US Dollar Dips to 105.44 Support Test After NFP

US Dollar, EUR/USD, USD/JPY Talking Points:

• Despite an above-expected NFP print, US Dollar weakness showed up to allow for a support test in DXY, with the 105.44 level coming into play to hold the morning lows.
• I had looked at that price in the Tuesday webinar as a key spot and the move came along with a resistance test in EUR/USD and a push to support in USD/JPY. If USD weakness is to hang around, the setup in USD/JPY could remain as attractive.
• In the article I update on both EUR/USD and USD/JPY and each market is a focal point in the Tuesday webinar, which you’re welcome to attend: Click here for registration information.

Indices AD

While last week was noticeable weakness in the US Dollar, so far this week has been considerably less decisive. At this point the weekly bar in DXY is showing as a doji, with the low printing at a major spot on the chart of 105.44. This is around the projection of a descending trendline that had previously helped to hold the highs and that came into play shortly after the release of Non-farm Payrolls on Friday morning.

US Dollar Weekly Price Chart

From the daily chart we can get better scope around the support level holding the lows today, as this was also the high from the post-election breakout in DXY, a level that held through the FOMC rate decision and into the end of the week of the election. So there’s a few different items of prior resistance coming in as support potential.

The daily chart also highlights recent structure, as the FOMC gap from last November has continued to loom large with price action. The bottom of that gap at 106.50 is what held the highs on Monday, Tuesday and Wednesday of this week before sellers were ultimately able to push lower-lows into the equation. The 106.13 level is also of importance, as this was the swing-high in July which came in to set lows on Tuesday and Wednesday. Both levels are key spots for bulls to encounter in the event of a stronger bounce in the Dollar; and if that shows, the big question is whether Euro bears are able to break fresh ground in that pair.

US Dollar Daily Chart

EUR/USD

I wrote about this on Thursday but the headlines out of Europe certainly haven’t seemed very positive. With political strife in France there hasn’t been much by way of positivity out of the Euro-zone for the headlines of late; but price action in the Euro this week doesn’t echo that sentiment as the currency has been strong over the past couple of days. And in EUR/USD, this continues a streak of higher-lows that stretches back for a couple of weeks now.

This morning’s shot of weakness in the US Dollar helped to push EUR/USD up to resistance as the pair is now re-testing the 1.0611 level, which is the 38.2% retracement of the 2021-2022 move in the pair. That same Fibonacci sequence helped to set the high last year at the 61.8% marker and the same 38.2 level was in-play as support in April and then again as support-turned resistance last month. It remains a big spot on the chart and for those looking to work bounces in the USD, bearish continuation scenarios in EUR/USD could be an attractive venue for such.

On the upside of EUR/USD, as looked at in yesterday’s article, there’s continued resistance potential at 1.0670, 1.0700 and then 1.0774.

EURUSD AD

EUR/USD Four-Hour Price Chart

 Chart prepared by James Stanley, EUR/USD on Tradingview

USD/JPY

USD/JPY was a major driver of USD-weakness in Q3 of this year and it was very much along for the ride when DXY reversed and broke-out in early Q4 trade. More recently that trend has been in question and last week saw USD/JPY put in a break of some very key support levels.

Like USD above, the weekly bar in USD/JPY has been less decisive so far this week but on a shorter-term basis, there has been a hold of a key spot of resistance from sellers as prices attempted to bounce earlier this week.

The Fibonacci retracement produced by the July-September sell-off has had a few different items of interest lately. The 76.4% retracement is what held the highs in November, and that set up a descending triangle with support (at prior resistance) which was the 61.8% retracement of that move. The 50% marker of that setup plots at 150.77 and that price held the highs on Monday, Wednesday and Thursday as sellers took control to push below the 150.00 psychological level. The 38.2% retracement of that same major move plots just above the 148.00 handle and that’s the next spot of interest for bearish continuation scenarios in the pair.

For USD-bears, given the recent relationship between USD/JPY carry unwind themes and DXY weakness, I think this could remain as a more attractive venue to work with those themes.

USDJPY AD

USD/JPY Daily Price Chart

--- written by James Stanley, Senior Strategist