May 10, 2021 14:35:55

The dollar is suffering after the shocking US monthly NFP jobs data put paid to any possible policy action by the Fed in June. Powell and crew have always said they wanted to see a series of decent job reports, so the +266k print has certainly bought them more time, especially while the global recovery continues elsewhere. This should see more downside for the dollar, although a strong inflation number on Wednesday (along with booming commodities) may give some second thoughts.

USDX through April lows

After teasing the bulls all last week about a possible break higher, the 50% retrace mark at 91.32 and the April downtrend proved too tough and prices have fallen through the recent lows at 90.42. This level corresponds to 1.2150 in EUR/USD so as long as this holds, USDDX should fall in line with the MACD indicator which is picking up a bearish skew. Next support lies at the February low at 89.68 before the longer-term cycle lows at 89.21. This should provide strong support, with the February 2018 low at 88.25 below.

GBP ceiling broken

Patience is a virtue in trading, especially when allied to discipline…and a pair that is trading in a long-held range. 1.40 has held GBP/USD on several occasions but today cable moved higher in line with the long-term trend. The February high at 1.4238 is the main target though we may see some consolidation with prices touching the upper Keltner band. Bulls will not want to see a drop below 1.40 so below here is a good place for stops, otherwise the 50-day SMA sits at 1.3853 which would certainly mean a false breakout has taken place and we’re back in sideways mode. Targets above 1.43 are next eyed with Wednesday’s GDP not expected to dent the bulls enthusiasm.

USD/CNH approaching huge level

We shift to a weekly chart here to show the importance of a major price level of support (6.40) in USD/CNH. This mark is where the People’s Bank of China intervened in February and the pair bounced strongly in textbook fashion to the middle Keltner band. We are now trading back down near that intervention level of 6.40, which is also just below a long-term Fib level at 6.46 which we broke on Friday. (Interestingly, the double top target to the downside was roughly around 6.48). If the intervention level breaks or there is no action from the PBoC, then expect sharp moves in all the majors with the USDX making new multi-year lows. The next Fib level below is at 6.27, and momentum indicators aren’t over stretched so price action around the 6.40 marker is hugely significant.