Higher USDJPY & GBPCAD Expected as US NFP Disappoints

Higher USDJPY & GBPCAD Expected as US NFP Disappoints
May 11, 2015

 
The much awaited NFP (Non-Farm Payroll) data was released last Friday, and it failed to bring clarity in an FX world that seems to be dominated by ranges.

From a fundamental point of view, the release was really poor in the sense that the expectations were not beaten. Unfortunately, March’s numbers were also revised lower, and these were disappointing anyway. The revision simply added to the sentiment that the US isn’t recovering fast enough.

As a consequence, the markets were experiencing ranges. The best example comes from the USDJPY pair as it travelled to the 120.20 area before the NFP, then down to 119.60 after the release, only to close the day where it started at 119.80.

The EURUSD pair moved a bit more in the sense that it closed the week at the 1.12 level after flirting with the 1.14 area just two days earlier. The ongoing Greek drama making the Euro resilient on any move higher, and all eyes are on the Eurogroup’s negotiation talks meeting on Monday.

The general assumption is that Greece will be still part of the Eurozone, as negotiations would not take so much time otherwise.

At the time this article is being written, China cuts (again!) the benchmark interest rate by 0.25 basis points and this should be seen supportive for the USDJPY pair and the general equity markets.

A cut in interest rates can be viewed as a stimulus, and the first thing you’ll notice is that assets are inflated. Therefore, equities should benefit from the cut and USDJPY as well.

As a target on the long side, the USDJPY is eying the 122 area but not much follow through is being viewed after that. I am favoring the long side until the 122 area and most likely that level should hold until the beginning of June.

A new disappointment in the NFP numbers in June would definitely put the so called rate hike at the next Fed meeting on hold, and a revisiting of the 117 area is mandatory.

Besides the USDJPY, the GBPCAD has seen a terrible rally on the back of the UK elections and the Conservatory party’s win. I am looking for the cross to continue to rise in a zigzag pattern, targeting the 1.93 area sooner rather than later. From that point, shorting the cross or even better, shorting the USDCAD might be the best way to take advantage of these markets.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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