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Pre-NFP US Dollar Price Action Setups: EUR/USD, GBP/USD

Pre-NFP US Dollar Price Action Setups: EUR/USD, GBP/USD

2020-03-05 20:00:00
James Stanley, Strategist

US Dollar, NFP, EUR/USD, GBP/USD Talking Points

  • It’s been a busy couple of weeks and tomorrow brings February NFP’s out of the US. Buckle up.
  • While Coronavirus has elicited considerable fear already through global markets, that’s unlikely to yet show in US economic data; so tomorrow will still bring a bit of projection based on current events.
  • Risk markets remain on the precipice: Treasuries have rallied to the point of record-low yields, far outstripping the yields seen during the Financial Collapse.

US Markets on the Edge Ahead of NFP

Tomorrow brings Non-Farm Payrolls out of the United States and the backdrop remains rife with risk as a number of themes are in the headlines. Equity markets still have yet to recover following the emergency rate cut out of the FOMC on Tuesday, and that was a big topic in this afternoon’s webinar. After a bounce yesterday, sellers came back into the S&P today to erase yesterday’s gain. This keeps US equities on their backfoot ahead of tomorrow’s jobs report, and the S&P 500 is closing in on the 3k psychological level.

S&P 500 Two-Hour Price Chart

SPX500 Two Hour Price Chart

SPX500 on Tradingview

Treasuries Crumble to Record Low Yields

Further highlighting the tumult in the backdrop, US Treasury yields have plunged to fresh all-time-lows as safe-haven flows have driven into the safety of US debt. The ten-year note is now yielding a meager 90 basis points: A far cry from the prior all-time-low of 1.325% and a full 72% lower than the October 2018 high of 3.25%.

This is a massive move in a critically important market in which Trillions of Dollars’ worth of global paper are based on. This indicates the level of fear in the backdrop at the moment, and further places emphasis on the short-side of equities until something changes or shifts.

US Treasury Yield – 10 Year Note Monthly Chart

US Treasury 10 Year Notes

TNX on Tradingview

US Dollar Down the Drain

Despite the rampant demand for US Treasuries, the US Dollar has continued a brisk sell-off that’s nearly wiped away the entirety of 2020 gains. At this point, a bit of support potential has started to show from a bearish trendline projection; and just given how incredibly oversold the currency is ahead of tomorrow’s NFP report, the long side will likely look most attractive to many traders. This is an area to be especially careful around tomorrow’s NFP release.

US Dollar Daily Price Chart

US Dollar Daily Price Chart

USD on Tradingview

EUR/USD Resistance Test

One of the areas where USD-reversals may look very attractive is in EUR/USD, where the pair is testing a key zone of resistance on the chart. I had written about this in-depth yesterday in the article entitled, Euro Price Analysis: EUR/USD Rip Runs into Key Fibonacci Resistance. That resistance held the advance yesterday and is back in-play again today.

EUR/USD Daily Price Chart

EUR/USD Daily Price Chart

EUR/USD on Tradingview

GBP/USD Bounces Back Towards 1.3000 handle.

Just last week I had looked at a bearish setup in GBP/USD as resistance was showing in the 1.3000-1.3013 area on the chart. That setup hit and price action ran down to a fresh 2020 low after. But so far this week – the pair is rallying fairly aggressively, breaking through a couple of different resistance zones already.

This places emphasis once again on that zone from 1.3000-1.3013 for resistance plays. Alternatively, should seller step in ahead of that, a cross back-below 1.2900 could re-open the door for bearish momentum/trend strategies.

GBP/USD Hourly Price Chart

GBP/USD Hourly Price Chart

GBP/USD on Tradingview

USD/CAD: Primed for Dual Jobs Releases

USD/CAD is pushing higher as even more CAD-weakness priced-in to the equation yesterday. At yesterday’s rate decision, the Bank of Canada cut rates by 50 basis points, mirroring the move at the Fed just a day earlier. This helped to propel USD/CAD back up towards prior highs but, not too far away is the same 1.3500 level that was stopped bulls dead in their tracks last year.

This is a scenario that could benefit from a quick pullback around tomorrow’s jobs releases – focusing in on potential support around the 1.3383-1.3391 area on the chart.

USD/CAD Hourly Price Chart

USD/CAD Hourly Price Chart

USD/CAD on Tradingview

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

Contact and follow James on Twitter: @JStanleyFX

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


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