The NFP Aftermath & USDJPY Trend Warning

Hello Forex Traders!

Last Friday the NFP was released and the figure was quite disappointing for the USD and the US economy. Employers added a mere 162,000 jobs to non-farm pay rolls, while a 188k was expected.

The unemployment rate did drop from 7.5% to 7.4%, but other factors hidden in the footnotes were less positive:

1)      Participation rate decreased from 63.5 to 63.4

2)      June figures were revised from 195k to 188k

3)      Construction jobs were down 6k – not supporting a housing recovery as yet

This puts the taper temporarily in the fridge, and that will help the U.S. equity market. It had its effect on the USD as well, as the EURUSD jumped up a cent from 1.3190 to 1.3290.

NFP TRADING

The most of that movement happened within 1 minute. The 1 min chart shows us that the 1 min candle saw the currency increase by 90 pips. Those of you who had read my article of last Friday `NFP Trading in Forex` know that:

1)      The 1st reaction in the 1st minute is almost impossible to catch for retail traders

2)      The deviation between the released figure and the expected figure was too small to expect a big continuation, and indeed the EURUSD barely moved up after the 1st minute only inching forward to 1.3290

5- 8- 2013 EURUSD 1 MIN

NFP EFFECT

The USD NFP release had different conquences for the currency pairs:

a)      Despite the up movement, the EURUSD is still stuck at a resistance spot. The EURUSD is at horizontal resistance, but also at a major trend line. Fridays bullish candle was also not able to break Thursday‘s high. Do we see a break of last week’s low for downside or will last week’s high crack for more upside trend continuation?

b)      GBPUSD had bullish englfing candles, indicating more strength than the EURUSD. The 1.54 zone is still at major resistance, just like the 1.5550 (786 Fib) and the 1.5650 (886 Fib) zones

c)       AUDUSD still had a down day, despite the weak USD news

d)      USDJPY had a down day confirming a bigger potential bull flag (more on that later in this article)

Same news event, other effects and other positions.

This week we should also realize that with regard to the Aussie there will be a cash rate announcement on Tuesday (12.30am EST, 5.30am London), which could infuence this currency pair heavily.

a)      A drop in the cash rate to 2.5% could spiral the AUDUSD downwards fast.

b)      A 2.75% rate could see the AUDUSD retrace part of last week’s downside. Later on there is aslo a emloyment change, unemployment rate, and monetary policy statement to keep an eye on.

This week brings also interesting news events on the Yen. There will be a monetary policy statement and a BOJ press conference. Let us take a look at the USDJPY more in depth.

USDJPY UP TREND CONTINUATION?

When looking at the USDJPY from upclose, there are a few things that stick out almost immediately to all technical analysts.

1)      The sideways zone for the past few week indicating indecision and a pause (purple)

2)      The formation of a wedge and triangle (green)

3)      Weekly bearish egulfing candles 2 weeks ago and small inside candle last week

5- 8- 2013 uj week

When placing this more recent price action in a larger context, the Forex trader is of course able to see the gigantic up trend on the USDJPY prior to recent price action. Here too some observations:

1)      The USDJPY hit the 382 Fibonacci retracement level of the entire wave up (purple)

2)      The USDJPY could be in a wave 4, after completing a wave 1, 2 and massive wave 3

3)      In that case a wave 5 to the upside could be remaining

4)      The Oscillator is approaching the 0 line. Once it does hit the 0 line, wave 3 could be over and wave 5 could start at any point. The confirmation would be the break of a weekly fractal

5- 8- 2013 uj week 2

Yes you read it right… a wave 5 could mean the up trend continuation! And I know that every Forex trader must be heavily interested in those pips to be won!! So make sure to follow our blog daily to be ready and prepared for pip grabbing…

One word of warning: we must consider the fact that most trends do not restart in August, especially at the beginning of the month, as many people are on summer holiday. Especially Europe usually sees a massive migration for the entire month from the office to the beach and typically trading is slow, ranging, and non-event full.  Therefore, wave 4 could easily last the entire August and the wave 5 might start in September.

TARGETS and DAILY

Potential targets for the wave 5 are the -0.272 at 111 and the -0.618 at 120.

The daily chart shows a close up of the weekly retracement where the currency moved down  1,000 pips pretty rapidly. Interestingly enough the UJ bounced back up right at the long-term moving average. Weekly support kicked in and the bounce was pretty rapid, but has now paused for a while.

What is going on?

1)      Currecntly the move down is looking suspiciously close to a bull flag. A break of that bull flag could be the first signal that the currency is indeed moving back up. Be careful though, as always, of the bigger tip.

2)      If the bottom bull flag line breaks, then maybe the UJ is planning of retracing a bit lower, maybe back to the bottom of the weekly wedge / triangle for example. In that case the daily bottom at 94 is key support.

5- 8- 2013 uj daily

What is your opinion of the USDJPY? Make sure to share your thoughts in the comment section down below!

Here is Tim’s latest article by the way, check it out here.

As always, thanks for reading and for sharing the article!!!

Good Trading in August!

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