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The U.S. dollar index settled at 91.74 on Friday, after price action was seen consolidating above the 91.50 handle over the past four daily sessions. On Friday, the December nonfarm payrolls data was released. Although not a blockbuster report, the payrolls showed that wages edged higher to 2.5% on the year, the unemployment rate held steady for a third consecutive month at 4.1%. The pace of jobs created in December was however smaller than expected.

The Greenback, which has been in a strong decline over the past few months managed to stabilize. However, a lot remains up in the air regarding how the USD reacts from here on.

Economic data today is relatively quiet, meaning a slow start to the week. Data from the Eurozone will see the release of the German factory orders which are expected to rise at a slower pace. Bank of Canada will be releasing its business outlook survey. The report comes a week ahead of the BoC meeting next week. From the U.S., FOMC members Bostic and Williams will be speaking later in the day.

The euro has slipped back below the 1.2030 level against the U.S dollar, after another failed attempt at the 2017 price-high at 1.2093 on Friday. The EURUSD currently trades around the 1.2020 level, as three technical failures below the 2017 price-high weigh heavily on the pair. Traders also remain cautious on Monday, as German politics comes back into the spotlight, with Angela Merkel trying to salvage a coalition deal between the SPD and CDU parties. During the upcoming European trading session, we see the release of the Eurozones Sentix Investor’s Survey and EU November Retail Sales data.

The EURUSD pair is likely to see intraday softness below the 1.2030 level, sellers may target the 1.1989 and 1.1958 support levels.

Should EURUSD price-action move above the 1.2030 zone, intraday resistance is found at the 1.2070 and 1.2093 levels.

The U.S dollar continues to trade well above the 113 handle against the Japanese yen, as rising Asian stock markets boost risk-on trading sentiment on Monday. The USDJPY pair hit 113.46 on Friday, following the release of the December Non-farm payrolls job report. Going forward, buyers will now need to break the Friday high and close price-action above the 113.60 level, and then look towards challenging the 114.40 region. With a lack of macroeconomic data from the U.S and Japan on Monday, the U.S dollar index will likely be the key driver for the USDJPY pair.

Further upside is expected while price-action trades above the key 113.10 level, bullish targets for the USDJPY pair remain 113.60 and 114.40.

Should the USDJPY pair start to trade below the 113.10 technical level, further selling towards 112.70 and 112.30 should be expected.

A batch of European sentiment indicators will headline an otherwise quiet day of trade on Monday. The first full week of the year is expected to see a deluge of economic data, culminating in Chinese and US inflation figures.

Action begins at 07:00 GMT with a report on German factory orders. November bookings are expected to rise 0.8% month-on-month, following a gain of 0.5% the previous month.

Switzerland's Federal Statistical Office will release official inflation figures at 08;15 GMT. The Consumer Price Index (CPI) is expected to come in at 0.8% year-over-year in December, unchanged from the previous month.

European sentiment data will be released at 10:00 GMT, including the Sentix investor confidence index.

Separately, the European Commission's statistical agency will report on services sentiment, consumer confidence, industrial confidence, business climate and economic sentiment. All figures will be based on the month of December.

Data on Eurozone retail sales will also be released Monday.

In North America, the Bank of Canada will release its first Business Outlook Survey of 2018. The report provides an analysis of the nation's economy through the eyes of business executives.

The only US report of note is consumer credit change for November. The Federal Reserve will issue the data at 20:00 GMT.

The US dollar rose slightly against a basket of currencies Monday. The DXY basket was last seen trading at 92.00. The greenback plunged toward four-month lows in the first week of 2018. Analysts say it could be a tough year for the US currency even as the economy shows signs of strengthening. The greenback is coming off its worst year since 2003.

EUR/USD

Europe's common currency traded comfortably above 1.2000 US on Monday, as the EUR/USD consolidated near four-month highs. The regional currency is benefitting from a stronger economic recovery and the gradual removal of policy accommodation by the European Central Bank (ECB). The EUR/USD was last seen trading at 1.2033 for a gain of 0.1%. Despite the upsurge, the pair faces a major resistance test around 1.2100.

GBP/USD

Cable settled well off multi-month highs on Friday, but remains in a firm uptrend as traders continue disavowing the dollar. The GBP/USD exchange rate was last seen trading around 1.3570, where it was little changed compared to the previous close. The pair is seeing strong support at the psychological 1.3500 level. On the opposite side of the ledger, resistance is likely found at 1.3560.

USD/CAD

The North American cross resumed its descent last week, with the USD/CAD falling to its lowest level since September. The pair was last seen trading just below 1.2400. Immediate support is located at 1.2350. If the greenback recovers, the 1.2570 region is likely the next resistance region.

Canadian Jobs reports came in strongly for the second month in a row, far exceeding expectations and leading to strong moves in CAD crosses. Unemployment is at a low of 5.7% and focus is shifting today towards the Bank of Canada Business Outlook Survey at 15:30 GMT. Traders will look for any indicators that could influence a change in monetary policy with regards to rate hikes, in view of the strong labour market, during the next BOC monetary policy meeting on the 17th of January.

Eurozone Consumer Prices Index – Core (YoY) (Dec) was out at 1.1% v an expected 1.0%, from a previous 0.9% that was revised up to 1.1%. Consumer Price Index (YoY) (Dec) was 1.4%, as expected, from a prior 1.5%. EURUSD bottomed at 1.20404 and rallied to 1.20550 after the data.

US Non-Farm Payrolls (Dec) was a miss to the downside when they were released. 148K new jobs were created from an expected 190K, compared to 228K previous that was revised up to 252K. The Unemployment Rate (Dec) was as expected at 4.1%, unchanged from the prior reading. EURUSD rose from 1.20445 to 1.20825 but then sold back down to 1.20203 after the data release.

Canadian Unemployment Rate (Dec) was 5.7% v an expected 6.0%, from a prior of 5.9%. Net Change in Employment (Dec) was 78.6K v an expected 1.0K, with a previous read of 79.5K. USDCAD started to selloff before the release from 1.25118. This move lower accelerated once the data was out and price bottomed at 1.23542.

US ISM Non-Manufacturing PMI (Dec) was in at 55.9 v an expected 57.6, from a prior of 57.4. Factory Orders (MoM) (Dec) were 1.3% v an expected 1.1%, with a previous reading of -0.1%, which was revised up to 0.4%. USDJPY fell from 113.253 to 113.080 upon the release.

Baker Hughes US Oil Rig Counts were released with a headline number of 742 from last week’s 747. WTI Oil extended its gains from $61.45 to $61.57 after the event.

EURUSD is down -0.09% overnight, trading around 1.20162.

USDJPY is up 0.18% in early session trading at around 113.216.

GBPUSD is down -0.09% to trade around 1.35507.

USDCAD is down -0.06%, trading around 1.24043.

AUDUSD is down -0.18% this morning, trading around 0.78446.

Gold is unchanged in early morning trading at around $1,318.40.

WTI is down -0.08%, trading around $61.51.

Major data releases for today:

At 08.00 GMT, Swiss Consumer Prices Index (YoY) (Dec) is expected unchanged at 0.8%. Consumer Price Index (MoM) (Dec) will also be released, with a prior value of 1.5%. Swiss Franc pairs may see price movement if the data released varies from the consensus.

At 10:00 GMT, Eurozone Business Climate (Dec) will be released, the previous was 1.49. Also at this time, Consumer Confidence (Dec) is expected to be unchanged at 0.5. Industrial Confidence (Dec) was 8.2 previously. Services Sentiment (Dec) was 16.3 previously. Economic Sentiment Indicator (Dec) is expected to be 115.0 v 114.6 prior. EUR crosses could experience volatility around this data release.

At 15:30 GMT, Bank of Canada Business Outlook Survey is expected to be released. CAD crosses could make sudden moves to test support and resistance after the data points are released.

At 20:00 GMT, US Consumer Credit Change (Nov) is expected at $18.75B from a prior of $20.52B. This data shows the amount of money that individuals borrowed and can move USD pairs upon its release.

Major data releases for this week:

Wednesday, 09:30 GMT, Manufacturing Production (MoM) (Nov) is expected at 0.3% with a prior of 0.1%.

Friday, 13:30 GMT, US Retail Sales (MoM) (Dec) is expected at 0.4% from a previous read of 0.8%. US Consumer Price Index (YoY) (Dec) is expected to come in unchanged at 2.2%.

Daily Pivots: (S1) 152.80; (P) 153.21; (R1) 153.74; More...

Intraday bias in GBP/JPY remains on the upside. Current rally would target 61.8% projection of 139.29 to 152.82 from 146.96 at 155.32 first. Break will target 100% projection at 160.49 next. On the downside, break of 151.74 is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, it now looks like GBP/JPY has finally taken out 38.2% retracement of 195.86 to 122.36 at 150.43. Medium term rise from 122.36 should be targeting 61.8% retracement at 167.78. This will now be the favored case as long as 146.96 support remains intact.

EURUSD remains steady in the near term after stalling a rally just under the key 1.2100 level. The overall outlook remains bullish as the 50-day and 200-day moving averages are bullishly aligned.

Upside momentum has started to fade as prices struggle to rise past the 1.2091 peak that was hit in September 2017.

The resistance level at 1.2100 will likely be a challenge to break but while short-term price action looks a little soft for now. However, both the RSI and the Stochastics are pointing to the downside, suggesting that weakness in prices cannot be ruled out in the near-term. Yet, underlying trend remains bullish.

EURUSD is expected to remain well supported on dips and the key level at 1.2000 is now seen as strong support, which has held for several days now. Consequently, a consolidation phase has been forming.

The risk of a move lower is limited but if EURUSD fails to regain upside momentum to break 1.2100 soon then the risk of a drop would increase quickly.

Daily Pivots: (S1) 135.76; (P) 136.20; (R1) 136.42; More....

Intraday bias in EUR/JPY remains neutral for consolidation below 136.36 temporary top. Downside of retreat should be contained by 134.39 resistance turned support to bring another ally. Above 136.63 will extend the larger up trend towards 61.8% projection of 114.84 to 134.39 from 132.04 at 144.12.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). It should now be targeting 141.04/149.76 resistance zone. On the downside, break of 132.04 support is needed to be the first sign of medium term reversal. Otherwise, outlook will stay bullish in case of pull back.

Key Highlights

The Euro traded as high as 1.2088 recently against the US Dollar before starting a correction.

There is a major bullish trend line forming with support at 1.2000 on the 4-hours chart of EUR/USD.

Downsides in the Euro remain supported around the 1.2000 and 1.1950 support levels.

The US NFP in December 2017 posted 148K, less than the market forecast of 190K.

EURUSD Technical Analysis

The Euro made a nice upside move this past week and traded above 1.2050. EUR/USD formed a high at 1.2088 and is currently correcting lower.

It tested the 23.6% Fib retracement level of the last wave from the 1.1817 low to 1.2088 high. On the downside, there is a major bullish trend line forming with support at 1.2000 on the 4-hours chart.

The trend line support is likely to act as a strong buy zone in the short term around 1.2000. Should there be a break below 1.2000, the pair could test the 50% Fib retracement level of the last wave from the 1.1817 low to 1.2088 high near 1.1950.

Therefore, it seems like there are a few crucial supports on the downside such as 1.2000 and 1.1950. On the upside, the recent high near 1.2080 is a resistance zone. A clear break above 1.2080 could push the pair further above 1.2100.

On the positive side, both 100 and 200 simple moving averages (4-hours) are at 1.1860-80 with an upside angle. Thus, the chances of more gains in EUR/USD are high once the current correction completes either near 1.2000 or 1.1950.

US NFP

This past week, the US saw the non-farm payrolls release for December 2017. The market was looking for an increase of 190K in jobs compared with the last 228K. However, the actual was on the lower side, as the NFP posted 148K.

On the other hand, the last reading was revised up from 228K to 252K. The unemployment rate remained at 4.1% in Dec 2017. Overall, the result was disappointing, which is why short-term downsides in EUR/USD will most likely find support.

Daily Pivots: (S1) 0.8849; (P) 0.8880; (R1) 0.8895; More...

Intraday bias in EUR/GBP stays neutral for the moment. On the downside, break of 0.8847 minor support will argue that the rebound form 0.8688 has completed. In such case, intraday bias will be turned back to the downside for 0.8688 support. Break will resume whole fall from 0.9305. On the upside, break of 0.8981 resistance is needed to confirm upside momentum. And in that case, near term outlook will be turned bullish for retesting 0.9305.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.