The Dollar Get Swept Off Its Feet Before NFP

The Dollar got swept off its feet and not in any romantic notion…no I mean like a a nice judo leg sweep that puts you flat on your back, the one that came fast and you didn’t see coming. That was the U.S. Dollar.

The Dollar had been trading within a nice range
84.20 to the upside and 83.80 to the downside. Both major psychological
numbers and both with multiple tests. The EUR/USD had also been a contributor to the range as it was held below the 1.3400 level.

The New York session began with a 7:00am EST breakout in the EUR/USD.

The sideways Wave and balanced triangle pattern was the set up, a classic momentum look. The positive MACD Histogram at the time of the price break completed the trigger to enter. The break was 1.3370.

The U.S. Dollar has been weak, there is no doubt when looking at the daily chart. One thing to note is the proximity of current prices to the December 2006 low.

The 30 minute chart broke down as buyers bid up the Euro. What made this weakness different that past sell-offs was the support that it broke as it traded lower. Taking out the “80” tick was a clear signal that the buyers who had support this level in recent days were no longer there or no longer willing to as the Euro headed higher.

The EUR/USD entry long at the “70” pip had an initial profit target of 1.3395 as it was necessary to respect the potential resistance at 3400. If prices could move beyond 3400 had as much to do with Euro buyers at this level as it did U.S. Dollar sellers below “80”.

The current perch of the EUR/USD is a precarious one as the heights it has found are not only one year highs but also heading up to multi-year highs. There is a saying that stock traders adhere to: buy 52 week highs. Now I do not like doing so unless that 52 week high is set up by a momentum play or unless I can get a correction entry. But I certainly do not want to play a short in the face of a 52 week high.

The EUR/USD broke the “00” with the momentum play back at “70” and while traders would do well to take some of the position off the table as the battle at “00” happens, there is no reasons that a portion of the overall entry could not sit back at a nice trailing or break even stop to see if there is more life in the move.

We now head into tomorrow’s NFP with a markedly weak U.S. Dollar. The non-farm payroll is likely to also have a two-part move as the Dollar has the possibility of being effected Monday morning when U.S. stock traders are able to react to the number for the first time. Remember that the U.S. equities markets will be closed tomorrow as will the NYBOT where the U.S. Dollar Index is traded.

Raghee Horner is a trader with more than 15 years’ experience in the markets. Ms. Horner has taught her brand of technical analysis and charting strategies to students all over the world. Emphasizing charting and price action and continues to teach the tools and strategies that encourage self-directed traders to pursue the study of chart analysis and market psychology. She is a much sought after public speaker who has conducted seminars in the US, Canada, the Caribbean, and Asia. Raghee’s charts are created using eSignal and EZ2 Trade Software.