US jobs report makes dollar trading short-term, yet EUR/GBP and GBP/AUD could provide alternate markets for focus.

Source: Bloomberg

GBP/USD retracement from support proves short-lived
‘Super Thursday’ failed to prove super for the pound, with GBP/USD falling back out of the triangle and down to the $1.5467 support level. We have seen a short-term bounce off that level, yet the selling appears to be resuming again this morning.

The question here is whether we will see a move back down to $1.5467 to continue the selloff, or else the creation of a new higher low. I favour the latter and would expect us to remain within this $1.5467-1.5675 range and thus until we break below $1.5467, I would expect some form of recovery, simply due to the significance of that support level. The level is absolutely crucial as it represents the neckline of a possible double top and thus a close below that support level would bring a projected target of $1.525.

So until it is broken, I would be looking towards the bulls to return. Remember that today’s jobs report means the direction of any dollar denominated chart is anyone’s guess come 1.30pm (London time).

USD/JPY consolidation likely to bring another move higher
USD/JPY has been consolidating over the second-half of the week, following a strong move higher. However, given the trend upon the entry of this consolidation, I would be bullish for the exit.

Any move back to Y1.2456 would provide a likely bounce higher and thus I expect buyers to come in if we see price continue to move lower today. Given the NFP release today, any volatility would mean that we will look bullish should price close above Y1.2504 and/or bearish with a close below Y1.24.

EUR/GBP upside likely to be limited
The upside seen in EUR/GBP yesterday came as a result of the Bank of England meeting and whilst we could see further buying as the markets adjust to that change in mentality, I would be surprised if it completely reversed the trend in the medium-term. The daily chart shows a falling wedge formation in play, which points towards further upside towards the £0.71 region.

However, the long-term downtrend would then be expected to resume. One thing worth noting is that a falling wedge in a downtrend is typically bullish, meaning the breakout would theoretically be expected to be out the top. But until we see a move above £0.716, I remain bearish.

GBP/AUD breaks out of uptrend and begins to turn
Previously an example of an amazingly clearly defined uptrend, GBP/AUD is showing signs of reversing, given the break below the lower trendline and creation of new lows and lower highs. Price is currently attempting to create a new low yet again and whilst I am a little skeptical about whether this is a true long-term reversal, I think we could see some legs on this retracement.

The next level to watch on the downside is $2.0888, which is the 100% Fibonacci expansion. Also the 200-period simple moving average (currently at $2.0922). Thus I am bearish as long as price remains below $2.1345.

Yet in the short-term, I am also aware of the fact that price would need to close below $2.1018 to provide further selling today. Given the impact of the jobs report today, it could be worthwhile trading something that avoids much of the influence of the US dollar.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.