Often, the day before a major announcement, the forex market will be met with wide ranges without direction bias as positions are taken ahead of the announcement. Today was no different. Tomorrow's non-farm payroll (employment data) could stimulate the equities and commodity markets into a boom or a bust. If the equity markets fall and the commodity markets fall, watch for a rush to the dollar and the yen. If the equity markets fall and commodities rise, watch for money to be moved to the commodity currencies such as the CAD, AUD and NZD. The price action around the employment data should be very active. This can lend to some great scalp trades but the newsletter format does not lend itself to quick scalp trades so we will not be participating in scalping tomorrow.

The EUR/USD ran up and fell back over 170 pips from the high only to climb back and settle in where we started the day near 1.4180. As we won't be scalping, we are going to look for confirmation of the head and shoulders pattern that has been established on the hourly charts. It took 4 days for the pattern to form which means it can take 4 days for the price to reach the target. The distance from the top of the head to the neck line is about 250 pips. We will watch for a 10% of the target break of the neck line and a target for the remaining 225 pips. This puts our entry at 1.4045 and a target of 1.3820. Notice how the neck line, 50% Fib and the longer term trend line are going to intersect early in the morning tomorrow at our entry point and how the target matches the 100% retracement level.

After an initial pull back, the GBP/USD continued it's descent. When a trend is broken, the correction will often run the same distance from the high to the break of the trend. This expectation puts the GBP/USD target in line with the strong resistance near 1.60. Though the drop is 111 pips, we are not going to chase this. We are going to watch for a test of 1.60 and then a break of the short term resistance line before trading this long again.(below)

The AUD/JPY looks a lot like the EUR/USD, lots of activity but no commitment to direction. Though similar in price action, the price pattern looks different. A symmetrical wedge has formed around the 38% Fib level. We love wedges and their unbiased nature but the current base of 150 pips is a little tight for a trade for us to set up the day before a big announcement. So, if you want to look for some scalps here, we think there could be some good, quick money. As stated above, it is a little quick for the newsletter format, so we will sit this dance out. (see below)