EUR/USD, USD/JPY: Price Action Setups Heading Into Nonfarm Payrolls (NFP)

EUR/USD and USD/JPY are showing key technical setups ahead of the US Nonfarm Payrolls (NFP) report, with implied volatility spiking across FX majors. While the US dollar remains in a broader downtrend, short-term bullish signals and sentiment extremes suggest a potential rebound. EUR/USD shows signs of a reversal near major resistance, while USD/JPY trades within a tight range likely to break on NFP. Traders are cautioned not to overreact to the weak ADP print, which historically offers little predictive value for NFP.

EUR/USD, USD/JPY: Price Action Setups Heading Into Nonfarm Payrolls (NFP)

Earlier today I outlined a bullish bias for the US dollar. While that remains my core view heading into next week, we still have nonfarm payrolls (NFP) to contend with — and that could either accelerate the bullish scenario or act as a speed bump by sending the dollar lower in the near term. Either way, I continue to suspect a bounce is due on the daily timeframe.

However, with NFP on the horizon, I remain open to movement in either direction on the day. Today’s key levels therefore ignores my core view of a higher US dollar on the daily timeframe as we get into next week.

View related analysis:

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

At the time of writing, this is the lowest weekly range for the Japanese yen in 10 weeks, with a high-to-low range of just 1.46%. But with implied volatility perking up ahead of NFP, it seems unlikely we won’t see some range expansion.

The 1-hour chart shows prices have more or less been oscillating between the April VPOC (volume point of control) at 142.7 and the weekly pivot point at 144.14. Prices are now drifting towards that upper resistance zone, which has a ‘sucker punch incoming’ feel about it. Prices tend to seek liquidity in the lead-up to events like NFP, only to sharply reverse. That’s why I suspect we’ll see USD/JPY move lower within range before eventually moving higher — assuming my higher timeframe bias plays out.

Bears could look to fade into the weekly pivot point or 144.4 highs and target the lower 1-day implied volatility band, just above 143.

EUR/USD Technical Analysis: Euro vs US Dollar

The shooting star reversal on the daily chart met resistance perfectly at the 2022 high. For reasons based on a potential inflection point, I suspect gains on EUR/USD could be limited and a bearish reversal is due.
The 1-hour chart shows prices spiked higher out of a bullish flag, which has a bit of a ‘last hurrah’ quality about it. But as we’ve seen prices drifting lower into NFP, I suspect EUR/USD will initially try to reclaim 1.15.

Further out, I’ll be seeking short setups on the daily timeframe, in line with my higher timeframe bearish view for EUR/USD.

Implied Volatility Rises Ahead of Nonfarm Payrolls (NFP)

As per usual, volatility has all but died in today’s Asian session, though the 1-day implied volatility (IV) level is elevated for all FX majors.

The Japanese yen stands out with a 1-day IV of 92 pips, which is 174% of its 20-day average
EUR/USD is close behind with a 1-day IV of 52 pips, or 171% of its 20-day average
USD/CHF’s IV sits at 151% of its 20-day SMA
GBP/USD has an IV of 142% of its 20-day SMA

ADP Miss Offers Little Guidance Ahead of Nonfarm Payrolls (NFP)

There’s some excitement that today’s NFP figure could come in weaker, following a notably soft ADP payrolls report on Wednesday. But not only is ADP notoriously unreliable at predicting the level or even the direction of NFP, it could be argued it's better at doing the opposite. In fact, given ADP came in so low that President Trump publicly urged Powell to cut rates, it might actually point to a hotter NFP print — if anything at all. For a deeper dive, check out my article linked below: “So how good is ADP at predicting NFP, anyway?”

Nonfarm payrolls change is expected to slow to 127k (177k expected)
Unemployment forecast to remain steady at 4.2%
Average earnings expected to tick higher to 0.3% m/m (0.2% prior)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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