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July 5, 2022

How To Trade Dollar Before NFP

Frank Cabibi

The US dollar had a great start to the week in the first couple trading sessions. With NFP and unemployment numbers coming out this Friday, volatility and speculation around the USD will increase as investors look to price in the unexpected.

What To Look For

The first set of heavy news starts tomorrow with the Fed's meeting and the JOLTS job openings. This indicator will let us know how many job openings there were in the month of June. A higher number of openings means that companies are looking to hire. Expectations are higher than the forecast.

JOLTS will also give us some insight on what to look for on Friday with Non-Farm Payroll. If there are more job openings than expected it could be an indication that more workers were added to the labor force (higher NFP).

dollar
https://www.forexfactory.com/calendar#graph=122943
dollar
https://www.forexfactory.com/calendar#graph=122943

However, job openings have not really reflected the number of people hired over time. The visuals above show a fall in the number of jobs added but a rise in job openings. Although expectations are getting beat, the NFP has still fallen the past 4 months suggesting a slow in economic growth.

What This Means for the Dollar

An expectation of a hurting economy from high CPI, lower consumer spending, less jobs added, etc. is why the dollar is higher today. Investors are likely trying to price all of this in before the news on Friday. Therefore, it could be beneficial to start looking for long setups on the USD.

Dollar Setups

USD/CAD

dollar

The USD finds strength above riskier assets and takes this pair up to the top of a trend line and a triple top. Investors eye Friday's NFP report while expectations are much lower than last month's actual. Price could break higher as the third test on highs suggests hard bullish momentum especially from today's heavy green candle. If price can close above this channel, the next major level of resistance lies around 1.32000.

AUD/USD

dollar

Aussie-dollar is in a steady downtrend which started about a month ago thanks to depleting risk appetites. Price has recently moved higher on the day which means it could be setting up for a test at resistance around 0.68308. The lower lows suggest that the trend will likely continue to the downside.

USD/CHF

dollar

USDCHF looks to be nearing resistance on the 4H after crossing to a lower low. The pair is trending in a falling channel with huge price swings in the meantime. However, it does look like price could complete the move above 1.00000 before hitting the top of the channel and reverting back to the downside. Support lies in the 61.8% fib level.

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