Traders take profit on Dollar long positions following expectations for March rate hike

Last week’s Non-Farm Payrolls release continued to confirm a March rate hike for Wednesday.

The March rate hike has been priced in at 93% as traders take profit on long positions with the next progressive rate hike in June priced in at 50%. Similarly, the Euro has rallied as European Central Bank policymakers discuss the possibility of a rate hike before the quantitative easing policy is over. Finally, the Dollar slipped against the Yen as traders predict Japan will be a priority in upcoming trade agreements.

Taking a look at this week’s chart setups, USDJPY is beginning to face with the 4-hour resistance.

Screenshot at Mar 13 00-36-35
USDJPY 4-Hour

Given the expectations that Japan will be treated with high priority for future trade agreements with the U.S., the Yen remains relatively stronger. The Dollar strength building up to the Non-Farm Payrolls was quickly short-lived and the week ahead remains rather bearish.

Screenshot at Mar 13 00-59-38
EURUSD 4-Hour

The other pair I am monitoring is EURUSD as it breaks above previous highs and continues into the Sydney and Tokyo sessions. It currently nears one 4-hour supply zone, which also represents a whole number of 1.07 price level. The two supply zones mark the areas for highly probable zones for downward pressure.

This, of course, depends partially on the fundamentals and whether the ECB will project rate hike forecasts and possibly an early end to the quantitative policy. If the Euro zone is deemed recovered as inflation picks up, there is no doubt any further stimulus would be rolled back.

 

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