The positive NFP figures for the U.S. sparked another round of USD buying on Friday. Unemployment dropped below the 6% mark and the NFP numbers were decently higher than expected (248k versus 216k). Will this lead the way for one more month or even one more quarter of USD strength? To answer that important question our post today focuses on the EURUSD and USDJPY.
EURUSD APPROACHING TRIANGLE BOTTOM
The break of the rising wedge (blue trend lines) has been impressive to say the least: a 1,500 pip fall so far. Within that downtrend the strongest bearish candle closed last month (September), which implies that the downtrend in fact accelerated last month. With the low of last month already broken there seems to be little standing in the way of a further EURUSD downtrend continuation.
The exception is the 1.25 psychological round number which is a support level that deserves monitoring. But once this level breaks then a downtrend continuation in October seems likely. The next stopping spot could be all the way at the bottom of the wedge (orange trend lines).
The 4 hour downtrend channel (blue) does a great job of capturing the downtrend. As long as price stays within the top and bottom lines then traders should primarily be concerned with catching downtrend continuations. For the moment Forex traders can see that price is potentially at the bottom of the channel, which could indicate that the EURUSD is at a retracement or correction spot.
I will keep a very close eye on:
a) Does price indeed make a correction here or will it break below the current bottom and below the channel?
b) In case of a break, I would be interested in trading short below the 1.35 on lower / intra-day time frames. (scenario 1 in screenshot)
c) In case of a retracement, I will be looking to trade shorts for more downtrend continuation at spots of resistance. I also want to monitor how price retraces back to the upside.
- In case it’s very quick and impulsive, a bigger retracement could be starting (scenario 4 OR 5 in screenshot).
- In case it’s slow and corrective, a downtrend continuation seems even more likely (scenario 2 OR 3 in screenshot).
USDJPY UNABLE TO BREAK 110
The USDJPY made an impulsive drop last week but then managed to recover due to the NFP. The speed and rate however remains impressive and the question arises whether the 110 resistance level could be too tough to crack in the short-term.
When viewing September monthly candle (above screenshot) I remain bullish in the medium term and do expect a continuation of the uptrend this month. But this week could easily see a triangle pattern (scenario 1 in screenshot below) or bigger correction (scenario 2) unfold. Of course, if price does manage to break above the 110 resistance, then swing longs and intra-day longs are fully on the table again. Until then, I would only be looking for a potential bounce at the support (scenario 1) or at the 38.2 Fibonacci retracement level (scenario 2).
How do you see the USD against EUR and JPY? Post your opinion or analysis down below!
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