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Currency Pair Overview:
Pound Moves As The Market Stalls
The pound and to some extend the yen were the only two pairs that moved against the dollar overnight, while the rest of the currency market coming to a virtual standstill ahead of the NFP report. This was to be expected, since the last NFP report was interpreted as a shock in the currency market, which allowed the dollar index to make bullish moves that have held, for the first time in a long period.
All eyes are now pointed to the NFP data, which could spark strong volatility in the currency and in the financial markets. The NFP’s usual pattern is to create knee jerk reaction moves, then retrace most of that before choosing the direction in which it wants to move decisively.
Dollar Index Technical View: TheLFB Member Charts
4 Hour Chart Flows: Mixed Price Points: 77.09 Looking for: A Long wave V)
Momentum: The dollar index went into Long mode in early December and has held that trend since. The near-term path of least resistance is consolidation around new highs, with long-bounces on flat equity trading days, and major pairs probing support whenever they can. A weekly close above 78.50 will be a signal that buyers are dominating, and until then we may see further tests of support.
Elliott Wave: The dollar index traded higher at the start of the week, towards the upper resistance line of a trading channel, where a turning point into a Short, black wave ii appeared. This black wave ii is a sub-wave of a Long, impulse blue wave V). Recently, the black wave ii found its lows around the 77.30 area where a Long black wave iii should started.
Technical traders will be targeting the 79.00 zone, if the 77.09 support (wave IV) low) remains untouched. A near-term bullish signal will be confirmed after a break through the 78.00 resistance zone (the top area of a black wave i).
The euro (EUR/USD 1.4320) had an effective range of 15 pips overnight, moving up and down in the 1.4310 area. The euro is trading above a support trend-line that held the market since Dec 22. A break below this price point would pull another strong wave of Eur short/dollar long orders into the market, probably sending the pair to fresh new lows.
The pound (GBP/USD 1.6020) gained 90 pips throughout the overnight session, recovering almost every pip lost during the prior day of trading. It seems that the PPI numbers might have played a role in all this, after U.K. PPI and the CPI data showed that inflation is still at high levels in the U.K., but the BoE’s main fear remains deflation.
The aussie (AUD/USD 0.9165) lost a few points during the Asian session, but the move was retraced back in a short period. Aussie formed a bearish shooting star formation in the previous session, which usually forms around the last few phases of an uptrend. A break below the 0.9100 area, where the 50-day moving average is, would confirm this bearish outlook.
The cad (USD/CAD 1.0330) has to prepare today for two major events, the labor market data coming from the Canadian economy, at 07:00 EST and for the NFP numbers, scheduled at 08:30 EST. Good Canadian employment numbers could send the cad much lower, maybe towards parity, in the 1.0000 area.
The swissy (USD/CHF 1.0350) spent the day trading in a tight range, without a clear direction, similar to how the euro traded. On the daily chart, the swissy is trading between the 20-day moving average, which acts as resistance, and just above the 1.0250 area, where the 50 and 100-day moving averages meet.
Swissy Technical View: TheLFB Member Charts
4 Hour Chart Flows: Mixed. Price Points: 1.0241, and 1.0507. Looking for: A Long wave v
Momentum: The pair's trend went Long on 3rd December, and has held since, although it now is starting to move towards a neutral stance.
Elliott Wave: Swissy is trading slowly higher, after reaching a new 1.0241 low. In that zone a Short, corrective wave iv might be finished. The structure of this fourth wave is a double zig-zag correction followed by a recent gain of around 120 pips towards the upper line of the corrective channel.
Traders must be very patient and wait on the breakout through the upper resistance line and wave x) top (1.0420), before an up-tend of our Long, blue wave v can be confirmed.
Overall our bias remains bullish so long as the market trades above the 1.0241 low of a wave iv.
The yen (USD/JPY 93.15) bounced from the 200-day moving average during the early Asian session, and since then has moved mostly lower. A break above this price point is expected to come over the upcoming sessions, and this is likely to happen only on positive NFP data, which would boost the dollar compared to the Japanese yen.
TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.