The US Dollar Hit Some Hard Resistance Today… Will Tomorrow’s NFP Report Save the Staggering Greenback?

The hottest currency to trade today was undoubtedly the British pound, which strengthened mightily. The UK’s manufacturing PMI which was expected to come in at 49.0 came in much higher at 53.3. The pound gained more than 100 pips against the US dollar in less than 5 minutes. It looks like economic data out of the UK is just getting better and better. The pound gained about 130 pips against the US dollar today. A bit more than two months ago on the 24th of June the pound was the weakest currency by far. Today it was the strongest by far. Things change fast in the world of FX!

 

The dollar posted a very poor performance today. I have to say, today was a very active day in the forex market if you consider the very important economic data scheduled for tomorrow – the US nonfarm payrolls numbers. Many times investors and speculators don’t engage in large trading positions just before such an important event, just in case the news catches them out on the wrong side of an impulsive move. Let’s look at a few charts.

 

GBP/USD

 

GBP/USD Daily Chart

 

Here we see that the GBP/USD has lately been trading in a wide range of about 500 pips. If this range breaks out to the top, this pair could move aggressively higher. A few weeks ago people were talking about how institutions were accumulating pounds. This was already a warning that the pound could perhaps be stronger in the near future than many people were expecting. Especially after the Brexit happened nobody was expecting any pound strength. But look at today – the pound is definitely not on the backfoot anymore. The GBP/USD has carved out an important zone of support in the region of 1.2875. I think it would take a spectacular performance by the bears to push down the exchange rate through this zone. Here is a 5-minute chart of the GBP/USD:

 

GBP/USD 5 Minute Chart

 

What an incredibly impulsive rise! This big jump is a result of the UK manufacturing PMI which came in so strong today.

 

USD/CHF

 

USD/CHF Daily Chart

 

Here is the trade setup I posted on Monday. As you can see we had a strong rise which pushed through the 200-day moving average where the entry was. As expected the 200-day moving average resisted price pretty well, and we are currently trading below this important moving average again. The trade is in profit by about 30 pips right now. Traders who would like to open short positions on this pair could perhaps get another opportunity to sell it at the specific price mentioned in the trade setup above. Just remember that we have the NFP release tomorrow which is known to be a big market mover. Another matter to keep in mind is that the weekend is just around the corner. Many traders don’t like to engage in new positions on Fridays. Sometimes, there are market gaps over weekends which could be a problem if you are keeping trades open over the weekend.

 

 

AUD/USD

 

AUD/USD Daily Chart

 

I’m still holding on to my short positions on this pair and I expect some more downside soon. Perhaps there might be a push into the sell zone mentioned in the chart above. If we get very strong US nonfarm payrolls numbers tomorrow, this pair might serve us a juicy short play.

USD/CAD

 

USD/CAD Daily Chart

 

I’m not too excited about trading this pair right now. The reason is that at the moment the US dollar and the Canadian dollar are both relatively weak. Oil prices have been falling for a couple of days now, and this is hurting the Canadian dollar. Nevertheless, if we look at the technicals of the USD/CAD, we cannot ignore the two consecutive pinbar candles that have formed in the last two days. It is possible that we might get a decline in the pair soon, especially if oil prices stop falling, or even if it starts rising for some reason. Tomorrow we have some economic data out of Canada which includes labor market and trade balance figures. We also have the US Baker Hughes oil rig count which could also have an effect on the Canadian dollar via oil price fluctuations. The most important data to be released tomorrow is the US labor data numbers which include the prominent nonfarm payrolls numbers.

May you rake in the pips tomorrow!