Economic events in focus (AEDT)
- 16:00 – CN trader balance
- 21:00 – EU Q4 GDP, employment change
- 00:30 – US Nonfarm payrolls, unemployment, average earnings
- 00:30 – CA employment report
- 02:15 – FOMC Bowman wins
US dollar index technical analysis
The demise of the dollar continued for a fourth day, sending US dollar index briefly below 104. However, it was the smallest daily range of the four days, and its late-day recovery saw it close above the monthly S2 pivot point with a small bullish hammer. The low of the day also found support at a high-volume node (HVN) and the daily RSI (2) reached oversold to suggest a near-term inflection point may be near.
Take note that we have already seen the US dollar index fall -5.7% from its cycle high on the weekly chart, which is on the ballpark of the prior two declines. However, what makes this decline stand out is how bearish momentum has accelerated, which could indicate further losses once an anticipated countertrend bounce has played out.
The 103 handle near the November low and 102 handle near the 101.96 HVN could become focal points for bears. And that in turn suggests further gains for AUD/USD, GBP/USD and EUR/USD this month. However, AUD/USD is the clear laggard.
USD/JPY technical analysis
USD/JPY closed beneath its December low on Thursday, taking its drop from the Jan high to -7.2%. Yet support was found just above the September high with a daily RSI (2) also reaching oversold, which has also formed a bullish divergence.
An ok-or-better NFP report today could help the US dollar recoup some of its losses, which could also be exacerbated by bears booking profits ahead of the weekend. This leaves USD/JPY vulnerable to a bounce, but I also suspect bears could be lurking around the December high and 149 handle seeking to rejoin their bearish trend.
AUD/USD technical analysis
It was a rough ride for my analysis last week, with AUD/USD’s plunge far exceeding my estimate and falling for six consecutive days. While I anticipated a rebound at the beginning of the week, once again the ‘battler’ exceeded my expectations to rally all the way back to 63c. Yet a small shooting star candle formed on Thursday to show the rally has lost steam, and its high found resistance at the 100-day SMA.
When compared to EUR/USD and GBP/USD (which have broken to new cycle highs), AUD/USD is clearly the laggard. This also makes it susceptible to a deeper retracement should today’s NFP figures surprise to the upside, which history shows it has a tendency to do.
Note the monthly R1 pivot at 0.6378 which could cap pre-NFP gains. For now, my bias is for a retracement against this week’s rally towards Wednesday’s high (0.6279) before its next leg higher and anticipated break above 64c.
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
