Daily Technical Analysis by Kate Curtis from Trader's Way

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GBPJPY Broken Channel Retest (Nov 07, 2017)

GBPJPY was previously trending higher inside an ascending channel before breaking below support to signal a reversal. Price bounced off the 148.75 level before showing signs of pulling back to the broken support.

Applying the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 50% Fib and the 150.00 major psychological mark. This is also close to the moving averages' dynamic inflection points.

However, the 100 SMA is still above the longer-term 200 SMA on this time frame, so the path of least resistance is to the upside until a crossover forms. Stochastic is already indicating overbought conditions to show rally exhaustion and a potential return in selling pressure.

Yen weakness was in play at the start of the week after the dovish BOJ minutes and speech by Governor Kuroda. Risk-taking also came into play later on in the sessions, further weighing on the lower-yielding yen.

Meanwhile, the UK BRC retail sales monitor printed a 1.0% decline, erasing part of the previous 1.9% gain. The Halifax HPI is due next and a smaller 0.2% uptick is set to follow the previous 0.8% gain.

Later in the week, Japan will release its data on core machinery orders and the current account balance. The Economy Watchers Sentiment index and the tertiary industry activity index are also on the docket. UK manufacturing production is due on Friday and a 0.3% uptick is eyed.

By Kate Curtis from Trader's Way

 

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USDCAD Uptrend Correction (Nov 08, 2017)

USDCAD continues to trend higher and is moving above an ascending trend line connecting the lows on the 4-hour time frame. Price looks prime for another correction and the 50% level lines up with the trend line support at 1.2700.

The 100 SMA is still 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. Stochastic is on its way up to signal that bullish momentum is already in play.

A larger pullback could last until the 61.8% Fib or the 200 SMA, but if the rally is already resuming from here, a move towards the swing high at 1.2900 or higher could be underway.

In his testimony this week, BOC head Poloz warned that slack in the labor market could keep a lid on wage growth and overall inflation. He reiterated that policymakers are more careful about future rate hikes and that there are several uncertainties present. However, he also mentioned that the BOC would be comfortable with inflation overshooting its 2% target.

As for the dollar, roadblocks in tax reform such as the possibility of Senate imposing a one-year delay before implementing tax cuts have weighed on the currency. Congress is scheduled to vote on the proposal next week and there has been some opposition within the GOP, so nothing is set in stone yet.

Medium-tier data from the US came in stronger than expected on Tuesday but there are no reports due today, so the focus could remain on tax reform. There are also no reports due from Canada so the crude oil inventories data could push the Loonie around.

By Kate Curtis from Trader's Way

 

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NZDUSD Downtrend Correction (Nov 09, 2017)

NZDUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is also moving below a descending trend line connecting the highs since mid-September.

A pullback to this trend line appears to be underway after the pair bounced off the .6825 level. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the trend line at the .7000 handle.

The 100 SMA is still below the longer-term 200 SMA, so the path of least resistance is to the downside. The 200 SMA is close to the Fibs and trend line resistance, potentially acting as the last line of defense in this downtrend correction. Stochastic is moving up to reflect bullish presence but is nearing overbought conditions.

The RBNZ decided to keep interest rates on hold as expected at 1.75% but the central bank adjusted its forecast for when New Zealand would hit its inflation target by a few months earlier. This also meant adjustments to its OCR timeline.

Apart from that, Acting Governor Spencer also assured that proposed government changes to the central bank mandate would have little effect on economic conditions.

Meanwhile, the US dollar is being bogged down by setbacks in tax reform as Senate is set to unveil their version of the bill within the week. This is said to have huge differences from the Congress version, which will be voted upon next week.

By Kate Curtis from Trader's Way

 

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EURUSD Area of Interest (Nov 10, 2017)

EURUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is now moving inside a descending channel pattern and looks ready for a pullback to the resistance.

Applying the Fibonacci retracement tool on the swing high and low shows that the 50% to 61.8% levels are close to the channel resistance. This also coincides with the 200 SMA dynamic inflection point.

The 100 SMA is below the longer-term moving average so the path of least resistance is to the downside, which suggests that the downtrend is likely to continue. Stochastic is still pointing up but already dipping into overbought territory to reflect rally exhaustion.

The US dollar took some hits on setbacks to the tax plan as the Senate version contained several key differences with the one in Congress. This suggests that it would take much longer than initially expected before any of these are implemented, especially since Senate is also proposing a one-year delay for the cuts.

Medium-tier US data has been mixed, with initial jobless claims coming in higher than expected and final wholesale inventories printing a 0.3% increase as expected. US banks are closed for the holiday today but the UoM preliminary consumer sentiment index is still up for release and analysts are expecting to see an increase from 100.7 to 100.8.

The euro drew support from upgraded forecasts by the EU, which supported the idea of tapering next year and possibly an interest rate hike later on. ECB member Coeure also had a testimony with hawkish remarks suggesting that QE cannot go on indefinitely.

By Kate Curtis from Trader's Way

 

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EURJPY Range Support (Nov 13, 2017)

EURJPY has been trading sideways recently, bouncing off support near 132.00 and resistance at 136.25. Price is testing support once more and could be due for another climb to the top or at least until the middle of the range around 133.00.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside, which means that support is more likely to hold than to break. However, stochastic is already indicating overbought conditions and is starting to turn lower to signal a pickup in selling pressure. A downside break of support could lead to a drop of around 400 pips or the same height as the chart pattern.

Economic data from the euro zone turned out mostly weaker than expected on Friday as French preliminary private payrolls and Italian industrial production came in short of consensus. Japanese data was also downbeat as the tertiary industry activity index posted a 0.2% decline instead of the estimated 0.1% dip.

Only the preliminary machine tool orders data is due from Japan today and a stronger increase compared to the earlier 45% year-over-year gain could be positive for the yen. Meanwhile, Germany is set to print its wholesale price index and might show a 0.4% increase.

Flash GDP readings from the euro zone nations and the region itself are lined up for the next few days and this should give traders more insight on how the ECB might proceed with its policy changes. Japan also has its preliminary GDP reading due and a 0.4% expansion is expected for Q3.

By Kate Curtis from Trader's Way

 

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AUDUSD Range Breakdown (Nov 14, 2017)

AUDUSD was previously trading sideways between support around .7650 and resistance at .7700-.7725. Price has just broken below the range support and looks ready for a pullback before heading further south.

Using the Fib tool on the breakout move shows that the 38.2% level is close to the broken support that might now hold as resistance. Stochastic is climbing out of the oversold region to indicate that sellers are taking a break.

Still, the 100 SMA is below the longer-term 200 SMA on this time frame to indicate that the path of least resistance is to the downside, which means that the selloff is likely to resume at some point. These moving averages are closer to the 61.8% Fib, which might be the line in the sand for the downtrend.

The US dollar has been extra sensitive to tax reform updates from Washington in the past few days as the economy is waiting on tax cuts before the end of the year. The House is scheduled to vote on their version of the bill by Thursday and US President Trump is set to give a speech to urge them to work together before the vote.

In terms of data, CPI and retail sales are up for release from the US on Wednesday and strong upside surprises could revive dollar demand. Speeches from a number of FOMC members are lined up on Thursday as well.

As for the Australian dollar, the employment report is due later in the week but the currency could take its cue from Chinese reports earlier on. Industrial production and fixed asset investment are foreseen to dip, which would mean lower demand for raw material commodity products and a likely drop in risk appetite.

By Kate Curtis from Trader's Way

 

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GBPAUD Triangle Breakout (Nov 15, 2017)

GBPAUD is slowly breaking above the resistance of its symmetrical triangle pattern on the daily time frame. This chart pattern is approximately 2000 pips tall so the resulting uptrend could be of the same height.

The 100 SMA has just crossed below the longer-term 200 SMA on this time frame but appears to be ready for another upward crossover that could draw bulls back in. Stochastic has been on the move down but is turning higher as well.

UK CPI came in weaker than expected for October as the reading held steady at 3.0% instead of improving to the estimated 3.1% figure. Core CPI was also unchanged at 2.7% instead of rising to 2.8%.

Traders are now waiting on the release of the claimant count change and the average earnings index for signs of wage growth. The index is slated to dip from 2.2% to 2.1% to signal weaker spending and inflationary pressures.

As for the Australian dollar, the currency was weighed down by downbeat Chinese industrial production and fixed asset investment which signaled slower demand for commodities. The Aussie also got hit by weaker than expected quarterly wage price index, which posted a 0.5% gain versus the estimated 0.7% increase. Australia's jobs figures are due tomorrow.

By Kate Curtis from Trader's Way

 

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EURAUD Bullish Momentum (Nov 16, 2017)

EURAUD was previously trading inside an ascending channel pattern and has surged past the resistance to signal a steeper climb. Price stalled upon reaching resistance at the 1.5600 mark, so a correction to the broken resistance could be due.

This lines up with the 38.2% Fibonacci retracement level around 1.5400-1.5450, which might keep losses in check. A larger correction could last until the 61.8% Fib at 1.5300.

Stochastic is on its way down so price could follow suit while sellers remain in control. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still the upside, which means that the uptrend could resume at some point.

Australia's jobs figures turned out weaker than expected as the economy added only 3.7K jobs in October versus the projected 17.8K gain. On a less downbeat note, the previous reading enjoyed a significant upgrade to show a 26.6K increase in employment while the unemployment rate improved from 5.5% to 5.4%.

Prior to this, Australia's quarterly wage price index fell short of estimates at 0.5% versus 0.7%. Chinese reports also turned out weaker than expected, suggesting slower demand for raw materials.

As for the euro, the shared currency got a strong boost earlier in the week from stronger than expected flash GDP readings. The region's trade balance also turned out stronger than expected and final CPI readings are due today.

By Kate Curtis from Trader's Way

 

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GBPJPY Descending Channel (Nov 17, 2017)

GBPJPY continues to trend lower on its short-term time frames. Price is testing the resistance at 149.00 and could be ready for a drop to the channel support at 147.50.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. The 200 SMA also lines up with the channel resistance, adding to its strength as a ceiling.

Stochastic is pointing down to indicate that sellers are in control of price action, but buying pressure could still return once the oscillator hits oversold levels and turns back up.

UK retail sales turned out stronger than expected with a 0.3% gain versus the estimated 0.1% uptick. Prior to this, the claimant count change report and average earnings index also beat expectations. CPI data, on the other hand, fell short of consensus.

Brexit issues and uncertainties in PM May's government are also keeping a lid on pound gains at the moment. So far, May has been able to defend the plans to leave the EU in the debates this week. However, the discussions are set to carry on for the next weeks and any major changes could pose more uncertainties for businesses.

As for the yen, Japanese data hasn't been all that impressive either. The economy grew 0.3% in Q3 versus the projected 0.4% expansion while the price index came in line with expectations of a meager 0.1% uptick.

By Kate Curtis from Trader's Way

 

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USDJPY Range Resistance (Nov 20, 2017)

USDJPY looks ready to trade sideways on its daily time frame as price has bounced off the resistance around 114.25. This could put the pair on track towards its range support at 108.50.

The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages has narrowed and an upward crossover appears imminent. These moving averages could hold as dynamic support as well.

Also, stochastic is dipping into oversold levels, which suggests that sellers are already exhausted. If buyers are able to take over, another test of the range resistance could take place.

Over the weekend, Japan printed a stronger than expected trade surplus of 0.32 trillion JPY versus the projected 0.21 trillion JPY figure and the earlier 0.27 trillion JPY reading. There are no reports due from Japan today so the yen could take its cue from market sentiment or bond yields.

Meanwhile, the dollar also saw strong US data on Friday, particularly in the construction sector. Building permits jumped from 1.23 million to 1.30 million, surpassing the consensus at 1.25 million, and housing starts rose from 1.14 million to 1.29 million.

Only the CB leading index is due from the US today and another strong gain could keep the currency supported. Apart from that, updates on tax reform could also impact dollar movement.

By Kate Curtis from Trader's Way