Hawkish FOMC Minutes Spark Dollar Revival Ahead Of NFP

Hawkish FOMC minutes highlighted that many of the members expected QE to end in 2013.

Part of the reason for this is the diminishing effect QE is having and the increasing cost of undertaking it.

We also saw the ADP number come in better than expected today. ADP hasn't been that good a predictor for the NFP although many analysts still believe it has. However, that didn't stop some of them increasing their NFP targets.
Forecasts are now around the 150k mark.

Given the real lack of any follow through following the FOMC minutes if NFPs miss, we could easily see some dollar weakness, and the pair to watch in this case would be the USD/JPY.

If NFP breaks the 150k mark, though, I wouldn't be surprised to see the USD/JPY hit the 88.00 mark.

EUR/USD
Euro pushed lower again today hitting the 1.3120/1.31 mark as we highlighted on the 2nd January. 1.3050 followed by 1.3000 are suspected to be the strong areas of support.

My strategy therefore remains the same, as the break lower today offered a nice 100 pip + move and I will now be looking for a rejection off of these support levels for potential long entries.

The cross in the EUR/USD COT Strength indicator is also highlighting long opportunities.


GBP/USD
The pound obliged with our thoughts from the 2nd putting in a nice down day.

Similar to the euro, it offered quite a nice entry and dropped quite smoothly before finding support at the 1.6150 mark followed by the 1.61 mark.

The next support comes in around the 1.6060 mark and a break of this is likely to see the pair test the 1.600 then the 1.5915 mark. An option to look for long entries from these levels, or if we break lower, from the 1.6000 mark, looking for a potential channel play or push higher.

In the meantime if playing the short (like I am), I will continue to move stops down until either a retracement or a long entry signal.

AUD/USD
The aussie fell sharply on the FOMC minutes. There was a small double top formation intraday but you need the eyes of a hawk to catch it, which frankly I didn't.

For the moment I stand aside this pair, it has been extremely choppy and therefore I would prefer to see signals at the extremes of the current range.

USD/JPY
The dollar-yen put in a relatively flat day today. The yen remains week and I wouldn't be surprised to see us hit the 88.00 mark in this pair now.

COT report points to weakness up ahead and therefore I still prefer looking for short opportunities at these levels, however, we do need to see some clear strong signals before jumping on the trade. With the overextended feel for the USD/JPY, future retracements back to the 84.25 mark wouldn't be shocking.


EUR/NZD
The EUR/NZD pair moved lower off of our signal last night.

A rejection of the previous support now turned resistance would help for a larger move lower.

USD/SEK
The USD/SEK pair pushed higher today, hitting the 6.500 mark.

A push higher to weekly pivot high would negate this setup. A move lower from current levels would keep this in play for now.