In the days before Friday’s US Employment report, the USD Index was trading near a 2.5 year high just over 97.60.
However, the US Government shutdown in January combined with extremely cold weather during the reporting period sank the headline new jobs number down to 20,000 versus the consensus estimate of 180,000.
There’s little doubt that this number will be revised higher next month due to seasonal factors. And with the Unemployment rate dipping back to 3.8% while weekly earnings matched a cyclical high of .4%, this data set is unlikely to leave a negative impression on the FOMC Governors in terms of their next policy move.
In a broad sense, even though the USD Index gave back some of last week’s gains, it was not technically damaged by the weaker-than-expected headline payroll data.
It’s not unusual for Forex traders to see less currency volatility in the week after the US payroll report. As such, we will review some technical levels which may offer some opportunities over the course of this week.
With several votes scheduled in the UK Parliament this week, the Sterling could be the most active currency during the next few sessions. After posting a high of 1.3350 on February 27th, the GBP/USD has traded lower in seven of the last eight trading days. The daily RSI and MACDs are pointing lower and the next key support level is near 1.2860.
Our initial target of 1.3060 was hit, which closed out our short position from 1.3225 with a nice profit. We suggest short-term traders can look to buy GBP/USD at 1.2740 with an initial target of 1.3025 and a 1.2630 stop.
Even after Friday’s 40 point rebound on the weaker US Jobs report, the EUR/USD still posted a 160 point (1.3%) loss for the week. The bounce off the 1.1175 low has lifted the daily RSI from 30.00 to 39.50. The pair has now traded below the 30-day moving average of 1.1340 for the last five sessions and would need to trade above 1.1300 to neutralise the downside momentum.
We see scope for a few sessions of consolidation before carving out new lows for the move near 1.1050. We are currently short from 1.1445 and suggest adding to short positions at 1.1285, with an initial target of 1.1135 and a 1.1360 stop.
The Aussie Dollar tested the .7000 level last week for the first time since the “flash crash” in early January. A key retracement level from the low of .6740 posted that day can be found at .6950. We see scope for a correction back into the .7075-.7100 range before moving back toward the January lows.
We are currently short from .7145 and suggest adding to short positions at .7095 with and initial of .6960 and a .7185 stop.
The USD/JPY ended a month long advance with a 100 point loss last week. The pair traded through the 20-day moving average and reached a low of 110.75 before recovering into the weekend. The Bank of Japan meets on Friday but we don’t expect any new policy signals.
We are currently short from 111.70 and suggest adding to short positions at 111.60 with an initial target of 109.70 and a 112.85 stop.
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