US dollar bulls return after disappointing payrolls release

Last week’s Non-Farm Payrolls came short of meeting expectations, but the dollar’s whipsaw action post news signals the continued expectations of a tightening labor market and rate hike schedule.

Summary of Events:

  • Last week’s NFP change came at 164K, short of the 190K expectations
  • US dollar initially sold off, but rebounded as markets price this as on par with expectations of tightening labor market and kickstart for inflationary controls

While the whipsaw action was noticeable on all pairs, I was primarily focused on the EURUSD pair.

Screen Shot 2018-05-07 at 10.59.01 PM

Despite the poorer than expected release, the economy added jobs while keeping the unemployment rate at a 3.9% low. Ultimately, the market reacted positively to this figure as it further confirms the anticipated rate hike schedule for the rest of this year.

Moving onto the trades this week, the first pair I’m looking at is USDJPY:

Screen Shot 2018-05-07 at 11.06.03 PM

Beginning on the weekly chart, I develop the following short bias:

  • Last week’s near doji candle signals indecision between buyers and sellers.
  • Given the longer upper wicks, buying pressure held surpressed.
  • This week’s lower open signals a potential for a bearish week ahead.

Screen Shot 2018-05-07 at 11.08.24 PM

Moving onto the 4-hour chart above, short bias is strengthened on the lower timeframes:

  • First initial moving average crossover with price holding resisted at this crossover.
  • Price experiences resistance at both intra-day levels

Meanwhile, I remain bullish on USDCAD despite it largely channeling at the moment.

Screen Shot 2018-05-07 at 11.16.52 PM

Taking a look on both the 4-hour and weekly time frames of USDCAD:

  • Weekly bar formation continues expected uptrend
  • Fundamentally speaking, Canadian dollar still at risk unless NAFTA negotiations put Canada unexpectedly better off
  • Over on the 4-hour time frame, this pair is still ranging. Ideally, I would be monitoring it to buy at the bottom of the range.

These are the only two major pairs I am actively monitoring at the moment. Stay tuned as I go through minors later throughout the day.


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