Well, we saw the pullback lower in the dollar over the Nonfarm Payrolls as expected, but not as deep as I had expected. Having said that, nor have we seen a break to the dollar upside. There is still potential for be deeper losses in the dollar before the next leg higher. We even have a decent hourly bullish divergence in EUR/USD. Looking at USD/CHF, price has broken below the hourly Price Equilibrium Cloud while the 4-hour Cloud low is being tested. There is a little room on the upside in EUR/USD but with the 4-hour Price Equilibrium Cloud declining any pullback may be relatively shallow. Taking GBP/USD into account, the potential for a pullback higher is also possible but limited.
However, the alternative is a more direct rally in the dollar. Therefore, I’d suggest that we should take a cautious stance initially and wait for breaks. However, it would imply a more dollar bullish outlook below Friday’s lows.
Coming back to USD/JPY, it has seen breaks below both hourly and 4-hour Clouds but in an ABC decline. It tentatively suggests a pullback higher and then we’ll have to see how it develops. The 4-hour Price Equilibrium Cloud is around 111.50-80. This could stall the rally temporarily.
AUD/USD rushed higher to break above the hourly Price Equilibrium Cloud – but then stalled at the 4-hour Cloud but within a rather neutral zone that could see higher gains – or just a reversal back lower.
Finally, EUR/JPY should make a minor new low and a modest pullback – but overall the outlook will turn bearish. That tends to suggest deeper losses in EUR/USD – or in USD/JPY. Thus, observe the balance between those pairs.