US Brief: top Trade Setups in Forex - US NFP in Highlights!

The U.S. stock indexes closed at record highs as market sentiment improved further amid eased geopolitical tensions. The Dow Jones Industrial Average soared over 211 points (+0.7%) to 28956, the S&P 500 rose 21 points (+0.7%) to 3274, and the Nasdaq Composite was up 74 points (+0.8%) to 9203.

The U.S. Labor Department reported that initial jobless claims amounted to 214,000 in the week ending January 4, below 220,000 expected and 223,000 the week before.

Later today, the official U.S. December jobs report will be released (+160,000 non-farm payrolls and the jobless rate at 3.5% expected).

USD/JPY - Overbought Pair Bracing for Retracement! 

The USD/JPY currency pair flashing green and hit the high level of 109.61 from the 107.65 lows of yesterday's bearish levels, mainly due to the risk-on sentiment in the market in the wake of the de-escalation of the United States and Iran war. As of writing, the USD/JPY currency pair is currently trading at 109.58 and consolidates in the range between the 109.45 - 109.61. 

The strong U.S. dollar added to the upward movement of USD/JPY on Thursday. Meanwhile, the President of New York Federal Reserve John Williams said that the current environment of low interest rates & low inflation were likely to persist for years, and that would be a great challenge for the central bank to operate.

The Minneapolis Federal President Neel Kashkari said on Thursday that the interest rate cut made by Federal Reserve last year helped to reduce the recession risks, which were linked with increased geopolitical tensions and weak business investments.

Kashkari added that the improvement in trade negotiations with China had increased optimism, and this could encourage new business investments in 2020.

On Thursday, the FOMC vice-Chair, Richard Clarida, said in a speech that the U.S. economy has started well with 2020 with low unemployment, strong economic growth, and inflation near target. He further said that the bank would adopt a wait-and-see approach on interest rates after three back-to-back cuts last year.

USDJPY - Daily Technical Levels

USD/JPY - Daily Trade Sentiment

The USD/JPY has made a massive bullish recovery from 107.600 to 109.450. As we can see on the 4-hour chart, the pair has entered the overbought zone. The Stochastic's value is around100, which is suggesting solid chances for a bearish retracement. The USD/JPY pair may slip lower to complete 38.2% Fibonacci retracement around 108.790. 

Closing of candles above this level are likely to support USD/JPY; elsewhere, we may see the further drop until 108.600. At the moment, the pair is holding around 109.675, and a bullish breakout of this level can soar to 110.

USD/CAD - Dollar Slips Amid Weaker NFP

The USD/CAD pair closed at 1.30552 after placing a high of 1.31044 and a low of 1.30258. Overall the movement of USD/CAD remained bullish throughout the day. The USD/CAD pair jumped to its highest level since December 27 above the 1.3100 on Thursday amid the decline in WTI crude oil prices.

After the Iranian air-strikes on U.S. troops in the Iraqi base on Wednesday, the WTI crude oil prices started to drop and reached below $59.00 per barrel and weighed on Canadian Dollar. The fall in commodity-linked Loonie gave a boost to the USD/CAD prices on Thursday.

Adding to the weakness of the Canadian Dollar was the weak macroeconomic data release from Canada on Thursday. At 18:13 GMT, the Housing Starts in December decreased to 197K from the expectations of 212K and weighed on the Canadian Dollar.

The Building Permits in Canada for December also dropped to -2.4% from the expected 1.0% and weighed on the Canadian Dollar at 18:30 GMT.

Weaker than expected housing starts & building permits from Canada weighed on the single currency and gave strength to the pair USD/Cad on Thursday.

Meanwhile, the Bank of Canada's governor, Stephen Polo, said on Thursday that it would be too early to tell whether the recent improvements in global trade would lead to stronger trade & investments in 2020.

Polo said that companies were reluctant to a big investment in times of uncertainty. He also noted that the estimation of the central bank for the global GDP this year decreased by 1% due to trade conflicts.

Poloz said that the country's labor market had shown growth over the past year and bank will carefully watch whether the gains in job data persists. He added that a strong labor market, along with the rising population, has been supportive of the housing market.

On the other hand, the stronger U.S. dollar on Thursday also added in the upward trend of USD/CAD. The jobless claims decreased in previous months were reported by the U.S. Department of Labor and supported the U.S. dollar, which raised USD/CAD to its 8-days highest level of 1.31044.

USD/CAD - Daily Technical Levels

USD/CAD - Daily Trade Sentiment

The USD/CAD is trading in line with our forecast as it continues to recover from previous losses. The pair is currently trading at 1.3039, resting around 38.2% Fibonacci retracement. Violation of this level can extend bearishness until 1.3000. 

The RSI and Stochastics are in the buying zone, and these may drive more buying in the USD/CAD currency pair. The idea is to look for selling trades below 1.3067 to target 1.3000 today. 

AUD/USD – Choppy Session Continues

The AUD/USD closed at 0.68643 after placing a high of 0.68851 and a low of 0.68488. Overall the movement of AUD/USD remained bearish throughout the day. The pair AUD/USD dropped for the 5th consecutive day on Wednesday, below the level of 0.68500.

At 2:30 GMT, the AIG Construction Index for December showed a contraction in the construction sector of Australia and weighed on the Australian Dollar. At 5:30 GMT, the closely watched Building Approvals for November from the Australian Bureau of Statistics showed an increase in buildings approved for construction by 11.8% from the expected 2.1% and supported Aussie.

The stronger than expected building approval data from Australia failed to raise the AUD/USD prices on Wednesday amid the stronger U.S. dollar. The U.S. dollar remained strong throughout the day after the release of ADP Non-Farm Employment Change at 18:15 GMT, which showed a growth in the employed number of people in December by 2020K against the expectations of 160K.

The stronger U.S. dollar put pressure on AUD/USD prices on Wednesday. The pressure also came from another factor, which was the expectation of losing monetary policy in its upcoming meeting by Reserve Bank of Australia.

The minutes from the December meeting of RBA revealed that the policymakers wanted to reassess the economic conditions and policy stance in February. The markets are hoping for one further rate cut by RBA by the middle of 2020, and it is weighing on the Australian Dollar.

AUD/USD - Technical Levels

AUD/USD - Daily Trade Sentiment

The AUD/USD has not traded much lately as it continues to exhibit choppy trading sessions in between 0.6880 - 0.6855. The AUD/USD is still holding below 50 EMA, which is likely to extend resistance around 0.6910. The AUD/USD pair may gain support at 0.6831, which is a double bottom support mark. Under 0.6885, the AUD/USD can trade bearish until 0.6835 and 0.6804 trade level. 

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