Car-Crash NFP Sinks Taper Hopes And The Dollar

A truly abysmal non-farm payroll print today has surely removed any hope for a taper any time soon, with a print of 148K, well below the consensus opinion of 182K. The Dollar dropped sharply, but interestingly the Yen dropped more initially, due to strong EURJPY buying and as such USDJPY very quickly regained any initial losses and began rallying in the hours after the release, before weakness finally crept back in. The poor NFP was contrasted by an improving unemployment rate which came in at 7.2 vs 7.3 forecast, although this says more about the participation rate than it does about any improvement in the actual employment situation and highlights the difficulty of using only one metric to establish the health of the struggling US economy.

Tomorrow is all about the Bank of England, although the bank rate is expected to remain the same due to the current implementation of forward guidance. Overall, Dollar weakness may remain the major theme for the rest of the week but some consolidation is needed to bring things away from such extreme levels.

USD% Index

The awful NFP and the untrustworthy improvement to the unemployment rate have pushed the dollar lower and may continue to do so, although we are now quite oversold, so things may start to get messy again. USD% index RSI is now below the important 30 threshold, but a continuation lower will likely happen anyway. Retail orderbooks are at extremes and there is a feeling that something has to give, but it’s hard to find a reason to hope for a dollar rally given the perfect storm of poor US data and an almost guaranteed delay to the long awaited taper. The next support for the Dollar is the AB=CD 100% fib expansion at EURUSD 1.3817. I remain bearish USD

USD% Index Resistance (EURUSD support): EURUSD 1.3744, 1.3700
USD% Index Support (EURUSD support): EURUSD 1.3817

EUR% Index

A strong performance today with Euro longs the trade of the day, although interestingly EURJPY was the most crowded trade. The cluster of resistance between 1.3800 and 1.3850 may provide some significant resistance, especially given the very overbought state of the index. Brave knife catchers could think about a short at the top of this channel at 1.3850, but my preference is to wait to see how this resistance is handled. The index is in need of consolidation again though before an eventual push higher.
I remain bullish EUR

EUR% Index Resistance: EURUSD 1.3800, 1.3818, 1.3850
EUR% Index Support: EURUSD 1.3767, 1.3688

JPY% Index

Between a rock and a hard place currently, there are seemingly equal pressures of selling and buying for the JPY index. EURJPY longs will be fighting against USDJPY shorts so pair selection is currently critical for Yen trading. As such I am neutral JPY in the short to medium term

JPY% Index Resistance (USDJPY Support): USDJPY 98.00, 97.38, 97.00
JPY% Index Support (USDJPY Resistance): USDJPY 98.50, 98.83, 99.00

GBP% Index

A reluctant push higher for the pound today saw some initial weakness creeping back in after the NFP as some traders took the chance to close larger longs as the flood of buyers hit the market. Typically this would be a good hint of a reversal soon, but we will have to see if the dollar can plumb new depths with the markets already so dollar short, before a reversal call can be made. We are almost upon the major, long term resistance level of 1.6360. A breach of this level would be very bullish for the pound and probably very bad for the UK economy. I remain bullish GBP although expect a major reversal soon

GBP% Index Resistance: GBPUSD 1.6250, 1.6300, 1.6360
GBP% Index Support: GBPUSD 1.6200, 1.6073

AUD% Index

US Dollar weakness pushed the Australian dollar higher today, although the reaction was far more muted than was to be expected for such a high yeilding currency. This could signal trend exhaustion following the relentless push higher recently so a retracement is a definite possibility. The significant level of 1.0000 is now not too far away, although we will have to see how things pan out before considering a push up to there. I remain bullish AUD

AUD% Index Resistance: AUDUSD 0.9750, 0.9789, 0.9800
AUD% Index Support: AUDUSD 0.9700, 0.9600, 0.9580

CHF% Index

A symbolic break to a new high today could signal further strength for the Swiss Franc, helped considerably by very strong Euro buying. Although quite overbought, a push higher seems likely. The cluster of resistance at the 0.8900 to 0.8850 levels may provide a barrier in the medium term given the extreme overbought condition of the index.I remain bullish CHF