When the FOMC minutes meeting released on Wednesday was full of uncertainty and with references to the strong dollar, it wasn’t a surprise that it spurred selling of the USD in the subsequent sessions. Thursday slight strengthening of the USD created an opportunity for USD shorts and as a result the AUD rose. What we are waiting to see if how the Trump administration will control their fiscal effort with particular focus being on the size and then the timing, otherwise the minutes gave a signal that the FEDs where not really confident about future prospects and especially the new monetary policy stance taken. Back to yesterday’s data and the investors were looking on how the manufacturing sector will perform and well, it came in as a disappointment. ADP Non-Farm employment change dropped to 153K from the median estimate of 173K and even though this data is not considered a reliable indicator of Friday’s NFP, it gives a good picture of private employment. ISM non-Manufacturing PMI remained unchanged at 57.2 while Jobless claims dropped to a record 8 year lows of 235K. These positive data only cemented claims for a stronger USD in the coming months.
To the chart now and in the dailies, price is finding it hard to break above the 0.7330 mark which is a region of resistance in the monthly chart and of that resistance trend line drawn from 09.11.2016 and 14.12.2016 highs. In the 4HR chart, it is clear on how price is making a series of lower lows relative to the upper BB with oversold stochastics and increasing short positions. Any break below 0.7310 will signal a bear move and be in line with the monthly chart general trend.
Trading this pair will be as follows in the 1HR chart. We wait for a retracement back to the daily resistance trend line at around 0.7330-50 is when we place our sell limits since it is a recent resistance zone. Alternatively, and a safe strategy is to place a sell stop at 0.7300 when there is a convincing break below the support of 0.7315-20.
So trading will be as follows:
Sell stop: 0.7300
Stop Loss: 0.7345
Take Profit: 1:3 risk reward ration recommended.
Sell Limit: 0.733-50
Stop Loss: 30 pips from sell point
Take Profit: 1:3 risk reward ratio is recommended.
Otherwise watch out for NFP at 1430 London time for a good trade.