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Dollar Pairs After Jobless Claims

September 7, 2023
Frank Cabibi

Unemployment claims came out this morning lower than expected. The initial reaction caused a strong dollar with falling stocks and gold prices. Here's a look at some dollar pairs from the EdgeFinder and their setups:

EdgeFinder Analysis

EU is still at a strong bearish reading on the EdgeFinder as price nears a support level. The euro dropped yesterday after PMI numbers came in lower than expected, suggesting a slowdown in the Euro-area economy. If price comes down to test the 1.066s, it could find support. There is also resistance around the falling trend line on the 1D timeframe.

Unemployment claims came out lower than expected, suggesting continued dollar strength. The combination of higher NFP last Friday and lower claims today is starting to clear up the fog around risk on or off sentiment.

Gold broke and closed under a support level on the 1D timeframe. After today's job numbers, gold might continue to push lower towards the lows in the $1880s. The trend is still bearish overall, and it will likely remain so unless the trend line can get broken.

Price is at a decision point right now, and if a candle breaks lower, it could come down to the lows again. Smart money is buying gold this week, however. Net positions on the non-commercial side are still pointing to the long side, so institutions could be buying the dip on this metal.

GBPUSD is now a -8 on the EdgeFinder, the strongest bearish reading today. Recently, the UK city of Birmingham declared bankruptcy as the rise in interest rates is causing more pain to the British economy. The BoE's main goal is still focused on inflation, and until then, the economy may have to suffer in the meantime.

Confusingly enough, smart money are both short the USD and GBP this week. Retail likes the pound more than the dollar right now, and this is likely due to the pair's performance over the past few months. September also happens to be the most bearish month on a 10 year average, and the trend reading points to lower levels as well.

Retail Spotlight

It's clear that retail is short the dollar and heavily long risk-on pairs. Gold is still looking mixed while oil is mostly short. One noticeable change is that USDCHF is no longer the most longed pair on the EF anymore, although price is now starting to move higher.

Smart Money Spotlight

Taking a look at positional sentiment on the Smart Money Tracker, GBPUSD is losing its bullish bias. Regardless of the two currencies being sold this week, it appears they're selling the pound at a quicker rate than the dollar.

Fundamental Spotlight

With UK and US's unemployment rising, it's still not enough to sway investors' opinions on their central banks. Expectations of higher interest rates over time are still very much at the forefront of their minds. Even if both banks decide not to hike, the rates will likely remain this high for some time.

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