USD/CZK could take out a key level tomorrow on the realize of NFP and if it does we would expect significant upside.

The USD has had a broad-based sell-off on the view the Fed could cut rates by up to 50 bps this month and 100 bps this year – tomorrow will be a big day for the USD as we have NFP. In terms of the recent sell off it has been the emerging market and high BETA currencies such as the CZK which rallied hardest. We have seen the USD move up from support and if it breaks out tomorrow to the upside we see significant upside in the USD.

NFP is expected to show an increase of 161,000 and a tick down in the unemployment rate to 4.2%. We dont expect a big miss and agree with this view.

“A relatively weak labor market report on Friday could lead to notable USD weakness again. However, our economists expect the unemployment rate to remain unchanged at 4.3%. Employment growth should be slightly higher again at 150 thousand. Today and tomorrow, the USD could see a bit of a back and forth due to the job openings and the ADP index, but without any particular direction, since Friday's report will be decisive. If it continues to show a solid situation on the labor market, major shifts in interest rate expectations for the near future and thus USD weakness are inappropriate.” (COMMERZBANK) We are looking to buy an upside breakout in USD/PLN.

In a previous article on the SEK written earlier today, we looked at using a key moving average the 20 day with which to time entry...

Using the 20-Day Moving Average in Strong Trends

In terms of strong trends, we view the 20-day moving average as a key level that can be used to time entry or in terms of setting stops – In strong downtrends, the 20-day MA will often provide resistance to rallies, and in uptrends will provide support. Below we are looking for a break of the 20-day MA to time a long entry.

Technical Analysis

The key levels of support and resistance to look out for are below.