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Pre-NFP Price Action Setups Across the U.S. Dollar

Pre-NFP Price Action Setups Across the U.S. Dollar

James Stanley, Senior Strategist

The next few trading days bring some interesting USD drivers to the fray, with tomorrow’s release of November Non-Farm Payrolls and next week’s widely-expected interest rate hike out of the Federal Reserve. In this webinar, we look at price action setups across the U.S. Dollar ahead of this pick-up in activity.

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- In this webinar, we looked at price action setups across the U.S. Dollar ahead of tomorrow’s release of November Non-Farm Payrolls and next week’s widely-expected interest rate hike out of the Federal Reserve. The U.S. Dollar has started to show a bit of strength as we near these drivers, and this opens up a number of interesting possibilities in major currency pairs.

- We first looked at longer-term trajectory of USD. 2017 has been, without a doubt, a nasty year for Dollar-bulls. But – this may just be a corrective move of the larger, longer-term bullish trend that started in 2014 and peaked on the second trading day of this year (shown below). The sell-off in the first nine months of the year was a 50% retracement of that move, so there could be a compelling case for USD-strength next year. This is relevant because if others are looking at the matter from a similar vantage point, it could help to impact near-term price action, and this is something deserving of attention over the next few trading days as the Fed’s plans for rate hikes in 2018 comes closer into focus.

U.S. Dollar via ‘DXY’ Weekly: 2017 Sell-Off a Correction of Bigger Picture – 38.2% Retracement of 2008-2017 Trend, 50% retracement of 2014-2017 Major Move

Pre-NFP Price Action Setups Across the U.S. Dollar

Chart prepared by James Stanley

- The first short-USD candidate that we looked at was GBP/USD. Cable is in the midst of a fairly strong day, and this comes after what was a fairly aggressive sell-off down to a key support level. We looked into that setup yesterday while looking at a support point around 1.3320, and after a quick check this morning, price action has run back up towards 1.3500. This can be tough as we go into NFP tomorrow, and the most attractive strategy may be to look for a quick blip of USD-strength on tomorrow’s print, which could allow for a support hit in GBP/USD.

- We then moved over to GBP/JPY, which could allow traders to look for a continuation of GBP-strength while removing the risk around a shaky U.S. Dollar. We looked into this setup yesterday in a different article, as both a double-bottom and double-top formation have shown in GBP/JPY price action. In yesterday’s article, we looked at a mechanism to make a play inside of this recent range by playing support off of 150.00. GBP/JPY has been peculiarly quiet so far this year; and this may be leading into a rather active 2018. We looked at playing bullish continuation after a break through resistance around 152.85.

- We then moved over to AUD/USD, which remains as one of the more attractive ways to play for USD-strength. Even as USD-strength has reversed since early-November, AUD/USD has continued to move-lower, highlighting how the Australian Dollar has been even weaker than its American counter-part. We looked at how we could use an NFP reaction tomorrow to build-in bearish exposure in the pair.

- We then looked at EUR/USD, which appears to be continuing to try to dig-out support above that key zone of 1.1685-1.1736. This zone has been an item of interest for EUR/USD price action going back to early-August, and after the recent re-break back-above this area, prices have started to trickle-lower. We looked into the technical setup earlier this morning, and at the time of the webinar, the context was fairly similar. I’m looking for support above the prior swing-low of 1.1712 to open the door for fresh long exposure in the pair.

- USD/CAD saw some fireworks yesterday around the Bank of Canada rate decision. We looked into a support zone just ahead of that meeting yesterday, and price have burst higher in the aftermath. At this point, we’ve almost filled in the bullish side of the range in a mere two trading days, and a re-test around 1.2900 around NFP tomorrow can open the door for potential reversal setups.

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

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