Daily Technical Analysis by Kate Curtis from Trader's Way

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EURGBP Channel Resistance (Jan 05, 2018)

EURGBP is trending lower in a shallow descending channel visible on its 4-hour chart. Price is approaching the channel resistance at the .8950 minor psychological level and might be due for a bounce.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This means that the downtrend is more likely to resume than to reverse or that the top of the channel would probably keep gains in check. However, the gap between the moving averages is narrowing to suggest a potential upward crossover or pickup in bullish momentum.

Stochastic is pointing down from the overbought region, though, so sellers could still pick up their pace. In that case, EURGBP could slide back down to support at the .8700 handle.

Economic data from the UK turned out stronger than expected as the services PMI rose from 53.8 to 54.2, a notch higher than the 54.1 consensus. Euro zone medium-tier reports also printed a few higher than expected figures as well.

German retail sales, French preliminary CPI, and the region's flash CPI readings are up for release today. Another round of upbeat results could continue to stoke expectations of ECB rate hikes later this year, following their taper plans this month.

There are no major reports due from the UK for the rest of the day, so pound price action could take its cue from other headlines, such as those related to Brexit.

By Kate Curtis from Trader's Way

 

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USDJPY Triangle Resistance (Jan 09, 2018)

USDJPY has formed lower highs and found support at the 112.00 major psychological level, creating a descending triangle pattern on its 4-hour time frame. Price bounced off the bottom to make another test of resistance, which appears to be keeping gains in check for now.

The 100 SMA is above the longer-term 200 SMA ,though, which means that the path of least resistance is to the upside. This suggests that a break higher could be possible, sending price up by around 150 pips or the same height as the chart formation.

Stochastic is on its way down, signaling that sellers could regain the upper hand. If so, USDJPY could still make its way back down to the triangle support and keep trading sideways.

The dollar caught a bid against its peers when the consumer credit report posted a stronger than expected result. Credit card spending leading up to the Thanksgiving holidays buoyed debt up from $20.5 billion to $28 billion in November while auto and student loans also ticked higher.

The S&P and Nasdaq continued their push for another round of record highs but the Dow closed in the red. FOMC members Bostic and Williams shared their views on the economy and warned of potentially weaker inflation weighing on rate hike prospects.

Only medium-tier reports such as the NFIB Small Business index and JOLTS job openings data are due from the US today. Japan just printed its average cash earnings report and showed a stronger than expected 0.9% gain versus the 0.6% consensus. Japanese consumer confidence data is due next and a gain from 44.9 to 45.1 is eyed.

By Kate Curtis from Trader's Way

 

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Another USDJPY Triangle Bounce (Jan 10, 2018)

USDJPY is still trading inside its descending triangle pattern and has just bounced off the resistance previously highlighted. Price is now making its way back to support at the 112.00 major psychological level for another test.

The 100 SMA is above the longer-term 200 SMA on the 4-hour time frame, so the path of least resistance is to the upside. This means that a bounce is more likely to happen than a breakdown. Still, a breach of support could lead to a 150-pip drop or the same height as the chart formation.

Stochastic is heading south to show that sellers are on top of their game, but the oscillator is dipping into oversold territory to indicate bearish exhaustion. Turning higher could draw buyers back in and lead to a move up to the triangle resistance near the 113.00 mark.

The BOJ recently surprised the markets by tapering its bond purchases, leading many to believe that the central bank is shifting to a less dovish stance. Weaker than expected data from the US also weighed on the dollar later in the day, but the US currency is able to draw some support from rising equities and bond yields.

Data from Japan came in mixed, with average cash earnings up 0.9% versus the estimated 0.6% uptick and the consumer confidence figure slipping from 44.9 to 44.7 instead of improving to 45.1. US JOLTS job openings and NFIB Small Business Index both disappointed.

Up ahead, US import prices and final wholesale inventories data are due. Traders are likely to keep close tabs on bond yields and stock market performance to gauge if dollar strength can be sustained.

By Kate Curtis from Trader's Way

 

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EURAUD Countertrend Play (Jan 11, 2018)

EURAUD has been trading in a descending channel pattern on its 4-hour time frame and has recently bounced off the resistance. Price is also breaching the middle of the channel to show enough downside momentum to reach the bottom.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, which means that the selloff could carry on. Stochastic is turning back down as well, so price could follow suit.

However, the channel support might keep near-term losses in check and trigger another bounce to the resistance. A long opportunity arises but could be risky since it would run counter to the trend.

Australia just reported stronger than expected retail sales growth of 1.2% versus the 0.4% forecast and the earlier 0.5% gain. Earlier in the week, Australia's building approvals also impressed with a 11.7% jump versus the estimated 0.9% drop.

Data from China last week has also been positive for the Aussie, as gains in the manufacturing and non-manufacturing PMIs spurred expectations of stronger commodities demand. Chinese trade balance is due on Friday and a wider surplus is eyed.

Meanwhile, the euro has tumbled on weaker European equities performance as risk aversion took hold. Interestingly enough, this has been positive for the Aussie as it took part in gold rallies.

By Kate Curtis from Trader's Way

 

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USDCAD Support Turned Resistance (Jan 12, 2018)

USDCAD recently broke through the floor around the 1.2650 minor psychological mark then fell to a low of 1.2362. Price is showing signs of a pullback from its drop and sellers may be waiting at the nearby resistance levels.

Applying the Fib tool on its latest swing high and low shows that the 50% to 61.8% levels are close to the broken support, which might now hold as resistance. The 100 SMA is also around this area and is below the longer-term 200 SMA to signal that the path of least resistance is to the downside.

Stochastic is already turning lower to indicate a pickup in selling pressure. This suggests that the current barrier around the 38.2% Fib might be enough to keep gains in check and push the pair back to the swing low or lower.

US PPI turned out weaker than expected and weighed heavily on the dollar as this spurred downbeat expectations for CPI. Recall that policymakers have been stressing the weaker inflation outlook as a potential reason to slow their pace of tightening.

US retail sales are also due later today and the headline figure could show a 0.5% uptick. The core version of the report is expected to show a 0.3% gain but there could be a chance for an upside surprise as holiday sales have been strong.

Meanwhile, the Canadian dollar drew some support from rising crude oil prices on the heels of lower US stockpiles and production. Upbeat data from China has also supported demand expectations, which is also positive for the commodity and risk-taking.

By Kate Curtis from Trader's Way

 

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USDJPY Broken Support Retest (Jan 16, 2018)

USDJPY recently fell through support at the 112.00 major psychological level and looks ready for a pullback to this area of interest. Applying the Fib tool on the latest swing high and low shows that the 61.8% level is close to this broken support, which might now hold as resistance.

Stochastic is pulling up from the oversold region to indicate a return in buying pressure. However, a shallow pullback to the 38.2% Fib might be enough to let the selloff resume.

The 100 SMA is crossing below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the downtrend is more likely to continue than to reverse.

The dollar has been on very weak footing despite a few upside data surprises. Banks were closed on a holiday yesterday, so the usual stock market rallies weren't there to buoy the currency higher.

Only the Empire State manufacturing index is due today and a gain from 18.0 to 18.5 is expected. Stronger than expected results, combined with positive earnings data, could lead to a pickup for the dollar.

Still, it's worth noting that the BOJ recently made some adjustments to its bond purchases, leading traders to speculate that tapering is in order. For now, doubts about the Fed's pace of tightening remain owing to a weaker inflation outlook

By Kate Curtis from Trader's Way

 

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NZDUSD Ascending Trend Channel (Jan 17, 2018)

NZDUSD is trending higher on an ascending channel visible on its 1-hour and 4-hour chart. Price is currently testing support and might be due for a move back to the resistance soon.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This signals that the uptrend is more likely to resume than to reverse. Also, the short-term moving average lines up with the channel support to add to its strength as a floor.

Stochastic seems to have pulled up from the oversold region to indicate that buyers would take over. However, the oscillator has yet to make headway north to show a pickup in buying pressure.

The Kiwi has been able to take advantage of dollar weakness for the most part of the week as risk-taking is present and demand from China could be sustained. However, economic data from New Zealand came in weaker than expected today as ANZ reported a 2.2% drop in commodity prices after the earlier 0.9% dip.

In the US, the Empire State manufacturing index slipped from 18.0 to 17.7 instead of rising to the consensus at 18.5. Today has the industrial production and capacity utilization rates due. FOMC member Mester also has a speech lined up after the release of the Fed Beige Book.

By Kate Curtis from Trader's Way

 

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GBPAUD Trend Line Retest (Jan 18, 2018)

GBPAUD recently fell through the rising trend line on its 4-hour time frame, indicating that a reversal is in order. Price is showing a pullback now, and applying the Fib tool shows that the 61.8% retracement level lines up with the broken support zone.

The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. Stochastic is still pointing up to signal that buyers are in control but reaching overbought levels could draw more sellers in.

Economic data from Australia turned out stronger than expected, as the employment change figure printed a 34.7K gain versus the estimated 13.2K increase. The previous reading enjoyed an upgrade from 61.6K to 63.6K.

However, the unemployment rate increased from 5.4% to 5.5% instead of holding steady. As it turned out, the participation rate rose a couple of notches from 65.5% to 65.7%.

Meanwhile, the pound is still weighed down by Brexit concerns and to some extent, the Carillion collapse. There are no major reports due from the UK today. China has a number of top-tier reports due, though, and this could influence Aussie action still.

GDP, retail sales, industrial production, and fixed asset investment are expected to tick lower and might reflect weaker global demand for commodities. Stronger than expected results, on the other hand, could be bullish for the Aussie.

By Kate Curtis from Trader's Way

 

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GBPAUD Area of Interest (Jan 19, 2018)

GBPAUD has been trending inside a long-term ascending channel visible on its daily time frame and is testing support at the mid-channel area of interest. This lines up with the 50% Fibonacci retracement level which already seems to be holding as support.

The 100 SMA is still above the longer-term 200 SMA to signal that the path of least resistance is to the upside or that the rally is likely to resume. These moving averages are also around the 50% Fib level.

Stochastic is on the move up to show that buyers are in control, but the oscillator is nearing overbought conditions. Turning lower could draw sellers back in and lead to a drop to the channel support closer to the 61.8% Fib at 1.6400.

Economic data from Australia turned out stronger than expected this week as the jobs report showed a 34.7K gain versus the estimated 13.2K increase for December while the previous month's figure enjoyed an upgrade.

Data from China came in mostly in line with expectations. Fixed asset investment was unchanged at 7.2% instead of falling to 7.1% while industrial production ticked slightly higher.

The focus could shift back to the pound today as the UK will release its retail sales report. A drop of 0.8% is eyed, erasing part of the 1.1% gain in the earlier period, but the pickup in holiday spending could still lead to an upside surprise.

By Kate Curtis from Trader's Way

 

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EURUSD Short-Term Channel (Jan 22, 2018)

EURUSD continues to advance and positive updates from Germany's coalition talks over the weekend could sustain the climb. However, price is hitting a roadblock at its short-term channel resistance and might need a correction before heading further north.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the channel support is in line with the 61.8% level at 1.2100. The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. Also, the 100 SMA lines up with the channel support to add to its strength as a floor.

Stochastic is pointing down to show that sellers are returning even without seeing overbought conditions. Reaching the oversold level and turning back up could draw more buyers to the game and possibly even lead to a break past the channel resistance.

Flash PMI readings from Germany and France are lined up from the euro zone this week, and these usually provide strong clues on how the economy might fare in the next few months. However, traders are starting to get concerned about the shared currency's appreciation as some ECB officials pointed out that this could dampen inflation. The ECB decision is also scheduled this week.

Apart from that, German coalition updates continue to push the shared currency around as the prospect of political uncertainty has been bearish. On the other hand, a definitive agreement between Merkel's party and SPD could lead to more gains.

As for the dollar, government shutdown concerns have been mostly bearish for the currency over the past week and could continue to weigh on US assets while it lasts. Only the advanced GDP report is due from the US this week, but the attention could be fixed on Washington.

By Kate Curtis from Trader's Way