Forex Markets at Key Support/Resistance Levels into NFP

June 3, 2016

Image: Pexels

Markets Stutter at Draghi:
Mario Draghi and The European Central Bank left both the official minimum bid rate and €1.8 trillion stimulus package unchanged overnight.

In typical central bank rhetoric, Draghi was cryptically positive on the block’s prospects for increased economic growth, but was sure to let the market know that he still had some stimulatory ammo in his trusty QE bazooka yet.

“It is quite clear we will not hesitate to act.”

The latest unchanged ECB inflation forecasts point toward further stimulus being required if they are to get anywhere near their 2% target and this is why Draghi’s attempted positivity was not reflected in the price action.

EUR/USD Daily:
160603_eurusd_daily
Click on chart to see a larger view.

The EUR/USD market chopped before falling to sit at daily support. A technical move more so than a reaction to relatively corresponding rhetoric on policy.

As you can see, there are a few ways you can draw this daily trend line. I have chosen to draw the support line of the channel so it hits the first point where price bounced, ignoring the news spike that poked its head briefly through the level before carrying on.

All you can do here is draw the different lines on and see where price gives a reaction. Just remember that once again, the higher time frame, long term trend lines are more of a zone than a hard level due to this subjectivity in how it can be interpreted.

The Oil Narrative:
Still an interesting one!

What is OPEC’s purpose?

“Coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”

But lets be frank: OPEC is nothing but a circus. The organisation is an outdated cartel looking after their number one priority. Themselves. And doing a terrible job of it.

Last night’s OPEC meetings saw no deal on a supply ceiling as was possibly being anticipated heading in. Saudi Arabia and Iran stayed stubbornly at loggerheads and the meetings were really a whole lot about nothing at all.

OIL 15 Minute:
160603_oil_15minute
Click on chart to see a larger view.

I think the 15 minute price action highlights the issues that the organisation has, and maybe markets are learning after all!

Whatever your fundamental take away is, the fact remains that Oil’s $50 psychological level has held firm in wake of fundamental noise. You can’t go wrong managing risk around major levels.

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Charts of the Day:
With NFP highlighted on today’s economic calendar, the US Dollar Index is sitting right at important, higher time frame resistance.

USDX Daily:
160603_usdx_daily
Click on chart to see a larger view.

Using the same thinking as on the above EUR/USD chart in terms of where I have drawn my level from, I have used the following points simply because when it was broken it was because of a gap and then was re-activated as resistance (on a re-test) as soon as it tucked back underneath.

USDX Hourly:
160603_usdx_hourly
Click on chart to see a larger view.

An ugly zoomed out chart here, but to show the full length of the trend line/flag pattern, I had to show it like this to highlight the little break-out and re-test. Text book rejection not quite playing out, but USDX is still approaching a major resistance level heading into NFP tonight.

It’s always worthwhile keeping a USDX chart open on your MT4 platform. Get USDX on MT4 with Vantage FX.

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On the Calendar Friday:
CNY Caixin Services PMI

GBP Services PMI

CAD Trade Balance
USD Average Hourly Earnings m/m
USD Non-Farm Employment Change
USD Unemployment Rate

USD ISM Non-Manufacturing PMI

Keep an eye on the Technical Analysis section of the Vantage FX News Centre throughout the trading day as we delve into a deeper, full NFP preview post.

Dane Williams – @VantageFX

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