EUR/USD
The EUR/USD fell 102 points to close at 1.2003 after dipping below the 1.20 price for the first time in years in intraday trading. The euro slid to a 4-1/2 year low after European Central Bank President Mario Draghi indicated the bank could soon back a government bond-buying program to deal with alarmingly low inflation across the 19-nation Eurozone. The currency's latest foray toward $1.20 was triggered by a warning from Draghi that the bank is now more likely to fail in its ambition to keep prices stable than it was just six months ago. Today, it found enough support below the 1.18 level to bounce and form a little bit of a hammer.
Forecast: This hammer suggests that the buyers are going to stay here, and we recognize the 1.18 level has been massively supportive on the longer-term charts. With the nonfarm payroll numbers coming out and we have two possible outcomes: the break above the top of the hammer which may send this market at 1.20 level or the break below the bottom of the hammer which may send this market into a freefall. We believe that tronger than anticipated jobs number coming out of the US will send this pair much lower, but we need to see the reaction to the nonfarm payroll numbers first.
AUD/USD
The AUD/USD initially tried to rally during the course of the week, but then turned around at the 0.82 level and formed a shooting star, and it appears that it will continue to go lower. With that being the case, we are sellers on rallies and can not buy in this market. Ultimately, we believe that the Australian dollar does go lower, and we don't have any interest in buying the it anytime soon. However, we recognize that the 0.80 level could be massively supportive.
Forecast: We believe that this market is essentially waiting for some type of clarity coming out of the nonfarm payroll number. The 0.80 level below is massively supportive, and as a result we are not comfortable selling quite yet. But if we did find some type of supportive candle, we may be able to take a countertrend trade to the upside. On the other hand, if we did close below the 0.80 level with any type of strength, we would be sellers.
GBP/USD
The GBP/USD broke down below the 1.55 level at the end of the week, essentially "opening the floodgates" to the 1.50 level. With that, we have a lot of reasons to sell this market and absolutely no interest in buying it. As of now, the 1.55 level looks as if it is resistance because previously it was support. The market looks as if it's ready to continue to grind lower because of that, so we are simply waiting for resistant candle in order to push the value of the British pound down.
Forecast: The GBP/USD went back and forth during the week forming a little bit of a hammer.With that being the case, it looks as if the 1.50 level is going to offer support, and the fact that the nonfarm payroll numbers come out so we think that this market will be very volatile. The 1.50 level is important on the longer-term charts, and the support extends all the way down to the 1.48 handle in our opinion. Because of this, we think that there is much more danger to the upside than the down, making this a potential countertrend move.
USD/JPY
The USD/JPY initially fell during the course of the week but found enough support below the 120 level to turn things back around and formed a hammer which gave positive signs. Also, with the nonfarm payroll numbers coming out today, it's very likely that we will see a lot of volatility due to the announcement. This market tends to react quite significantly to this announcement, so if we get a better than anticipated employment number, this market could go much higher. If it doesn't, we will look at pullbacks as buying opportunities as this market certainly looks well supported.
Forecast: We feel that this market will continue the uptrend that we have seen for some time now. On top of that, the US Dollar Index of course went higher so it suggests that the US dollar will continue to be the favored currency in the Forex markets.Also, the Bank of Japan continues to work against the value of its own currency by stepping into the bond markets and purchasing Japanese Government Bonds, essentially quantitative easing such as the Federal Reserve has done. With that, we are buyers of dips in this currency pair.