8 Nov 2013
US Non-Farm Payrolls will likely continue the volatility party that started Thursday
FXstreet.com (Barcelona) - The world awaits the monthly Employment Situation Report out of the US Friday – especially those with money on either side of the various DXY / USD currency pairs.
Treasury yields and the DXY will move for sure on the NFP news – but which way?
What happens in the minutes and hours following the release of the US data will likely be a great deal of “noise” that tends to part traders with their hard-earned money. The more important issue is what the data may mean to the Fed’s tapering plans.
The mentality that traders seem to be taking is that the Fed is just itching to start their QE-tapering program. They (the Fed) just need a combination of strong data points and a benign political environment in the coming weeks and months in order to open the door to their tapering plans. While the latter is unlikely, a flow of strong data is certainly possible – although so is a flow of weak data. This is why numbers like the NFP report Friday are so critical to the direction of things in the Treasury markets and the DXY.
Technical outlook for Treasury Yields
Technicians say that the yield on the 10-year US Treasury Note seems to have made a fourth wave low at 2.467% back on 10/23 and then again on 10/30. The bounce that has occurred since the double bottom at 2.467% seems to be the first wave of a five wave sequence higher that will comprise the macro fifth wave of a larger five wave sequence. In the short-term, yields may correct a little bit lower before proceeding higher once again. Support for this very short-term down move will come in at 2.598%, 2.574% and/or 2.550% from 2.613% currently. The first of those levels was tested Thursday during the peak of the risk-off trading. The eventual target for the macro fifth wave is a re-test of the highs from early September at 2.998% - so shorting bonds on any move in yields down to the support levels given above seems to be a high quality trade set-up.
Technical outlook for the DXY
Just as yields appear to have a little more correcting to do prior to another expected move up to the recent highs, the DXY also appears to have topped out at 81.09 intraday and tumbled back down to close just above the 80.75 level. If the late day action Thursday is a bonified correction lower as technicians suspect, the first three downside targets are 80.52, 80.23 and 79.94 – all of which are meaningful Fibonacci retracements of the recent up move. Resistance now is set at Thursday’s peak at 81.09 and is backed up by Thursday’s intraday peak at 81.46.
Treasury yields and the DXY will move for sure on the NFP news – but which way?
What happens in the minutes and hours following the release of the US data will likely be a great deal of “noise” that tends to part traders with their hard-earned money. The more important issue is what the data may mean to the Fed’s tapering plans.
The mentality that traders seem to be taking is that the Fed is just itching to start their QE-tapering program. They (the Fed) just need a combination of strong data points and a benign political environment in the coming weeks and months in order to open the door to their tapering plans. While the latter is unlikely, a flow of strong data is certainly possible – although so is a flow of weak data. This is why numbers like the NFP report Friday are so critical to the direction of things in the Treasury markets and the DXY.
Technical outlook for Treasury Yields
Technicians say that the yield on the 10-year US Treasury Note seems to have made a fourth wave low at 2.467% back on 10/23 and then again on 10/30. The bounce that has occurred since the double bottom at 2.467% seems to be the first wave of a five wave sequence higher that will comprise the macro fifth wave of a larger five wave sequence. In the short-term, yields may correct a little bit lower before proceeding higher once again. Support for this very short-term down move will come in at 2.598%, 2.574% and/or 2.550% from 2.613% currently. The first of those levels was tested Thursday during the peak of the risk-off trading. The eventual target for the macro fifth wave is a re-test of the highs from early September at 2.998% - so shorting bonds on any move in yields down to the support levels given above seems to be a high quality trade set-up.
Technical outlook for the DXY
Just as yields appear to have a little more correcting to do prior to another expected move up to the recent highs, the DXY also appears to have topped out at 81.09 intraday and tumbled back down to close just above the 80.75 level. If the late day action Thursday is a bonified correction lower as technicians suspect, the first three downside targets are 80.52, 80.23 and 79.94 – all of which are meaningful Fibonacci retracements of the recent up move. Resistance now is set at Thursday’s peak at 81.09 and is backed up by Thursday’s intraday peak at 81.46.