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Strong July NFPs Could See USD/JPY Break ¥100.00 on way to ¥102.36

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ASIA/EUROPE FOREX NEWS WRAP

The US Dollar has a big day lined up for it, should a few key data break its way around the start of New York trading. With 12 events on the DailyFX Economic Calendar designated as “medium” or “high” importance, the excessive event risk promises an exciting end to what has been a disappointing week.

Expectations for big moves out of the majors were high coming into this week, given the supersaturated calendar. But after disappointments out of China (doomsdayers were looking for a contraction in PMI Manufacturing, but it never materialized), Europe (the Bank of England didn’t detail its forward guidance while the European Central Bank was decisively neutral), and even the United States (the Federal Reserve’s policy meeting barely amounted to a blip on the radar), there may be a great deal of pent-up tension among traders headed into Friday’s US jobs report for July.

Data out of the United States has been strong, and weekly jobs figures have trended in the direction of sustained growth above +185K, the current consensus forecast for July. Although earnings data has been weak outside of the financial sector, companies likely still feel positive about the labor picture considering that consumption trends remain bolstered as US stocks tick to fresh all-time highs.

While a print above +200K is very possible, the Unemployment Rate should be eyed to see if it dips below 7.5%; only a drop in the Unemployment Rate coinciding with a steady or improved Participation Rate will be strongly US Dollar-positive.

Read more: Join Quantitative Strategist David Rodriguez for US NFPs at 08:30 EDT/12:30 GMT

Taking a look at European credit, peripheral bonds remain supported after the ECB’s promise to keep rates low for “an extended period of time.” The Italian 2-year note yield has decreased to 1.499% (-2.1-bps) while the Spanish 2-year note yield has decreased to 1.847% (-0.5-bps). On the contrary, the Italian 10-year note yield has increased to 4.363% (+0.7-bps) while the Spanish 10-year note yield has increased to 4.614% (+1.1-bps); lower yields imply higher prices.

RELATIVE PERFORMANCE (versus USD): 09:40 GMT

GBP: +0.27%

EUR: +0.09%

CHF: -0.01%

JPY:-0.12%

NZD:-0.37%

CAD: -0.39%

AUD:-0.46%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.10% (+1.68%prior 5-days)

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

Strong_July_NFPs_Could_See_USDJPY_Break_100.00_on_way_to_102.36_body_Picture_1.png, Strong July NFPs Could See USD/JPY Break 100.00 on way to 102.36

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

TECHNICAL ANALYSIS – CHART OF THE DAY

Strong_July_NFPs_Could_See_USDJPY_Break_100.00_on_way_to_102.36_body_x0000_i1028.png, Strong July NFPs Could See USD/JPY Break 100.00 on way to 102.36

USDJPYPotential for a Bull Flag dating back to early-July is gathering pace as the pair tests the topside range of the governing descending channel. Accordingly, a catalyst (NFPs) is necessary to see the recent downside congestion broken. Fortunately, we have that today; so a reaction, either bullish or bearish, should be expected against resistance at ¥100.00 surrounding the data release.

The 61.8% Fibonacci extension off of the June 13 low to July 8 high, with the extension drawn to the July 31 low, comes in at 102.36, an area where resistance was found as the pair tried and failed to retake the yearly high of 103.73. As such, should NFPs beat current estimates (+185K, Unemployment Rate to 7.5% from 7.6%), a break of 100.00 should begin a larger up move to 102.36, 103.73, and 105.32 (100% extension).

— Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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EURUSD Weekly Technical Analysis: New Month, More Weakness

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What’s inside:

  • EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
  • Resistance in vicinity of 11825/80 likely to keep a lid on further strength
  • Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

EURUSD Weekly Technical Analysis: New Month, More Weakness

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email bysigning up here.

You can follow Paul on Twitter at@PaulRobinonFX.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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