Daily Technical Analysis by Kate Curtis from Trader's Way

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USDJPY Double Bottom (July03, 2017)

USDJPY looks ready for more gains as the pair has formed a double bottom on its daily time frame. Price failed in its last two attempts to break past the 108.00 support zone and is on its way to test the neckline at 114.00-114.50. A break past this resistance could send the pair up by around 600 pips or the same height as the chart formation.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, but the gap is narrowing to signal that a new crossover could take place. If this materializes, price could still gain bearish momentum and test support again. Also, stochastic is indicating overbought conditions and might be ready to head back down, reflecting a return in selling pressure.

Earlier today, economic data from Japan came in mixed, following last Friday's set of weaker than expected inflation readings. This underscores the BOJ's stance of keeping monetary stimulus in place for the time being, unlike most major central banks which seem to have shifted to a less dovish bias lately.

Meanwhile, medium-tier data from the US turned out mostly stronger than expected last week, but the real test of dollar strength could come on Friday's NFP release. Another downbeat jobs figure could undermine the Fed's rate hike timeline but an upbeat result could reinforce rate hike expectations for September.

By Kate Curtis from Trader's Way

 

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EURUSD Retracement Setup (July 04, 2017)

EURUSD recently surged past the resistance at the 1.1250-1.1300 psychological levels then climbed close to the 1.1450 minor psychological resistance. Price retreated from here, indicating that a correction from the rally is happening.

Applying the Fib tool on the latest swing low and high on the 1-hour time frame shows that the 61.8% retracement level coincides with the broken resistance, which might now hold as support. The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside while the 200 SMA lines up with the 50% Fib, which might also keep losses in check.

Stochastic has pulled up from the oversold area to indicate a return in buying pressure. This could reflect a shallow correction opportunity so the 23.6% Fib might already be enough to hold as support and push the pair up to the swing high and beyond.

Euro zone data turned out mixed on Monday as some final manufacturing PMI readings from its top economies fell short of expectations. Meanwhile, the US printed an impressive ISM manufacturing PMI reading which reflected stronger hiring for the month, hinting that the NFP release might beat estimates as well.

Only the Spanish unemployment change report is due from the euro zone today and analysts are expecting to see a 120.3K drop in joblessness. US banks are closed for the Fourth of July holiday.

By Kate Curtis from Trader's Way

 

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USDJPY Short-Term Uptrend (July 05, 2017)

USDJPY has been trending higher recently, moving inside an ascending channel on its 1-hour time frame. Price just bounced off the resistance and could be due for a test of support near the 112.50 minor psychological level from here.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA is also close to the bottom of the channel, adding to its strength as a floor. Stochastic is heading down to signal that sellers may be in control but the oscillator is nearing oversold levels.

US banks have been closed for the Fourth of July holiday so liquidity has been lower than usual. Tankan data from Japan has shown some improvements but it looks like the Asian currency is reeling from the recent North Korean nuclear missile test launch.

Looking ahead, US factory orders data is up for release today and analysts are expecting to see a 0.4% drop. The FOMC minutes are also due and this should provide more clues on when the Fed might hike rates or start unwinding its balance sheet.

Only the average cash earnings and leading indicators data are due from Japan for the rest of the week, but the yen could be more sensitive to risk flows and global bond prices. With that, the US NFP report could also prove to be a big catalyst before the week comes to a close.

By Kate Curtis from Trader's Way

 

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AUDUSD Channel Pullback (July 06, 2017)

AUDUSD is trending higher on its short-term time frames, moving inside an ascending channel on its 1-hour chart. Price is currently testing support and might be due for a bounce back to resistance at the .7750 to .7800 levels. Stochastic is indicating oversold conditions and is pulling up to signal a return in bullish momentum.

Applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with the channel support at the .7600 major psychological level and an area of interest. The 100 SMA also coincides with this level and is above the longer-term 200 SMA to signal that the path of least resistance is to the upside.

The RBA was less hawkish than expected in their monetary policy statement this week, barely highlighting the improvements in the economy and emphasizing that there are still a few roadblocks in place. Meanwhile, the FOMC minutes revealed that policymakers are still divided on their tightening and unwinding time line.

Australia is set to print its trade balance next and a larger surplus of 1.00 billion AUD from the earlier 0.56 billion AUD figure is expected. A stronger than expected result could spur a rally for the Aussie, especially since China has printed mostly stronger PMI readings lately to signal a recovery in demand.

The US NFP release on Friday could also be an event risk for this pair as traders are hoping to see an upside surprise. PMI readings and other leading indicators are hinting at strong employment prospects, which might be enough to shore up rate hike expectations for September or December.

By Kate Curtis from Trader's Way

 

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GBPJPY Range Resistance (July 07, 2017)

GBPJPY has been moving back and forth between support around the 138.50 and the range resistance at 147.50-148.00 visible on the daily time frame. Price is currently testing the resistance and could be due for a drop back to support. Stochastic is indicating overbought conditions, which means that sellers could take over while buyers take a break.

However, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that the resistance is more likely to break than to hold, possibly sending the pair up by 900 pips or the same height as the rectangle pattern.

The yen has been giving up ground against its rivals recently on the BOJ's dovish monetary policy stance and the rise in US bond yields. Japan's average cash earnings figure and the leading indicators are lined up for release and strong data could still shore up demand for the Japanese currency.

Another event risk for the yen is the upcoming US jobs report which might influence bond yields. Strong results could draw traders back to US assets and out of the yen while weak figures could renew yen gains. As for the pound, UK manufacturing and industrial production figures are due, with analysts expecting to see stronger gains this time.

By Kate Curtis from Trader's Way

 

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GBPAUD Channel Support (July 10, 2017)

GBPAUD has been trading inside an ascending channel pattern visible on its 4-hour time frame and is currently testing support. A bounce could take it back up to the resistance at 1.7150 to 1.7200 while a breakdown could mark the start of a reversal.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 200 SMA lines up with the bottom of the channel, adding to its strength as support. At the same time, stochastic is heading up from the oversold area to signal a return in bullish pressure.

Economic data from the UK turned out mostly weaker than expected last week, from its PMI readings to manufacturing production data, to signal that the economy might be on shaky footing leading up to Brexit. UK jobs data is up for release today and a higher number of claimants at 10.4K versus the earlier 7.3K is expected, but traders are likely to pay closer attention to the average earnings index to see any signs of wage growth.

Meanwhile, the Aussie was also weighed down by a less upbeat RBA decision. Only medium-tier reports are due from the Australian economy this week so weak readings could underscore the central bank's not so hawkish view. NAB business confidence, Australian home loans, and Westpac consumer sentiment data are lined up.

By Kate Curtis from Trader's Way

 

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EURAUD Area of Interest (July 11, 2017)

EURAUD is trending higher recently and has been moving inside an ascending channel on its 1-hour time frame. Price just bounced off the resistance and could be due for a test of support at the 1.4900 major psychological level.

Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level coincides with the channel support. If this keeps losses at bay, price could recover to the channel resistance at 1.5100 or higher. In addition, the channel support lines up with a former resistance level, adding to its strength as a floor.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This short-term moving average is currently holding as dynamic support but a larger pullback to the 200 SMA closer to the 50% Fib might be in order. Stochastic is already indicating oversold conditions but has yet to pull up to reflect a return in bullish momentum.

Economic data from the euro zone came in line with expectations on Monday, with the German trade balance widening from a surplus of 19.7 billion EUR to 20.3 billion EUR and the Sentix investor confidence index dipping from 28.4 to 28.3. There were no reports from Australia but China did print a weaker than expected CPI reading of 1.5% versus the consensus of a climb to 1.6%.

Up ahead, Australia will report its NAB business confidence index and home loans figure. The housing market in Australia has been under the spotlight after Moody's downgraded four of its top banks due to exposure to risky mortgages. Only the Italian industrial production is due from the euro zone next, although traders are likely to keep speculations of ECB tapering in play unless economic reports disappoint.

By Kate Curtis from Trader's Way

 

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NZDUSD Short-Term Retracement (July 12, 2017)

NZDUSD recently broke below support at the .7250 minor psychological level and dipped close to the .7200 handle before showing signs of a correction. Applying the Fib tool on the latest swing high and low on the 1-hour time frame shows that the 50% retracement level coincides with the broken support.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. The gap between the moving averages is getting wider to reflect stronger selling pressure.

Stochastic is still pointing up to signal that buyers are in control of price action for now. A larger correction could last until the 61.8% Fib at .7270 or until the 200 SMA dynamic inflection point while a break past that area could mean that bulls are back in control.

Fed officials shared mixed views on the timing of future rate hikes and balance sheet unwinding. FOMC members Brainard and Kashkari also stressed the need to wait for more inflation data to see if the slowdown is temporary before tightening again.

There have been no major reports from New Zealand so the Kiwi has been sensitive to market sentiment and counter currency price action. Fed head Yellen has a speech coming up and more cautious remarks could mean more losses for the dollar.

By Kate Curtis from Trader's Way

 

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EURGBP Channel Retracement (July 13, 2017)

EURGBP is trending higher on its short-term time frames but it could have room for retracement to nearby support zones. Price is moving inside an ascending channel with support at the .8800 major psychological level.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% level is in line with the mid-channel area of interest and the 100 SMA dynamic support while the longer-term 200 SMA is closer to the 61.8% Fib. The 100 SMA is above the 200 SMA so the path of least resistance is to the upside, which means that the uptrend is more likely to continue than to reverse.

The pair already seems to be bouncing off the 50% Fib around .8850 while stochastic is moving out of the oversold area to signal a return in buying pressure. In that case, price could make its way up to the channel resistance or the swing high from here.

UK economic data turned out stronger than expected as the number of claimants rose by only 6K versus the projected 10.3K increase. The unemployment rate improved from 4.5% to 4.6% but the average earnings index fell from 2.1% to 1.8% as expected.

Economic data from the euro zone also turned out better than expected as the region's industrial production rose 1.3% versus the projected 1.0% gain and the previous 0.3% uptick. However, the German WPI fell flat instead of posting the projected 0.2% rebound. German and French final CPI readings are due next.

By Kate Curtis from Trader's Way

 

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EURUSD Breakout and Correction (July 14, 2017)

EURUSD recently broke to the upside of a symmetrical triangle pattern then zoomed up close to the 1.1500 handle before pulling back. Price is retesting the broken triangle resistance which might now hold as support.

Applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with the broken triangle resistance and is also close to the 1.1400 major psychological support. If this area continues to keep losses in check, the pair could climb back to the swing high or higher.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is also heading higher to indicate that bullish momentum is in play. A break below the 61.8% Fib, however, could signal that bears are putting up a fight.

Economic reports from the euro zone came in line with expectations. The German final CPI reading was unchanged at 0.2% while the French final CPI was also maintained at a flat reading. Italy's trade balance and the region's trade balance are up for release today.

Meanwhile, the dollar had a mixed forex performance as Fed head Yellen shared a relatively balanced view of the economy and its risks. She did reiterate that they could start balance sheet unwinding later this year but warned that they'll be watching the impact on the yield curve to gauge if future rate changes are still necessary.

US PPI figures came in mixed and the CPI readings are due today. Fed policymakers have been emphasizing how inflation trends will influence their rate hike decisions so stronger than expected results could mean more upside for the US currency. US retail sales are also due, and both headline and core readings could show rebounds.

By Kate Curtis from Trader's Way