows in the pair through multiple failed attempts from bears to drive-lower. It finally gave way in the middle of the month, leading to this week’s failed breakout at the yearly low of 1.1300. This can keep the door open for bearish strategies in the pair, and this can remain as one of the more attractive venues to look for continued US Dollar strength.
On the news front, next week is expected to bring some developments around the ongoing saga between Brussels and Rome. Italy is supposed to have their revised budget to the European Commission by the following Tuesday (November 13th), and this can keep pressure on the single currency.
EUR/USD Four-Hour Price Chart: Soften From Key Resistance Around USD Support Bounce
AUD/USD Breakout Pulls Back with USD Support Bounce
On the short-side of the Dollar, I’ve been following AUD/USD this week. While USD-strength was showing quite visibly in both EUR/USD and GBP/USD ahead of this week’s open, AUD/USD retained a relative amount of support above the .7000 big figure. As USD reversed yesterday, AUD/USD put in a sharp topside move, breaking above a bearish trend-line as well as a large area of prior support around the .7200 handle.
Given the pair’s response this week to that theme of USD-weakness, this setup could remain attractive as we move into next week for short-side strategies in the Dollar, looking for a larger pullback in the US currency after AUD/USD posed its first daily close above the bearish trend-line that’s held the highs in the pair for the past nine months.
AUD/USD Four-Hour Price 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 Q4 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.
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX