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Trading Into FOMC and NFP

January 29, 2024
Frank Cabibi

This week is a big week for the dollar. On top of Powell's discussion of interest rates and the heavily debated March rate cut, NFP is to also report this Friday. Here are some setups to look at going into FOMC and NFP this week.

EdgeFinder Analysis

USDCAD is now a +7 on the EdgeFinder. Some factors that could change the score this week would be in the trend reading, CAD GDP (economy score), USD PMI (economy score), and USD NFP (labor score). In short, we could see a drastic change in USDCAD's score this week.

The likelihood of a stronger dollar this week is high as many metrics point towards UC bullishness already. Although it can change, dollar news will have to miss on all fronts to make the score less bullish.

USOil came up to test the $78s level and rejected off the highs this morning. Price is now red on the day but still has bullish potential on the fundamental side. The commodity reacts optimistically to good economic data and higher inflation.

We've seen higher CPI, and higher NFP in the last reports. If this trend continues, oil will likely see more strength in the coming months. Oil was the highest net long position this week on the COT scanner. It looks as if the price will fluctuate between 76.15 and 78.90 roughly.

NZDUSD is now a strong bearish reading on the EdgeFinder at -9. February might be even more bearish for the pair as seasonality is going to change to the negatives. The pair is down almost 3.5% since the start of the year.

NU will need to see higher NFP, PMI, and sentiment to lean towards no interest rate cut in March. A lower unemployment rate and higher NFP combined would likely end the dollar's week on a strong note. The primary focus may be around FOMC however.

Retail Spotlight

Retail is dollar bearish now with the exception of USDCHF. Gold is mixed along with EU, USDCAD, GBPUSD. The contrarian signal suggests that the dollar is actually bullish this week.

Smart Money Spotlight

Smart money got rid of silver, platinum, CHF, NAS, EUR and AUD. Meanwhile, bond prices, and oil were among the top buys this week.

Fundamental Spotlight

Gold's labor market score is neutral for now. All three of these metrics will be reported this Thursday and Friday. Higher NFP will be bearish for gold, meanwhile, higher jobless claims and UE rate will be bullish.

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