News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • No notable reaction in BTPs given that resignation from Conte has been touted earlier in order to put together a new government. Also, a resignation does not necessarily mean that a snap election will be the next step as of yet.
  • The retail speculative crowd is throwing around serious weight with GameStop today, but its appetites have been showing through with the likes of Tesla and FAANG before that. The Broader $NDX to $SPX ratio seems to similarly exhibit the charge: https://t.co/43fWH81O8S
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 100.00%, while traders in GBP/JPY are at opposite extremes with 66.51%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/oMldfyQvSy
  • AUD/USD still tracks the opening range for January amid the limited reaction to Australia’s Employment report. Get your $AUDUSD market update from @DavidJSong here:https://t.co/zrP58XUTln https://t.co/slnI0wp7N4
  • The focus will shift as to whether Conte will search for a new parliamentary majority As a reminder, PD Lawmakers noted that they would guarentee support for Conte as head of new government if he resigns $EUR https://t.co/8m5VDxfmMf
  • Italian PM Conte is expected to resign as early as Monday - Officials $EUR
  • Commodities Update: As of 17:00, these are your best and worst performers based on the London trading schedule: Gold: 0.13% Oil - US Crude: -0.19% Silver: -0.47% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/KzmYUuyoam
  • BoE Governor Bailey: - Digital innovations in payments are here to stay - Haven't yet landed on the appropriate design for a lasting digital currency - Doesn't think cryptocurrencies are lasting yet #BoE $GBP
  • Forex Update: As of 17:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.16% 🇯🇵JPY: -0.02% 🇬🇧GBP: -0.11% 🇦🇺AUD: -0.16% 🇪🇺EUR: -0.24% 🇨🇭CHF: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/kRlx2rPiiC
  • Mexican Peso Price Forecast: USD/MXN Above 20.00 as Bulls Break Out https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/daily_fundamentals/2021/01/25/Mexican-Peso-Price-Forecast-USD-MXN-USDMXN-Above-20-as-bulls-break-out.html $MXN $USDMXN https://t.co/oZBXOEtdwr
EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

John Kicklighter, Chief Strategist

EURUSD, Dollar, Pound, Canadian Dollar Talking Points:

  • The US Dollar extended its slide this past session, and Thursday activity showed it was a move that spread beyond EURUSD
  • Nevertheless, EURUSD extended its run to test the midpoint of its historical range as high-level technical resistance
  • Risk trends continue to struggle with the S&P 500 posting a doji; but perhaps NFPs can stir more growth traction than Stimulus and Covid headlines have been capable
Advertisement

Risk Trends Are Not Defined by Simple Relative Highs

If you were to evaluate the state of the broader market just by the relative position of the market’s favorite speculative benchmarks, it would seem that risk trends are in top form. The S&P 500 and Dow Jones Industrial Average are only slightly off record highs while the Nasdaq 100 actually earned a new peak on a close-over-close basis. That said, the technical picture offers very little enthusiasm for momentum behind the speculative rank with a notably restrained level of activity for the SPX and crew this week. Yet, a surprising faction of the financial market only refer to closing price versus a more contextualized candlestick or bar chart – institutional, fund and central bank interests among them.

Chart of the S&P 500 with 200-Day Moving Average and Nasdaq-Dow Ratio (Daily)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

It is important that when we make a sweeping assessment of the market – which you do in evaluating ‘risk trends’ – that we look at a broad array of regions and asset types with an eye towards correlation and intensity. That said, carry trade failed to spur what would have been key breakouts this past session for the likes of EURJPY and AUDJPY among others. International indices were of a mixed bag between the UK FTSE 100’s edge higher from depressed levels to Japan’s Nikkei 225 easing back from three decade highs. Perhaps the most impressive showing on the benchmarks I follow was the extension by emerging markets. The unevenness considered, the VIX is still holding above its historical average (around 20). In fact, market’s favorite ‘fear gauge’ has held above this tipping point for an astounding 198 trading days. This suggests there is an undercurrent of concern and markets are still positioned to take an unnerving turn to risk aversion on short notice.

Chart of VIX Volatility Index Overlaid with Nasdaq-to-Dow Ratio (Daily)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

The Dollar’s Relative Perspective is Exposing it to Fundamentals

It is proving difficult to develop a head of steam for risk-based markets - whether for risk benchmarks like the S&P 500 or safe havens like Gold. However, FX traders are familiar with the greater ‘relative’ influences that can play through. It seems those factors are hard at work against Dollar bulls. Amid coronavirus, growth and stimulus headlines; the DXY Dollar Index has extended it slide to more than two-and-a-half year low. The tumble from the Greenback is generating some of the most interesting volatility and trends in the financial system at present – from EURUSD to Gold.

Chart of the DXY Dollar Index with 100-Day Moving Average (Daily)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

To be clear, I don’t believe the fundamentals are any more extraordinary in intensity behind the USD or US assets, rather market bias seems to be more keep to respond to important event risk than many other benchmarks. And, ultimately, that is often all that is needed to urge movement. For a fundamental spark this past session, the news of coronavirus deaths in the United States and a state of emergency in Los Angeles reflects the concern about the outlook distinctly. Adding the economic take on that human toll, the ISM service sector survey would slip more than expectation for the November print.

Chart of S&P 500 Overlaid with ISM Manufacturing and Services Activity (Monthly)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created by John Kicklighter with Data from Bloomberg Terminal

In the final session of the week, there will be another big-ticket focus on the US docket in the form of the November nonfarm payrolls (NFPs) release. Last month’s 638,000 addition is extraordinary without context, but the US economy is still trying to recovery the jobs lost back during the pandemic; and the tempo looks like we will fall far short of the mark. With initial jobless claims still at 712,000 this week with some long-term unemployment benefits due to expire at the end of this year, there is very little leeway to see a positive story out of this data. Traders are no doubt taking note of that skewed scenario.

See our page for everything NFPs on DailyFX!

Chart of US NFPs and Continued Claims (Monthly|Weekly)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Federal Reserve Economic Database

The Dollar Majors I Am Watching

As we move into the final trading session of the week and look into the week ahead, I am evaluating more closely the productivity of the Dollar based majors. The most impressive move in my book is from EURUSD which cleared a multi-month range to at 1.2000 and proceeded to pressure the pair’s historical range midpoint at 1.2150. This level is not likely to give lightly, but it can still break. If we do clear resistance, I will take it as evidence that this market is more driven towards momentum that I had thought possible for the recently stoic currency. As for the Euro’s part, the EU-UK trade negotiations and held up European stimulus are still factors offsetting the latent swell from playing the ‘next most liquid currency’ role.

Learn more about technical channels and shifting former resistance to new support in the Technical Analysis module of our Education section.

Chart of the EURUSD (Weekly)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

Speaking of the UK-EU trade discussions, the perspective of the market and inside sources seems to ping pong between the situation improving to deteriorating and back again in an intraday time frame. GBPUSD is pushing a key technical overhead defined by a range high that stretches back multiple years at 1.3500. While the Dollar’s pummeling matters, I will remain dubious of any attempt at breakout (bullish) with follow through if there isn’t resolution that benefits the Sterling’s backdrop.

GBP/USD MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 16% 11% 13%
Weekly -20% 28% 2%
What does it mean for price action?
Get My Guide

Chart of the GBPUSD with 20-Month Moving Average (Weekly)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

Finally, a Dollar cross that deserves a closer look through Friday’s session is USDCAD. While the pair has slid through meaningful support of its own (~1.3000), the traction for bearish momentum remains in doubt in my mind. This is a pair notorious for restraint on technical pacing – common for pairs with very strong economic and financial ties – but there are also periods of remarkable pace. With the Canadian employment and trade data to bounce off NFPs Friday as well as the backdrop of a thawing trade outlook, a case for momentum could be made if the data cooperates.

Chart of the USDCAD with 20-Weekly Moving Average (Weekly)

EURUSD Faces Its Historical Range Midpoint as Resistance with Dollar Sliding Into NFPs

Chart Created on Tradingview Platform

Building Confidence in Trading
Building Confidence in Trading
Recommended by John Kicklighter
Building Confidence in Trading
Get My Guide

.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES