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U.S. Dollar Jumps as January Jobs Come in Strong

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Talking Points:

– January NFP’s came-in above expectations, printing at +200k v/s +180k.

– This helped to bring a move of USD-strength as DXY broke above a bearish channel from this week’s price action.

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NFP Beats

This morning’s release of January Non-Farm Payrolls came-in above expectations, with jobs added last month out of the U.S. coming in at +200k versus the expectation of +180k. Ahead of this morning’s release, the U.S. Dollar remained relatively weak, continuing a trend that’s been in-place for now more than a year. We looked at the possibility of the Dollar being a bear trap type of scenario in yesterday’s article, and on the back of this slight beat on NFP, we’re seeing USD-strength show up.

U.S. Dollar (DXY) 15-Minute Chart: Strength Post-NFP

U.S. Dollar (DXY) 15 Minute Chart

Chart prepared by James Stanley

The bigger question, as is often the case with Non-Farm Payrolls, is one of continuation potential. With USD holding on to that longer-term bearish trend, last week’s lurch lower helped to drive the market into even deeper oversold territory. This week has been marked by back-and-forth price action with a hint of a bearish bias, as sellers continued to show up around short-term resistance, but seemed to get gun-shy as prices approached prior support. While this, in-and-of-itself, is not direct evidence of a bottom being in place, it is a common first step if we are to see a retracement or reversal of that prior trend. With the Fed’s March rate decision carrying a strong probability of a hike, this opens the door to the prospect of a pullback in the USD downtrend as we approach that meeting on March 20-21.

U.S. Dollar Weekly Chart: Fibonacci Support Holding This Week

U.S. Dollar Weekly Chart

Chart prepared by James Stanley

Next Week Brings BoE (Super Thursday), and RBA

While this week’s economic calendar was very much denominated by U.S. issues, next week opens up a bit as we get high-impact prints out of Australia, Canada, China and the U.K.

DailyFX Economic Calendar, High-Impact Week of Jan. 4, 2018

Economic Calendar - DailyFX High-Impact Events

Chart prepared by James Stanley

BoE Super Thursday as the High Point

Of particular interest will be the Bank of England’s Super Thursday event, as this will be the first rate decision with a press conference since the Bank of England hiked rates for the first time in a decade at November’s Super Thursday. Will the strength that’s continued to show in U.K. data be enough to bump the BoE’s forecasts for rate hikes in the latter portion of this year? With inflation remaining at 3% or above, there’s a good chance that this might happen, and that could amount to another leg of strength in the British Pound as the currency furthers its post-Brexit recovery.

In yesterday’s webinar, we looked at a short-term bearish setup in light of the longer-term bullish trend. If support does show up ahead of the BoE, the time might be right to flip the switch and look at the long side, with the expectation that the bigger-picture bearish trend in the U.S. Dollar might be ready to continue, helping to push GBP/USD up to fresh highs.

GBP/USD Hourly: Lower-Lows, Highs Show Retracement Potential

GBP/USD Hourly Chart

Chart prepared by James Stanley

Yen Weakness Returns

Probably the biggest takeway from this week has been a return of Yen weakness, aided in part by the U.S. Dollar hitting some element of support. We looked at a bullish EUR/JPY setup earlier in the week, and yesterday we looked at the possibility of playing the topside in USD/JPY after prices began to leave a longer-term zone of support of a range that’s been in-play since last April.

EUR/JPY Surges to Fresh Two-Year Highs

EUR/JPY Daily Chart

Chart prepared by James Stanley

USD/JPY

With the Bank of Japan remaining loose and passive, with few signs of that changing any time soon, this could remain an attractive theme, particularly if we do see a grander move of Dollar strength as we approach the March FOMC rate decision.

USD/JPY Daily Chart: Bulls Drive From Long-Term Support Zone

USD/JPY Daily Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on Euro, or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD, USD/JPY, AUD/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

— Written by James Stanley, Strategist for DailyFX.com

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX



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Forex

Traders Net-Short Are 63.3% Higher from Last Week

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US500,SP500

TRADERS REMAIN NET-SHORT

US 500: Retail trader data shows 24.6% of traders are net-long with the ratio of traders short to long at 3.07 to 1. In fact, traders have remained net-short since Jan 07 when US 500 traded near 2473.53; price has moved 11.9% higher since then. The number of traders net-long is 1.7% higher than yesterday and 1.6% lower from last week, while the number of traders net-short is 5.2% higher than yesterday and 63.3% higher from last week.

For more in-depth analysis, check out the Q1 2019 Forecast for Equities

S&P 500 SUGGESTS STRONG BULLISH BIAS

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US 500-bullish contrarian trading bias.

— Written by Nancy Pakbaz, CFA, DailyFX Research

Follow Nancy on Twitter @NancyPakbazFX



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On to the Next Big Levels of Resistance

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S&P 500/Dow Jones/Nasdaq 100 Technical Highlights:

  • S&P 500 nearing 2800-area, several swing-highs from last year
  • Dow Jones 26k-ish stands between it and record highs
  • Nasdaq 100 trading around resistance already

Check out the forecasts for Global Stock Indices and other markets on the Trading Guides page.

S&P 500 nearing 2800-area, several swing-highs from last year

The S&P 500 is continuing to show impressive strength since its v-bottom began the day after Christmas, with it having a few points along the way where it could have been stopped in its tracks. But it wasn’t, and this has levels prior to the December swoon in view. The area surrounding 2800 is a big one.

From 2800 up to 2817 there were three peaks created from failed rallies, a logical area, with the rally having come this far, to look for stocks to weaken from. Watching price action will be key, as always, but especially around the levels just ahead.

While resistance looks likely to get tested soon, the upward channel structure over the past month will keep stocks pointed higher for as long as it holds. If the S&P is rejected off resistance, to further bolster the notion of a sizable retracement we’ll need to see the underside parallel undermined.

For now, the top-side must be respected, but the time for material weakness may be nearing…

Stocks are rallying, but will it last in the long-term? Find out where our analysts see stocks headed in the Global Equities Forecast.

S&P 500 Daily Chart (2800/817 big spot)

S&P 500 daily chart, 2800/817 big spot

Dow Jones 26k-ish stands between it and record highs

The Dow is nearing the 26k-area, a spot which is basically the equivalent of what 2800 is to the S&P 500. The zone runs up to near 26300. The focus is primarily on the S&P right now as it is the broader index, but depending on how price action plays out, the Dow may be the better index to short at some point if it shows relative weakness to the broader market.

Dow Daily Chart (26k-ish stands in the way)

Dow daily chart, 26k-ish stands in the way

Nasdaq 100 trading around resistance already

The Nasdaq 100 continues to lag behind, which is something to continue monitor given it was the bull-market leader with its leading group of stocks – FAANG – dominating price action and sentiment. The NDX is trading around the 200-day and near late-year swing highs equivalent to the ones discussed with regard to the S&P 500 and Dow. So far, relative weakness is making the 100 the preferred fade if the S&P finds material selling off resistance surrounding 2800/17.

Nasdaq 100 Daily Chart (trading around resistance)

Nasdaq 100 daily chart, trading around resistance

To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.

Tools for Forex & CFD Traders

Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX



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Aussie Dollar Falls on RBA Minutes, US-China Trade Talks Eyed

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TALKING POINTS – AUSSIE DOLLAR, RBA MINUTES, ZEW, TRADE WARS, CHINA

  • Aussie Dollar, commodity bloc FX down on downbeat RBA meeting minutes
  • Germany’s ZEW survey may compound worries about slowing global growth
  • Trade wars in focus on US-China negotiations, fears of US auto tariff hike

The sentiment-linked Australian, Canadian and New Zealand Dollars weakened in otherwise quiet Asia Pacific trade. The move appeared to be inspired by an ominous tone in minutes from February’s RBA policy meeting. Meanwhile, the US Dollar corrected gently higher.

RBA officials cited “significant uncertainties”, noting that trade tensions and cooling domestic demand have increased negative knock-on risks from China. They added that consumption may fall if domestic house prices fall much further. They suffered the worst drop since 1983 in the three months through January.

TRADE WAR DEVELOPMENTS, GERMAN ZEW DATA MENACE MARKETS

Looking ahead, Germany’s ZEW survey of analyst sentiment may compound the downbeat mood, especially if it echoes the disappointing trend in regional data outcomes since September. A small improvement in the forward-looking Expectations index is nevertheless expected to keep it within a hair of six-year lows.

The tone of US-China trade negotiations may also be formative as a delegation from Beijing arrives in the US for continued talks. Both sides painted a rosy picture earlier in the week, but the Trump administration may be preparing a spoiler as the President ponders raising auto import tariffs.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

Europe Trade Economic Calendar

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter



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