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US Dollar Setups: Key Tech Levels on EUR/USD and USD/CAD ahead of NFP

US Dollar Setups: Key Tech Levels on EUR/USD and USD/CAD ahead of NFP

Diego Colman, Contributing Strategist

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US DOLLAR OUTLOOK:

  • U.S. dollar slides on Friday as Treasury yields retreat
  • The U.S. employment report will steal the spotlight on Friday, with volatility expected to rise sharply
  • This article discusses the key technical levels to watch in EUR/USD and USD/CAD
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The U.S. dollar, as measured by the DXY index, pulled back modestly on Thursday but remained near three-month highs, in a session characterized by wild swings across asset classes and a sharp retreat in U.S. bond yields, ahead of the U.S. nonfarm payrolls report slated to be released Friday morning.

The February employment survey is forecast to show a downshift in hiring, with analysts anticipating a gain of 205,000 jobs after January's stunning 517,000 surge. The strength of the report will be key in determining the trajectory of monetary policy, so traders should keep an eye on the economic calendar.

The Fed has indicated that its terminal rate is likely to settle higher than initially anticipated and that the bank is prepared to accelerate the pace of tightening if warranted by the totality of incoming information. Because of this data-dependency bias, tomorrow’s NFP numbers will take on particular significance, helping set the trading tone in the FX space.

With volatility seen rising across U.S. dollar forex pairs in the near term, these are the key technical levels to watch on EUR/USD and USD/CAD over the coming days.

EUR/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 5% -8% -1%
Weekly -4% 20% 4%
What does it mean for price action?
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EUR/USD TECHNICAL ANALYSIS

Powell’s hawkish commentary on Tuesday drove EUR/USD sharply lower, but the pair encountered support around the February low prior to staging a moderate rebound off of those levels. If prices remain in recovery mode, initial resistance appears at 1.0690. On further strength, the focus shifts to the psychological 1.0800 handle.

On the other hand, if sellers return and upside pressure fades, the first technical floor to watch rests near 1.0530. If this region is breached on the downside, bears could launch an assault on 1.0485/1.0460, an area where the January low converges with a medium-term rising trendline and the 38.2% Fibonacci retracement of the September 2022/February 2023 rally.

EUR/USD TECHNICAL CHART

Chart, histogram  Description automatically generated

EUR/USD Chart Prepared Using TradingView

USD/CAD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -6% -1% -3%
Weekly 44% -14% 6%
What does it mean for price action?
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USD/CAD TECHNICAL ANALYSIS

USD/CAD has staged a strong rally this week, with the upside move reinforced by the Fed chair’s aggressive tightening message and Bank of Canada’s dovish guidance. At the time of writing, the exchange rate is hovering slightly below an important technical resistance near 1.3840, which corresponds to September 2022’s high. If bulls manage to take out this barrier, USD/CAD could be on its way to retesting its 2022 peak.

On the flip side, if prices turn lower from current levels, the first significant support to consider lies around 1.3690. Below that floor, the next area of interest comes at 1.3117, followed by 1.3465.

USD/CAD TECHNICAL CHART

Chart, line chart, histogram  Description automatically generated

USD/CAD Chart Prepared Using TradingView

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

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