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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.

– Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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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

Gold Prices Tests 2019 Lows, GBPUSD Recovers on EURGBP Drop

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MARKET DEVELOPMENT –Gold Prices Tests 2019 Lows, GBPUSD Recovers on EURGBP Drop

DailyFX Q2 2019 FX Trading Forecasts

GBP: The Pound has made a slight recovery from intra-day lows (1.2686) to reclaim the 1.27 handle as EURGBP pulls back from the 200DMA situated at 0.8792, which in turn could see the cross end its record win streak. However, the outlook remains soft for the Pound, given the continued turmoil in UK politics. Elsewhere, UK data surprised to the downside as the CBI reported that new orders had fallen to the lowest level since the October 2016 as UK manufacturers remain concerned over the ongoing Brexit uncertainty. UK inflation to be released tomorrow, although, data remains on the side-lines.

AUD: Gains in the Australian Dollar were faded after the RBA Governor explicitly stated that the central bank has an easing bias, something we have flagged for some time now (full story). Governor Lowe highlighted that lower rates would support employment and help lift inflation towards target, as a reminder, the RBA stated that a rate cut scenario would need to see inflation remain weak, while the unemployment rate would need to tick up, as such, with this being the case, a rate cut looks set to take place at the June 4th meeting. Alongside this, given the continued uncertainty regarding the trade war tensions between the US and China, the outlook remains soft for AUDJPY.

Gold: Equity markets are slightly firmer this morning after the US announced that they would provide a temporary ease on Huawei restrictions. Consequently, Gold prices have edged lower, having a made a technical break below trendline support from the 2018 low, which in turn could see a test of the 2019 low ($1266).

Gold Prices Tests 2019 Lows, GBPUSD Recovers on EURGBP Drop - US Market Open

Source: DailyFX, Thomson Reuters

DailyFX Economic Calendar: – North American Releases

Gold Prices Tests 2019 Lows, GBPUSD Recovers on EURGBP Drop - US Market Open

IG Client Sentiment

Gold Prices Tests 2019 Lows, GBPUSD Recovers on EURGBP Drop - US Market Open

How to use IG Client Sentiment to Improve Your Trading

WHAT’S DRIVING MARKETS TODAY

  1. Gold Price Sell-Off Continues, Silver Price Hits a Six-Month Low” by Nick Cawley, Market Analyst
  2. AUDUSD Risks Return to Flash Crash Lows as RBA Commits to Rate Cut” by Justin McQueen, Market Analyst
  3. EURUSD, GBPUSD, USDJPY & Gold Price Levels in Play” by Paul Robinson, Currency Strategist
  4. Euro Price Slide Set to Continue as European Elections Draw Closer” by Martin Essex, MSTA, Analyst and Editor
  5. Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX



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GBPUSD Price Slumps as Brexit Turmoil, USD Strength Takes its Toll

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Sterling (GBP) Price and Latest Brexit News

  • Sterling hits a four-month low against the US dollar.
  • Chart looks oversold, but client sentiment remains heavily bearish.

Q2 2019 GBP and USD Forecasts andTop Trading Opportunities

GBPUSD – Bearish Sequence Continues Unchecked

Sterling is under heavy pressure against a resurgent US dollar and is touching levels last seen in mid-January this year and the recent sell-off continues. The recent break of support levels at 1.2894 and 1.2773 has left the pair without an anchor and sellers remain firmly in control. The recent breakdown has been primed by yet more Brexit confusion and concern as UK PM May continues to put forward her Withdrawal Agreement despite it already having been voted down in the House of Commons three times.

GBPUSD Price Rattled by Heightened Brexit Fears, European Elections Near

The US dollar continues its recent ascent with the US dollar basket (DXY) at a two-week high of 97.50 and threatening to make a fresh two-year high at 97.84. A break and close above here would produced another higher high on the longer-dated chart and reinforced further upside. Wednesday’s FOMC minutes and/or Friday’s US durable goods orders may well fuel this move higher.

DailyFX Economic Calendar

GBPUSD may find some respite on the downside from the January 15 ‘spike low’ at 1.2669 yet this support looks fragile. The CCI indicator does show the pair as heavily oversold and this again may put a brake on any further sell-off in the short-term.

GBPUSD Daily Price Chart (August 2018 – May 21, 2019)

GBPUSD Price Slumps as Brexit Turmoil, USD Strength Takes its Toll

Retail traders are 81.7% net-long GBPUSD according to the latest IG Client Sentiment Data. See how recent daily and weekly positional changes affect GBPUSD and currently give us a stronger bearish contrarian trading bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.



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S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

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Trade Wars Talking Points:

  • A weekend for reflection on trade war ‘improvement’ around autos and USMCA led to another S&P 500 gap lower rather than relief
  • With both US and Chinese parties unwilling to repair their trade rift, the impact on markets and economy is registering more palpably
  • Growth will have its highlights this week, but it may be political risk that truly shapes the market landscape ahead

See how retail traders are positioning AUDUSD, EURUSD, S&P 500 along with the other FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Trade War Enthusiasm Doesn’t Benefit a Weekend to Reflect

There was no small sense of surprise for many through the end of this past week when reports of ‘breakthrough’ on certain fronts of the global trade war failed to trigger a relief rally for the speculative benchmarks. It seems a weekend of reflection wouldn’t thaw that reticence any further. In fact, we opened the new week with speculative appetite on a backfooting with hesitation for most and an explicit squelch of pain from equities. The US benchmark indices opened Monday with another gap lower – the S&P 500’s drop from previous session close to new day’s open matched the slump on Friday. Equities retain more speculative premium relative to many other key risk assets, and the United States indices in particular maintain the greatest advantage among global shares milestones. This may be a cause of excessive risk exposure bleeding off, or it could reflect a market with a unique exposure to the chief fundamental risks moving forward. While both scenarios are plausible, I am of the mind that the former is more likely. That says something of the motivations of our markets. Watching for trade war updates may stir volatility, but it will struggle to generate trends if the market is not simply waiting for a cue on the theme. Alternatively, should momentum build behind a broad effort at ‘de-risking’, the abstract concept could place sheer speculative drive at the helm of systemic trends.

S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

Regardless of whether the market moves forward with systemic bullish or bearish trends via collective speculation or behind the banner of an overt fundamental theme, we cannot afford to ignore the fundamental sparks as they ignite in the open market. As it stands, trade wars still poses the most pervasive and costly threat to the global economy. From the developments that could be labeled ‘relief’ from last week, there was still as little favorable market response for the assets more directly exposed to the headlines as from the broader ‘risk’ benchmarks themselves. The Canadian Dollar and Mexican Peso were still spinning their tires against the Greenback Monday, maintaining remarkably contrite ranges to bounce around. Meanwhile, the deferred decision by the Trump administration on auto tariffs translated into no significant lift in the Euro. What is far more surprising is that the reprieve didn’t prevent a drop from the DAX German equity index and German auto-manufacturer BMW continued its tumble lower. That isn’t to suggest that auto tariffs are the only risk that requires evaluation, but it is arguably one of principle concerns at hand.

S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

It seems the speculative compass continues to favor the mood in US-China relations. There were no overt escalations to the trade war tab like there had been the past week – the US raising tariffs on $200 billion in Chinese imports to 25 percent on May 10th and China matching the tax rate on $60 billion in US goods on May 13th. However, rhetoric was clearly souring between the two. President Trump tweeted that there would be no 50-50 outcome in negotiations while China accused the US negotiators as harboring extravagant expectations’ and was in no rush to restart talks. In the meantime, the actions to ban Huawei in the US were keeping the company’s shares to bear trend while industry groups started to use the label of a ‘tech cold war’. A new industry has requested exclusion from the Trump tariffs: apparel companies asked the White House to keep footwear off the list. As we keep tabs on general risk benchmarks, it will also be important to monitor USDCNH as it menaces the politically-important 7.0000 level.

S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

Growth and Political Risks Threaten to Amplify Market Movement

While there are different prevailing fundamental winds that will compete for market influence, there is little probability that these cross currents will shift the weight to a competing theme. That said, there is a strong probability that these significant developments can amplify the charge that we manage to generate. Sheer economic activity is a theme that is bound to draw significant attention this week. Thus far, the picture is mixed. Japan’s 1Q GDP update offered thwarted fears of recession with a robust 0.5 percent quarterly expansion that contrasted to the -0.1 percent contraction forecasted. Similarly, the annualized reading registered 2.1 percent growth against a -0.2 percent showing. How enthusiastic we should be in this reading given that consumer spending and business investment floundered which left a much weaker imports growth than export to do the heavy lifting is up for debate. For the United States, the Chicago Fed’s National Activity Index for April was unambiguous in its poor showing with a -0.45 versus -0.20 forecast. That does not support the outlook for an economy hosting a strong 1Q figure but struggling for sustained sources of growth moving forward. Ahead, the OECD will offer up an economic forecast Tuesday during European hours which will spur speculation for Thursday’s PMI figures from Japan, Europe and the US.

Another more open-ended fundamental risk in our immediate future is the scope of political risk across the global spectrum. Faltering diplomatic relations between the US and China certainly count for this category as do the impending EU elections. That said, there is more nebulous risk at play in the form of the growing threat between US President Trump and Congress. The latter is pressuring the former on financial information, testimony from his former staff and leveling threats against his family (son-in-law). There is high political drama to draw from this situation, but the economic implications are increasingly overlooked as the chances for infrastructure spending are increasingly jeopardized. Perhaps the most intense risk in this vein at present is the threat that a cold economic war between the US and Iran turns into a ‘hot’ military engagement between the two. Despite the frayed nerves and the contribution to troubled risk trends, oil prices are notably in check. Should this situation escalate, however, don’t expect the market to remain so detached.

Separating Volatility from Trend Intent for Euro, Pound, Aussie and Bitcoin

As we reach stronger fundamental developments moving forward, it is worth assessing what has greater potential for sheer (short-term) volatility and what is capable of hitting escape velocity on trend. The Euro has made a feeble effort to generate a clear trend with just the Eurozone and Italian current account balance figures to generate movement. Both series beat expectations significantly, but that does little to draw our attention away from far more systemic issues at hand. Thursday brings the start of the EU Parliamentary elections which threaten to further destabilize confidence in the shared currency already drawing fire from Italy’s anti-EU stance. Consumer confidence in the session ahead, Wednesday’s Draghi rhetoric and even Thursday’s PMIs are unlikely to draw our attention away from this systemic influence for too long.

S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

The situation for the Pound is much the same. The Sterling has extended its slide to an 11th consecutive daily loss on an equally-weighted basis. That is an extreme move for the currency as it has only seen one other such move of that magnitude on the bearish course some 12 years ago. Here too, there is interim event risk to keep track of in the form of the Bank of England (BOE) member rhetoric and the upcoming inflation data, but that will seriously struggle to distract from the implications of the same Parliamentary elections on the UK. Having had to extend the Article 50 cut off for the Brexit, the United Kingdom was forced to participate in the elections, leveraging discontent to even greater heights. If there is serious concern that the UK will come out of this event with even stronger pressure for an ‘exit at all costs’ (no deal), the Pound could absolutely lose more altitude.

Far more limited in their respective volatility are the Australian Dollar and Bitcoin. The commodity currency offered up a remarkable surge to start the new trading week. The bullish gap for the equally-weighted measure was the largest since February 2016 while the ASX 200 similarly received a boost with a push to highs only overwhelmed by the records set back in 2007. The spark for this bullish view was the news that the Australian Federal election had settled with the government leadership unchanged. Markets prefer the status quo, but that doesn’t mean they can leverage that comfort to dynamic trend development. Australia is still beholden to commodities and China for its future. A similar, serious caveat has to be applied to Bitcoin. The cryptocurrency has drawn remarkable attention fr the extreme volatility of the past week. That level of activity has not come with any meaningful promise of trend, so tread carefully. We discuss all of this and more in today’s Trading Video.

S&P 500 Repeats Gap Down on Trade War News, Oil Cautious on US-Iran

If you want to download my Manic-Crisis calendar, you can find the updated file here.



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