The Forex Guide to Fundamentals

Talking Points

• The EUR/USD Stalls at Range Resistance
• EUR German CPI Figures Released at .3%

The EUR/USD is testing resistance this morning, but has failed to breakout despite a series of high importance news events. This morning EUR German CPI (YoY) figures were released at .3%. This was better than the expected value of .1%.

Even with this news, the EUR/USD is still trading under today’s R3 Camarilla pivot at 1.1323. It should be noted that the EUR/USD has broken out to new highs in its previous two trading sessions. If the pair attempts to move higher, traders may look for bullish breakouts above the R4 pivot at 1.1360. In this scenario, traders may use today’s 111 pip range to extrapolate initial targets near 1.1471.

In the event that the EUR/USD fails to break higher, it opens the pair up to retrace towards values of support. Today’s value of range support is found at the S3 pivot at a price of 1.1249. As well, bearish breakouts may begin below the S4 pivot point at 1.1212. A move to this value would be considered significant as it would be the first attempted bearish breakout in the last four trading days.

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• The USD/CAD Breaks Lower on Employment Data
• Daily Price are Now Testing Weekly Lows

USD/CAD 30 Minute Chart

The USD/CAD is trading lower this morning, after the release of better than expected employment data. CAD unemployment was expected at 7.3% and released at 7.1% As well. Data on net changes in employment also beat expectations at +40.6k. This news has caused the USD/CAD to breakout below this morning’s R4 pivot point at a price of 1.3053. Traders may find initial bearish targets for the day at 1.2964, by extrapolating 1X today’s 89 pip range.

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GBP/USD prices have been trading inside of today’s 60-pip pivot range ahead of this morning’s initial jobless claims data. Expectations for this morning’s event were set at 261K and released at 274k. Currently, prices are trading back below range resistance, which is marked in the graph above at the R3 pivot at a price of 1.4522. If prices remain below range resistance, traders may look for the GBP/USD to again traverse today’s the pivot range back to support found at the S3 pivot at 1.4462.

GBP/USD 30 Minute Chart



If prices continue to decline from resistance, traders may look for a continued bearish move below today’s S4 pivot point at 1.4482. A move to this point would be significant, as it would mark the second bearish breakout this week. In this scenario, traders may use a 1X extension of today’s pivot range to find initial bearish targets near 1.4422. Alternatively, a breakout above the R4 pivot at 1.4552 may expose potential bullish targets near 1.4612.

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The AUD/USD continues to decline from yesterday’s high at .7749. This move in price has been guided by a descending trendline, which is drawn below by connecting a series of swing highs over the last two trading sessions. Aussie traders should continue to monitor this line ahead of today’s employment data as an ongoing point of resistance. Expectations for AUD Employment Change (July) figures are set at 10k, and any deviation from this value may result in a significant shift in the short term pricing of the AUD/USD.

AUD/USD, 15 Minute Chart & breakout

The AUD/USD can currently be seen trading to new daily lows at .7615. The Grid Sight Index (GSI) is currently highlighting a short term downtrend, with the pair printing a series of lower lows in early trading. After reviewing 23,227,069 pricing points, GSI has indicated that price action has continued to decline 21 pips or more in 46% of the 13 matching historical events. Today’s primary bearish distribution is found at .7596. A move through this point would place the AUD/USD at both new weekly and daily lows.

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Gold prices have opened Mondays trading lower, declining in a descending wedge pattern. This drop in price is continuing ahead of this Wednesdays US FOMC Rate decision. Expectations for this even are to see rates held flat at 0.50%. However if interest rate policy changes unexpectedly, it may have a drastic effect on Gold prices. As such, traders should continue to monitor this emerging price pattern to help identify the next directional breakout in gold prices.

Gold, 1 Hour Declining Wedge

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"Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."

Gold prices continue to rally from this morning’s low of $1,166.50, as the US Dollar is set to finish the week lower on worse than expected NFP (Non-Farm Payrolls) figures. NFP totals for November were expected at 180k, but released modestly lower at 178k. The biggest surprise was October’s totals being revised lower by a reported -19k. Technically if the US Dollar continues to retreat on this data, this may signal a shift in momentum for commodities markets including the price of gold.

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The EUR/USD is trading back towards key points of daily resistance, after German GDP figures beat expectations this morning. German GDP (YoY) was expected at 1.8%, but released at 1.9%. This move has now led to a two day rally for the pair spanning 231 pips.

Technically the EUR/USD is trading higher, but quickly running into resistance. As seen in the graph below, the pair is currently testing a 61.8% Fibonacci retracement level found at 1.0669. This measurement has been found by taking the distance between the December 8th high at 1.0873 and the January 3rd low at 1.0340.

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The USD/CAD has pressed to new 2017 lows at 1.3018, but the pair is now rebounding from this morning’s decline. Today’s decline has come ahead of Bank of Canada rate decision, where rates are expected to remain at 0.50%. While rates are expected to be unchanged, traders will look towards future policy cues from Governor Stephen Ploz that may directly affect the USD/CAD.

Technically the USD/CAD has turned bearish with the pair breaking below its daily 200 period moving average (MVA). This average resides at 1.3102, and if prices close beneath this value it will be the first time for the currency pair to do so in three months. While today’s price action qualifies as a daily breakout, traders will next look for the pair to close under the January 12th low at 1.3028. A move beyond this point exposes the next point of daily support near the psychological 1.30000 value. Alternatively if prices rebound near present values, bullish USD/CAD signals may begin again once the pair has risen back above the previously mentioned average.

Intraday, the USD/CAD is trading well below today’s S4 pivot at 1.3128. While this bearish breakout occurred earlier in the session, traders may continue to use this point as an intraday point of resistance to time retracement entries. Traders looking for a bullish USD/CAD reversal should also continue to monitor today’s S4 pivot. If prices move back above this point, the next key value for the USD/CAD falls at 1.3150. A move here would suggest an invalidation of this morning’s breakout, and suggest at least a temporary change in the short term trend.

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The US economic calendar is stacked with many events throughout the month but none is more anticipated that the release of Non-Farm Payroll figures. Non-Farm Payrolls also known as NFP, is reported monthly by the US Bureau of Labor Statistics to give a timely glimpse into employment changes inside of the United States.

S&P 500 M5: range price movement by Non-Farm Payrolls news events

Ultimately this report can give traders insight into whether the US economy is expanding or contracting while directly influences the decisions of policy makers such as the US Federal Reserve. With this in mind let’s take a closer at this news event, so we can better understand NFP and its potential impact on marks.

First, NFP looks specifically at net changes in employment as jobs are created or subtracted in an economy in any given month. The term Non-Farm is used since farm / agricultural workers are not included in the employment count. The decision to not include agricultural jobs lies in these jobs being largely seasonal that could possibly produce small temporary shifts in labor reporting. For this reason certain government employees, private household employees and nonprofit organization are also not included in the count.

As the most comprehensive employment number released in the United States, NFP numbers have been known to produce volatility in the Forex Market.

Traditionally there are many ways of trading the news including breakouts , news fades, and trading market dips. Trading NFP can be an exciting and often profitable pursuit for traders willing to enter into a volatile market. Regardless of the strategy taken, it is always important to keep an eye on risk / reward levels while minimizing the use of leverage in case the event volatility moves the market against your trade. With this in mind, traders should expect increased volatility and plan their strategy for the day accordingly.

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