As measured by the DXY index, the US dollar pulled back modestly on Thursday. Still, in a session characterized by wild swings across asset classes and a sharp retreat in US bond yields, it remained near three-month highs, ahead of the US nonfarm payrolls report slated to be released Friday morning.
The February employment survey is forecast to show a downshift in hiring, with analysts anticipating a gain of 205,000 jobs after January’s stunning 517,000 surges. The report’s strength will be vital in determining the trajectory of monetary policy, so traders should keep an eye on the economic calendar.
The Fed has indicated that its terminal rate is likely to settle higher than initially anticipated and that the bank is prepared to accelerate the pace of tightening if warranted by the totality of incoming information. Because of this data-dependency bias, tomorrow’s NFP numbers will take on particular significance, helping set the trading tone in the FX space.
With volatility rising across US dollar forex pairs soon, these are the key technical levels to watch on EUR/USD and USD/CAD over the coming days.
EUR/USD TECHNICAL ANALYSIS
Powell’s hawkish commentary on Tuesday drove EUR/USD sharply lower, but the pair encountered support around the February low before staging a moderate rebound. If prices remain in recovery mode, initial resistance appears at 1.0690. On further strength, the focus shifts to the psychological 1.0800 handles.
On the other hand, if sellers return and upside pressure fades, the first technical floor to watch rests near 1.0530. Suppose this region is breached on the downside. In that case, bears could launch an assault on 1.0485/1.0460, an area where the January low converges with a medium-term rising trendline and the 38.2% Fibonacci retracement of the September 2022/February 2023 rally.
USD/CAD TECHNICAL ANALYSIS
USD/CAD has staged a strong rally this week, with the upside move reinforced by the Fed chair’s aggressive tightening message and the Bank of Canada’s dovish guidance. At the time of writing, the exchange rate hovers slightly below an important technical resistance near 1.3840, corresponding to September 2022’s high. If bulls manage to remove this barrier, USD/CAD could be on its way to retesting its 2022 peak.
On the flip side, if prices turn lower from current levels, the first significant support to consider lies around 1.3690. Below that floor, the next area of interest comes at 1.3117, followed by 1.3465.