??NFP??: US Dollar Offers Confirmation and Invalidation Levels…

6 min read

Today the financial markets are awaiting key data from the US such as the Non Farm Payroll (NFP).

It’s time for a closer look at the expected numbers on US job growth, average earnings and the unemployment rate.

This article will also share technical analysis of the US Dolllar and how price action patterns could unfold.

US Data Focused on Earnings

The US unemployment rate has dropped all the way down to 4.3%. This rate is lower than the Federal Reserve’s (FED) expected full unemployment rate at 4.6%. This is what could happen if there is any push lower in the unemployment rate:

  • The labor market conditions could tighten.
  • Companies might finally need to raise salaries for their employees to remain competitive in the labor market.
  • A push higher in earnings could finally provide the needed push for inflation to reach the 2%, which is the FED’s official target.
  • If inflation finally does start to rise, interest rate hikes might soon follow to combat the inflation pressure.

The story would make sense if the earnings indeed started to show bullish pressure. But so far, they failed.

Hourly wages have not managed to break above the 2.5% band. But September or October could be different and a bullish breakout towards 2.7% or 2.8% could be a real possibility.

A move towards 2.7-2.8% could be seen as potentially bullish for the US Dollar. Another bullish signal could be if the NFP numbers beat the market expectations. The forecast for today is 182k jobs and a push above 200k would indicate strength.


Image from Admiralmarkets.com showing the earnings history.

EUR/USD Ready for Bearish ABC Correction

The bearish momentum on the EUR/USD could be a first indication of a larger bearish correction within the larger uptrend. The lower time frames are also showing a potential 5 waves within wave A (black). However, NFP event days also remain volatile and uncertain as the price reacts to the news in its own little vacuum of time and space. Once the reaction to the news settles down, traders will be able to see whether price has indeed respected the resistance zone at the 50-61.8% Fibonacci levels.

Unless the NFP volatility proves otherwise, I am expecting an ABC correction from 1.1950 – 1.1975 towards the -27.2% target at 1.1750 or the -61.8% at 1.1660. Here are the confirmation and invalidation levels that I use:

  • Confirmation: a bearish bounce in 50-61.8% Fibonacci zone or a bearish breakout below the support trend lines.
  • Invalidation: a bullish break above the previous top at 1.2070. This could indicate that the uptrend is back in play but wait for a corrective pullback first because the breakout could be part of an expanded wave B correction. Upside targets are 1.2150 and 1.2250.
  • Indecision zone: a strong bullish move above the 61.8% Fib (orange box) could make the bearish ABC less likely but is not an invalidation as yet.


Image showing EUR/USD 4 hour chart.

USD/JPY Indecisive Daily Chart before NFP

The USD/JPY has space in both directions. The news event could easily send this lower or higher because price is in a range. The moving averages for example are choppy and indecisive.

Here is how the NFP could impact the USD/JPY:

  • Bearish USD news could send the USD/JPY downwards (orange arrow) and price could challenge the support zone (blue lines).
  • Bullish USD news could send the UJ upwards (green arrow) and price could challenge the intermediate resistance level (orange line).

A larger break is needed before more we know more about the long-term breakout direction:

  • Bearish trend needs to break (red arrow) below the support zone at 108.50 (blue lines).
  • Bullish trend needs to break (green arrows) above the resistance at 111.


Image showing USD/JPY daily chart.

Conclusion

Keep an eye on today’s daily candle. This candle is important because of the NFP event. Many market participants are active in today’s price movements so today’s candle often has more important impact than other daily candles.

Keep an eye out for our video tomorrow (Saturday 2 September) at Elite CurrenSea that examines the US Dollar and the Forex market with today’s price action in mind. Here we will explain what we expect for next week’s trading.

Many Green pips,
Chris Svorcik

My twitter: @ChrisSvorcik

More info on our ecs.SWAT course and trading system

Elite CurrenSea Twitter: @EliteCurrenSea

YouTube: Elite CurrenSea

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