State of the Directional Trades

The chart below shows the state of the six currencies that I trade.

Starting from the top left-hand corner, the AUDUSD finally broke the 3-bar congestion pattern. Of course, we need to see where it closes to confirm that we have a bearish conviction-bar. At the time of writing, it has done a mean daily range. We may see a close above the lows to form a neutral day.

The EURUSD has continued in what appears to be a slow IPM.

I am in this trade, having shorted at 1.13864 and 1.13420. Given we have US Non-Farm Payrolls on Friday, I am looking for another day down today (with a range of about 60 to 80 points). We should see some sort of rally tomorrow. Then on Friday, we’ll need to see the number. Expectations are for 184k new jobs.

I am managing the trade and have secured a breakeven position for both entries.

The ADP number may give us a heads up. There is an over 80% correlation with the Non-farm Payroll in terms of direction. In other words, if ADP is lower, this month, when compared to last month, then there is a probability we will see the same in the Non-Farm Payroll. Unfortunately, if that is what happens, it won’t mean much since last month we had a record 300k new jobs. We may get a lower number but one that is well above expectations. An above expectation number should see the EURUSD tumble.

On the other hand, if the ADP is higher, it would suggest that we’ll see a number above 300k. If that should happen, we should see the US dollar go for a solid move north (EURUSD down).

In the GBPUSD, I am still waiting for a bearish conviction-close below the Primary Sell Zone, 1.3192 to provide a sell trigger.

In the NZDUSD, the pair is still trading within the 12-m 3-bar congestion pattern. I am standing aside until we see a breakout beyond the boundaries of congestion.

The USDCAD is showing the greatest bullishness. The one point that is concerning me is: the ranges for Monday and Tuesday are below mean. This can suggest that a retracement is likely. Given Friday being Non-Farm, the retracement ought to occur tomorrow.

The USDJPY is marking time after a breakout from the 3-bar congestion pattern. In fact, if today, we get a close within yesterday’s range, we will see another 3-bar congestion. Of the six, this pair and the NZDUSD are the ones I would leave in my “too hard basket”.

The S&P is flirting with a downside breakout of the 3-bar congestion pattern. If we do see a downside breakout, will need to conscious of the possible effect of the Non-Farm Payrolls. A number within consensus may well bring a rally. A number above consensus, especially if it is above 300k, is likely to cause a move south.

On Friday last week, we saw the 30-year bonds apparently break from a 3-bar congestion pattern. However, since then, prices have moved back into the congestion range. So, all we did on Friday was extend the lower boundary. It now stands at 144.49 (basis CFDs).

Of the instruments here the ones I like best are:

• The EURUSD,
• AUDUSD (or USDCAD, there is a correlation between the pairs) and
• The 30-years if there is a downside breakout

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