Daily Technical Analysis by Kate Curtis from Trader's Way

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EURUSD Major Correction (Oct 04, 2017)

EURUSD previously broke past the range resistance at the 1.1450 minor psychological level to indicate that bullish momentum has won over. Price stalled in its rally near the 1.2100 major psychological level and showed signs of a correction to the broken ceiling.

Applying the Fibonacci retracement tool on the latest swing high and low on the daily time frame shows that the 38.2% level lines up with the area of interest at which several buyers might be waiting. However, the 100 SMA is still below the longer-term 200 SMA on this chart so the path of least resistance is to the downside.

Stochastic is also just starting to turn down from the overbought zone to reflect a pickup in selling pressure. This could lead to a deeper pullback to the lower Fib levels, namely the 50% level at 1.1200 and the 61.8% level at 1.0500 near the 100 SMA dynamic support.

Euro zone economic reports have been mixed, with the latest flash CPI readings dampening hopes of ECB tapering this month. Leading indicators such as industry PMIs have printed upbeat results, though, while Spain's unemployment change figure released yesterday fell short.

Another factor weighing on the shared currency is the political uncertainty stemming from the Catalan elections. The push for independence could set a precedent for other cities seeking their own government and might put the stability of the union at risk.

As for the dollar, traders are keeping close tabs on leading indicators for employment as this could contain clues on how the official NFP report might turn out. Strong data could bolster Fed rate hike expectations for December and push the dollar higher, along with the increased focus on tax reform.

By Kate Curtis from Trader's Way

 

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EURGBP Area of Interest (Oct 05, 2017)

EURGBP is currently testing a former resistance level around the .8800 major psychological mark, which appears to be holding as support. This lines up with the 50% Fibonacci retracement level on the swing high and low on the daily time frame. Stochastic is also pointing up to reflect the presence of buying pressure.

The 100 SMA is above the longer-term 200 SMA on this chart so the path of least resistance is to the upside, which suggests that the uptrend is more likely to resume than to reverse. The gap between the moving averages is also widening to reflect strengthening bullish momentum that might take price up to the swing high around .9300.

Economic data from the UK didn't turn out so bad yesterday as the services PMI ticked up from 53.2 to 53.6, reflecting a stronger pace of industry expansion versus the consensus of no change. This is also in contrary with the results of other industry PMIs in the manufacturing and construction sectors. There are no major reports due from the UK economy today, so Brexit-related updates might push the pound around.

Meanwhile, data from the euro zone was mixed as final services PMI readings mostly came in line with expectations while Italy's reading surprised to the downside and Spain's figure was better than expected.

The ECB minutes are due next and traders are hopeful to get more clues on tapering plans. Draghi said that they have already started initial discussions and could reach a decision this month, probably agreeing to start tapering by December. However, any signs of strong dissent within the committee could douse expectations for the year.

By Kate Curtis from Trader's Way

 

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NZDUSD Head and Shoulders (Oct 06, 2017)

NZDUSD could be in for more losses as price formed a head and shoulders pattern on its daily time frame. Price is also testing the neckline around the .7100 major psychological mark and a breakdown could send it lower by 450 pips or the same height as the chart formation.

However, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that there's still a chance for the long-term uptrend to resume. Stochastic is also dipping into the oversold region, which reflects exhaustion among sellers and a potential return in buying pressure.

Earlier this week, New Zealand's GDT auction yielded a 2.4% slump in dairy prices, erasing the gains chalked up in earlier weeks. The NZIER business confidence index has also taken a hit and fallen from 18 to 5 to reflect much lower optimism among firms.

On the other hand, the dollar has gained strong support from better than expected leading indicators for the NFP. The ISM manufacturing and non-manufacturing PMIs both beat expectations and showed gains in the employment component while the ADP report and Challenger job cuts also reflected positive hiring momentum.

The main catalyst for today is the NFP release, which is expected to show a gain of 88K versus the earlier 156K figure. A higher than expected read could boost December hike expectations, especially since the latest batch of Fed officials to give speeches sounded more upbeat. On the other hand, a huge miss could lead to losses for the dollar if traders think it's bad enough to keep the US central bank on hold for the rest of the year.

By Kate Curtis from Trader's Way

 

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USDCAD Steady Channel (Oct 09, 2017)

USDCAD continues to head north and is trading inside an ascending channel on its 1-hour time frame. This channel has held since the start of September and another test of support is underway.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% level lines up with support around the 1.2500 major psychological level. This lines up with the 100 SMA dynamic support and a former resistance level.

The 100 SMA is above the longer-term 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 200 SMA is also slightly below the channel support, adding an extra layer of defense to the downside. Stochastic is in the oversold region, which suggests that selling pressure is exhausted and that buyers could take over soon.

Jobs data from both the US and Canada turned out weaker than expected on Friday, with the former shedding 33K jobs and the latter gaining 10K versus the estimated 13.9K increase. However, the US dollar was able to benefit from a stronger than expected 0.5% increase in average earnings and expectations of a positive revision in the September figure later on.

Also in Canada, the Ivey PMI rose from 56.3 to 59.3 to reflect a faster pace of industry growth compared to the estimated drop to 56.0. US and Canadian banks are closed in observance of Columbus Day today so liquidity could be lower than usual.

There's not much in the way of top-tier data from Canada this week while the US has plenty of catalysts on deck. This includes the release of the FOMC minutes, retail sales, PPI, and CPI readings. The oil-related Loonie might simply take its cues from the commodity this week.

By Kate Curtis from Trader's Way

 

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USDJPY Range Resistance (Oct 10, 2017)

USDJPY has been trading sideways on its long-term charts, bouncing off support at the 108.50 minor psychological mark and heading towards the resistance around 114.00 to 114.50. Price is consolidating at the moment, though, and technical indicators are hinting that a selloff could be due.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the ceiling is more likely to hold than to break. Stochastic is also turning lower to indicate the presence of selling pressure that might be enough to take USDJPY back down to support.

US economic data turned out weaker than expected on Friday as the economy shed 33K jobs instead of gaining 88K as expected. However, the previous reading enjoyed an upgrade while average hourly earnings showed stronger than expected wage growth that could fuel inflation down the line.

There were no major reports out of the US economy yesterday as banks were closed in observance of Columbus Day. Japanese banks were also closed then, which explains the consolidation for the pair. Today, the Japanese current account balance is lined up and a smaller surplus of 1.98 trillion JPY is eyed from the previous 2.03 trillion JPY figure.

In the US, FOMC member Kashkari is set to give a speech but traders have already heard his dovish remarks in the past. The next major catalyst for the dollar might be Wednesday's FOMC minutes release or the CPI and retail sales reports due on Friday. Japan has core machinery orders, preliminary machine tool orders, and PPI data due throughout the week.

By Kate Curtis from Trader's Way

 

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GBPAUD Support Turned Resistance (Oct 11, 2017)

GBPAUD previously broke through support at the 1.6950 minor psychological level then fell to a low of 1.6785 before making a correction. Applying the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the broken support is close to the 38.2% level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to resume. The 200 SMA could also hold as a dynamic resistance level, but the gap between the moving averages is narrowing to signal a potential upward crossover. If this materializes, bullish pressure could kick in and trigger a climb past the Fib levels.

Stochastic is on the move down, though, which means that there's some bearish pressure in play. If any of the Fib levels keep gains in check, price could fall back to the swing low or lower.

Data from the UK has been mixed, with manufacturing production beating expectations and the goods trade balance showing a wider than expected deficit due to slower exports. The pound has also been more vulnerable to Brexit-related updates, especially since Prime Minister May appears to be losing support and unable to inspire confidence in the economy.

In Australia, the Westpac consumer sentiment reading improved from 2.5% to 3.6% to reflect stronger optimism. Data, however, wasn't so upbeat last week as retail sales posted a surprise 0.6% drop while trade balance components weren't promising either.

Looking ahead, there are no major reports lined up from the UK and Australia, although China still has its trade balance due. Earlier this week, the Caixin services PMI turned out to be a disappointment and this is keeping a lid on the Aussie's rallies. Another downbeat figure from its top trade partner could mean more Aussie weakness while an upbeat result could spur gains.

By Kate Curtis from Trader's Way

 

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AUDUSD Support Turned Resistance (Oct 12, 2017)

AUDUSD recently fell through support at the .7800 level then dipped to .7750 before pulling back up. Applying the Fibonacci retracement tool on the latest swing high and low on the 4-hour time frame shows that the 23.6% level lines up with the broken support that might now hold as resistance.

A larger pullback could last until the 38.2% Fib close to the 100 SMA or the 50% Fib near the 200 SMA. The short-term moving average is below the longer-term moving average to signal that the path of least resistance is to the downside, which means that the selloff is likely to resume.

Stochastic is pointing up to signal that bullish pressure is in play but the oscillator is dipping into overbought territory to suggest rally exhaustion and a return in selling pressure. In that case, AUDUSD could fall back to the swing low or lower.

The FOMC minutes turned out less hawkish than expected as a good number of Fed officials still expressed concerns about another hike. In particular, many policymakers worried that the drop in inflation might not be transitory after all. Still, the committee concluded that a gradual pace of tightening would be appropriate as long as the economy stays at its current pace.

The next event risk for the dollar is the release of the CPI and retail sales reports on Friday. This should give market watchers a better idea of how inflation is actually faring, with a downbeat result likely to dampen December hike forecasts. The upcoming PPI release should have some clues on how the CPI figures might fare.

As for the Australian dollar, the lack of top-tier reports from Australia could keep it sensitive to market sentiment. Data from China hasn't been as impressive so expectations of weaker demand for Australia's products could stay in play.

By Kate Curtis from Trader's Way

 

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Forex Major Currencies Outlook (Oct 12, 2017)

USD

The US dollar dipped against most of its counterparts when the FOMC minutes were released as it revealed that some policymakers had some doubts about tightening in December. In particular, the minutes indicated that many members were worried that the factors dragging inflation down might not be transitory. A couple of FOMC members are set to give testimonies today and the PPI figures will be released, giving traders some insight as to how the actual CPI readings might turn out on Friday.

EUR

The euro continued its relief rally after Spanish PM Rajoy gave Catalonia an 8-day ultimatum to officially declare independence. There were no reports due from the euro zone then so this display of authority eased political uncertainty. Euro zone industrial production and French final CPI numbers are due next, with upbeat figures likely to put the focus back on ECB tapering expectations.

GBP

The pound also staged a rally as Brexit updates were no longer in the limelight. There were no reports out of the UK economy then while today has the BOE credit conditions survey lined up. Finance Minister Hammond said that they are looking into the realistic worst case scenario but has yet to set a budget for a no-deal Brexit.

CHF

The franc gave up ground to its peers on improving risk appetite stemming from weaker odds of a Fed December hike. There were no reports out of the Swiss economy then and none are due today so market sentiment could remain the driver of franc price action.

JPY

The Japanese yen was also in a weak spot, reacting to market sentiment rather than taking advantage of dollar weakness. Data from Japan was stronger than expected as core machinery orders rose 3.4% versus the projected 0.8% uptick while preliminary machine tool orders increased 45.3%. Earlier today, bank lending was also reported to have shown a larger than expected 3% gain.

Commodity Currencies (AUD, NZD, CAD)

The comdolls rallied on returning risk appetite as the FOMC minutes suggested weaker odds of December tightening. However, New Zealand reported a 0.2% dip in the food price index after previously posting a 0.6% gain. US crude oil inventories data is due next and a speech by BOC member Wilkins is lined up.

By Kate Curtis from Trader's Way

 

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EURJPY Short-Term Correction Setup (Oct 13, 2017)

EURJPY previously broke past the resistance at the 132.50 to 133.00 levels then zoomed up to a high of 133.46. Price has since pulled back to the broken resistance and the Fib tool on the latest swing low and high on the 1-hour time frame shows that the 38.2% level lines up with the area of interest.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the rally is more likely to continue than to reverse. The 100 SMA is also close to the 50% Fib, which might also hold as support in a deeper pullback, while the 200 SMA is slightly above the 61.8% Fib at 132.50.

Stochastic is pulling up from oversold levels to indicate a return in bullish momentum that might take EURJPY up to the swing high or higher. However, a break below the Fibs or moving averages could force it down to the swing low near 132.00 or lower.

The euro got a bit of a boost from ECB official Coeure's warning on how prolonging the asset purchase program could pose risks to financial stability. However, the shared currency gave up some of those gains when Governor Draghi lauded the central bank's negative interest rates and QE efforts.

Economic reports from the euro zone turned out mixed as industrial production beat expectations with a 1.4% gain versus the estimated 0..6% increase while the French final CPI was downgraded to show a larger 0.2% downtick from the earlier 0.1% dip.

Data from Japan was also mixed as PPI came in line with expectations of a 0.1% gain while the tertiary industry activity index surprised to the downside with a 0.2% drop versus the estimated 0.1% uptick. There are no reports due from Japan today while the euro zone has the German final CPI lined up.

By Kate Curtis from Trader's Way

 

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NZDUSD Neckline Retest (October 16, 2017)

NZDUSD previously broke below a head and shoulders reversal pattern neckline, indicating that a downtrend is in the cards. The chart pattern is approximately 350 pips tall so the resulting selloff could be of the same size.

However, price is still making a correction to this broken neckline to gather more bearish pressure. Applying the Fib tool on the latest swing high and low shows that this lines up with the 38.2% retracement level and the .7200 major psychological resistance.

The 100 SMA is still above the longer-term 200 SMA, though, so there may be some bullish pressure left. If so, price could still break past the area of interest and resume its uptrend. At the same time, stochastic is pulling up from the oversold region to signal that buyers are regaining the upper hand.

US data came in mostly weaker than expected on Friday, with downbeat CPI readings taking the spotlight and weighing on Fed rate hike expectations for December. Headline inflation came in at 0.5% versus 0.6% while the core reading stood at 0.1% versus 0.2%. Retail sales data turned out mixed, with the headline reading up 1.6% versus 1.7% and the core figure at 1.0% versus 0.9%.

Over the weekend, Yellen gave a testimony which contained upbeat remarks on heir assessment and outlook for the economy. There's not much in the way of top-tier reports from the US today since only the federal budget balance is lined up.

As for the Kiwi, New Zealand's CPI is due next and a 0.4% uptick in price levels is eyed for Q3 after the report printed a flat reading for Q2. Stronger than expected data could keep the currency bid while downbeat results could allow the selloff to resume.

By Kate Curtis from Trader's Way