The Buck Turned Higher On Better-Than-Expected NFP After Extended Declin

Summary:

  • The dollar rallied and broke above a critical resistance at H4-period EMA60 against a basket of foreign currencies after U.S. July NFP beat forecasts. Wait and see if it could sustain the rally and reverse its downtrend.
  • Several OPEC and non-OPEC countries will hold a two-day meeting on 7 and 8 August to figure out why some of the countries have not deliver their supply-cut promises yet. Look to any positive news for oil from the meeting.
  • The dollar rallied sharply and broke its downtrend on the 4 hour chart on last Friday’s better-than-expected NFP which showed the economy created 209,000 jobs in July vs. 180,000 jobs expected. In addition, June’s number was revised up from the originally-reported 222,000 to 231,000 as the unemployment rate for the month decreased from June’s 4.4% back down to 4.3% while average hourly earnings rose by 2.5% over the year. The dollar index jumped almost 100 pips on the substantially-exceeded-expectation report.

    Technical

    The dollar index (DXY) pulled back slightly after it rebounded sharply to above its H4-period EMA60. Its short term moving averages moved up sharply in a state of pergence and penetrated its contracted-quickly long term averages with strong momentum. Wait and see if the index will consolidate around its EMA60 or not today and await its long term averages’ contraction ended.

    DXY H4 Chart

    Let’s take a look at non-U.S. currencies now. The euro declined as much as 160 pips against the dollar before bounced back a tad off a support around H4-peirod EMA60, targeting a potential lower low relative to last Friday this week. The sterling extended two-day sharp declines to its daily EMA30 and could be corrected given that it slipped so much in the short term. Comparing to the EU currencies, the Aussie dollar, to a lesser extent, declined. Also, the commodity currency bounced back a little stronger, with a pennant configuration on its 4 hour chart.

    GBP/USD Daily Chart

    As to precious metals, the gold drop to a new low of the week at 1256, as much as 150 pips. The gold price consolidated after it dipped below its EMA60. Its short term moving averages attempted to cross below its long term moving averages, driving them to contract and converge and indicating an upcoming change in the trend. Watch if the scenario of crossing below could materialize or not.

    Gold H4 Chart

    Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.

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