The US$ has remained supported above the 95.50 S/R level despite the weaker than expected NFP result: the ‘Jobs added’ and ‘Wages’ components and the Unemployment rate all printed worse numbers than expected. Some reports suggest this is due to Investors still pricing in a Fed rate hike this year but I’m wondering if it might be more due to the USD/JPY and the S&P500 getting their lives back in sync?
NB: this is just a brief update as I am away for a few days.
USDX 4hr: note how the 61.8% fib kept price in check last week. The 95.50 remains as support below current price action and is the level to watch next week for any make or break activity that might evolve along with any increased momentum so keep an eye on the ADX too. Note, also, how the new monthly pivot is parked right at the 95.50 level too! Confluence!
FX Indices remain divergent on their 4hr and daily charts:
USDX 4hr Cloud: above:
USDX daily Cloud: within:
EURX 4hr Cloud: below:
EURX daily Cloud: above:
Weekly Cloud charts: the USDX is still below the weekly Cloud which is a bearish bias and the EURX is above which is a bullish bias:
USDX weekly Cloud: holding below for now:
EURX weekly Cloud: holding above for now:
USD/JPY and S&P500: The US$ closed the week above the key 95.50 threshold which may surprise some given the NFP miss. However, this support may be more due to a realignment of the USD/JPY with the S&P500 than due to investor ‘US rate hike’ thoughts.
The chart below shows how the USD/JPY and the S&P500 have traded over the last 15 years. So far, for 2016, these two entities have traded with divergence but the blue boxes show the periods of recent history where the two have traded in alignment. During the last 15 years there have been longer periods of alignment than divergence and we may just be heading back for another period of alignment.
This would tie in with what I have been seeing across some of the Yen pairs charts where many are at key support levels suggesting the potential for a reversal or, at least, a bounce. This would imply developing Yen weakness which would tie in with USD/JPY strength to go along with the recent bullish S&P500 and, also, a possible renewed period of S&P500 and USD/JPY alignment. The monthly charts below show the key support levels that some Yen pairs are currently poised at:
USD/JPY: poised at 100:
EUR/JPY: poised at 115:
AUD/JPY: poised above 75:
GBP/JPY: poised above 134:
It is also interesting that last week’s new successful TC trend signals that triggered were all Yen LONG signals; U/J, E/J and GBP/JPY and so that was some sort of clue for me as well. One situation I’ll be keeping an eye on if this U/J rally gets a move will be to monitor if Yen weakness might overtake US$ strength. If so, the US$ index could pull back. Any such development would suggest to me that the trading planets are starting to align with a classic style ‘risk-on’ bias, but, more on that in another post when I have more time.
Data next week: there isn’t much US$ sensitive high impact data next week but there are G20 Meetings to start the week, a Central Bank decision from the RBA and some high impact Chinese data (Trade Balance, CPI and PPI) that could impact risk appetite next week and this could flow through to the US$.
Summary: I’m keeping my eye on:
- the 95.50 threshold S/R level on the US$ index.
- the FX Indices and watching for any new alignment on their 4hr and daily charts.
- The Yen pairs and watching for any developing Yen weakness.