So last week it was all about NFP and well, it came out positively. US labor reports showed that the economy added 235K jobs in February and while unemployment remained constant at 4.7%. Many investors were watching the average hourly earnings which remained stuck at 0.2%. Even though expansion was below expectations at 0.3%, it wasn’t that bad. As always expected during NFP, the market was very volatile with price swinging back and forth as bulls and bears cancel each other out. But despite the volatility, the positive NFP report put Yellen and the Fed in a very good spot to raise interest rate by a modest 0.25% as widely expected. If they go on and raise interest rate, this will be the first of such tightening pace since the housing bubble in 2006 and would put the current interest rate at the lower range of pre-financial crisis where the Feds operated. Fed rate hikes is already priced in and with global economic recovery evident boosting events, this will at least stabilize things and hopefully tame inflation. Inflation has been on the rise in various economies including the Eurozone because of the ultra loose monetary policies in place. Mario Draghi confirmed this last week and even declared that the ECB monetary policy has been successful. Also, with revision of growth expectations placed higher, rising household wealth and employment in the US will further fuel inflation and so, going by Yellen “gradual” tightening will be the wise thing to do.
This week, I will be looking to go long the USD. The weekly chart is bullish and placing a Fibonacci tool between June’s lows and December’s high will place the current reversals at the 61.8 Fibonacci level. I will be looking at the 20 period moving average and looks if it holds as a support because my aim will be to buy this pair at every dip in the 4HR chart and fine tune it more in the 30 min chart. Clear resistance is visible at 118.00 and if there is a break above 115 this week, then that will be my target.
Last week was bullish. This week will likely be so. Intraday traders should trade in the 30 min chart with a 1:2 risk reward ratio while swinging should happen from the 4HR or the daily chart. So far the 4HR chart is bearish and I will wait till a buy signal is printed in the 4HR chart and enter any longs in the 30 min chart as follows:
Buy Limit: 113.30-114.00
Stop Loss: 112.60
Take Profit: 118.00-1.3-4 risk reward ratio
Have a good trading day.