Why You Should Expect a Bullish USD This Week

The U.S. Dollar uptrend has made a deep retracement and slipped into a consolidation zone. Will the USD be able to break out of the correction and continue with its trend? This blog post analyzes the key levels and scans the market for setups.

FUNDAMENTALS

The bullish U.S. Non Farm Employment (NFP) figure of 257k took the market a bit by surprise (but not Casey & Nathan) as the expectations were quite simply beaten (236k) for the 3rd consecutive month. In fact, there has been quite an impressive bullish run since May 2014: the last eight (8) out of the last nine (9) months have shown NFP figures above the 200k. The unemployment rate figure however did notch down by a tenth of a percent. All in all, the fundamentals support a bullish USD this week.

TECHNICALS EURUSD

The EURSD has been in a consolidation zone for the last 10 candles with a mixture of up and down trading days. Considering the obviously strong bearish momentum, a typical break out trade setup could occur as soon as price is able to break below the support trend line (green). Most traders should be prepared to pounce on a EURUSD short at that point.

I myself will try to avoid any false breaks by monitoring the strength of the 4-hour breakout candle. I want to see a majority of the candle below the trend line, a close near the candle low and below the trend line, and a sizeable breakout candle. Otherwise the breakout could be a nasty fake out and the consolidation could expand drastically. In that case I am looking for a short at the 50% Fib. In case of a strong breakout, the stop loss will be above the recent top at 1.1530 and the take profit will be aimed at the -27.2 (1.0825) and the -61.8 (1.0480-1.05) Fibonacci targets.

9- 2- 2015 eurusd

TECHNICALS USDCAD

The USDCAD uptrend has been steaming upwards without a single moment of hesitation and the US Dollar bullishness has been strongly dominating the scene against the CAD (same as the EURUSD). Bullish price action has been very impulsive whereas the bearish price action has shown typical behavior for a correction: slow and flat. The current consolidation stopped at the 38.2% Fibonacci retracement when placing a Fibonacci tool on the January monthly candle.

I am looking for either a bounce at the 50% Fibonacci retracement level (stop loss below bottom or 61.8 Fib) or a bullish break above the resistance trend line (stop loss below bottom). In both cases the target is aimed at the -27.2 at 1.31. The break of the resistance must be a strong one as well (like the EURUSD) with a majority of the candle above the trend line, a close near the candle high and above the trend line, and a sizeable breakout candle.

9- 2- 2015 usdcad

The fundamentals and technicals are aligned and the road map is clear. Our homework is completed. Now it depends whether price action will indeed confirm the analysis and trade setups throughout this week.

What is your trading plan for the US Dollar this week?

Thanks for sharing this post and Happy Hunting!

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  • Chris

    Hello Mayuran, thank you! good to hear that 🙂 Yes placing a Fib on a weekly candle makes sense to me and I use it as well. With range I think you mean which Fib do I decide to use. I basically look for confluence and then assess which one seems more likely. Sometimes I keep an eye on multiple ones and wait for price action / candle stick patterns to confirm that price is stopping at the Fibs.

  • Mayuran

    Good Analysis chris, Do you consider applying fib to weekly candles as well ? When do you try to apply fib what do range do you normally decide? is it usually monthly or any any big moves