Weekly Analysis: US Dollar Falters Again, Non-Farm Payrolls Eyed for Next Big Move
Weekly Analysis: Last week the pair reached the highest level since January 2015 on the back of a hawkish speech delivered by ECB President Mario Draghi at the Jackson Hole Symposium. Key resistance was broken and now the uptrend is resumed.
After a choppy start of the week, price finally broke out and moved above 1.1875, fueled by Draghi’s speech. Also, the market expected Fed Chair Yellen to be more hawkish but her speech at the Jackson Hole Symposium was disappointing and did not help the US Dollar.
Given the current situation we expect to see a move into the key psychological level at 1.2000, followed possibly by 1.2040, which is a level that last acted as support in 2012 (that’s a long time ago so we don’t know if the pair will react to it). A re-test of the recently broken level (1.1875) is very possible but the overall picture is clearly bullish.
The first notable release of the week is the CB Consumer Confidence, scheduled Tuesday. This is a survey of about 5,000 U.S. households that asks respondents to rate the overall level of economic conditions, both current and future. Consumer confidence is an early indicator of consumer spending so a higher number usually strengthens the US Dollar.
Wednesday we take a look at German inflation with the release of the Preliminary German CPI and later in the day the greenback will be affected by the ADP Non-Farm Employment Change and the U.S. Preliminary Gross Domestic Product.
Thursday the European Flash Estimate Consumer Price Index is released, showing changes in the price that consumers pay for the goods and services they purchase. This is the main gauge of inflation but its importance is dimmed by the fact that other EU member states have released inflation data earlier.
Friday the U.S. Non-Farm Payrolls come out, showing changes in the number of employed people, excluding the farming industry. This is widely considered the most important jobs data in the United States and its impact is always very high so caution is advised.
The US Dollar had a great start of the week against the Pound, moving the pair into the support at 1.2770 but Yellen’s speech triggered a wave of US Dollar selling across the board and the pair climbed above 1.2850.
The bounce at 1.2770 support and the break of 1.2850 makes the short term bias bullish, anticipating a move into the 50 days Exponential Moving Average and the resistance at 1.2950. The way price behaves in that zone will decide the next direction: a bullish break will make 1.3050 the target and a bounce will probably take the pair back below 1.2850. The oscillators are moving up, coming from the lower levels and this increases the chance of a move into the 50 EMA.
Monday British banks will be closed due to Summer Bank Holiday and no economic data will be released. This will most likely affect volatility and price action.
Wednesday the Net Lending to Individuals will show changes in the total credit issued to individuals but the indicator is not known to have a high impact. A more important indicator is released Friday: the Manufacturing PMI. This is a survey of purchasing managers that gauges their opinion regarding the state of the manufacturing sector and acts as a leading indicator of economic health. As always, the U.S. data released throughout the week will have a direct impact on the pair’s movement.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 7-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.