Daily Technical Analysis by Kate Curtis from Trader's Way

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EURGBP Range Support (Nov 21, 2017)

EURGBP has been trading sideways recently, finding resistance around the .9000 major psychological level and support near the .8750 minor psychological mark. Price has just bounced off the ceiling and is halfway through on its way to the floor.

The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside, which suggests that sellers could take it all the way down to the range support.

However, stochastic is already dipping to oversold levels, which signals exhaustion among sellers and a potential return in buying pressure. In that case, the moving averages might hold as dynamic inflection points around the middle of the range.

Uncertainty in German politics has weighed on the euro for the most part of the week as German Chancellor Merkel failed to strike a coalition with the Greens and FDP over the weekend. This could prompt the call for another round of elections, which could keep the shared currency in limbo for a while.

However, euro zone fundamentals remain stable and upcoming PMI readings could hint at further improvements. The ECB minutes are up for release, though, and their latest decision was considered a "dovish taper" announcement.

As for the pound, the BOE Inflation Report hearings could prove to be an event risk as this would contain more details on the central bank's inflation outlook and rate hike bias. The Treasury's Autumn Forecast Statement is also scheduled later in the week and would have updated economic estimates.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Channel Resistance (Nov 22, 2017)

USDJPY is trending lower on its short-term time frames, moving inside a descending channel and currently testing resistance. This lines up with the 100 SMA and 50% Fibonacci retracement level, which appears to have held as resistance.

The 100 SMA is also below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is more likely to resume than to reverse. The gap between the moving averages is also widening to reflect stronger bearish pressure.

Stochastic is pointing down to signal that sellers are in control of price action, but that could chance once the oscillator hits oversold levels and turns back up.

The dollar slid lower against most of its peers as bond yields ticked lower on Tuesday. Yellen spoke of how the central bank is "reasonably close" to achieving its goals but that rate hikes should proceed at a gradual pace to avoid having inflation run below target for too long or to push unemployment too low.

Yellen also expressed uncertainty about inflation rebounding, adding that it's possible for price levels to keep running below target for much longer. This probably cast doubts on rate hikes next year, weighing on the dollar as well.

As for the yen, the Japanese currency appears to be taking its cue from market sentiment and dollar price action. Japan's all industries activity index turned out weaker than expected with a 0.5% drop versus the estimated 0.4% decline.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Triangle Breakout (Nov 23, 2017)

GBPUSD appears to have finally broke out of its consolidation pattern on the 4-hour chart. Price surged past the resistance of its descending triangle, indicating its intention to go for more gains.

The chart pattern is approximately 900 pips tall so the resulting breakout could be of the same height. However, the 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. Stochastic is also indicating overbought conditions, which means that buyers are starting to feel exhausted.

Still, the gap between the moving averages has narrowed to show a potential upside crossover that might draw more buyers in. A quick pullback to the broken triangle resistance at 1.3150-1.3200 could take place before the pair heads any further north.

The pound took hits due to downgraded growth forecasts released during the Autumn Forecast Statement and increased its borrowing estimates for the next few years to offset the impact of Brexit. However, the currency stabilized as Hammond reassured that support will be provided to help the economy weather any uncertainties.

Meanwhile, the dollar was weaker across the board during the release of the FOMC minutes as it confirmed that policymakers were increasingly concerned about weak inflation. Many participants worried that inflation would run below target for much longer than expected, hinting at a less aggressive pace of tightening for 2018.

US banks are closed for the Thanksgiving holidays so lower liquidity and higher volatility for major pairs are eyed. The UK is scheduled to release its second estimate GDP for Q3 but no revisions to the earlier 0.4% estimate are expected.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Descending Channel (Nov 24, 2017)

AUDUSD is currently trending lower but looks prime for a correction to its descending channel visible on the 4-hour time frame. This is in line with the 200 SMA dynamic inflection point, but price is already testing the 100 SMA at the moment.

The short-term moving average is below the longer-term one, so the path of least resistance is to the downside. This means that the selloff is more likely to resume than to reverse. Also, stochastic is indicating overbought conditions and looks ready to turn lower, indicating a pickup in bearish momentum as well.

The dollar has been on weak footing recently, as traders are reacting to the more cautious view on inflation shared by Yellen and FOMC members. In her speech earlier in the week, the current Fed Chairperson admitted that it may take longer for inflation to recover. The FOMC minutes also signaled that policymakers are worried that inflation could run below target for much longer.

Meanwhile, the Australian dollar has been bogged down by cautious RBA minutes which expressed concerns about wage growth and spending. This suggests that the central bank could stay in its neutral stance for much longer.

Most US traders are out enjoying the Thanksgiving holidays today, so liquidity could be thin. US flash manufacturing and services PMIs are up for release and these could lead to larger than usual moves for the dollar if they come in way above or below expectations.

By Kate Curtis from Trader's Way

 

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USDCAD Triangle Resistance (Nov 27, 2017)

USDCAD has formed lower highs and found support around 1.2675, creating a descending triangle on its short-term time frames. Price has just bounced off the triangle bottom and is making its way back to the top around 1.2750-1.2775.

The 100 SMA has crossed below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the resistance is more likely to hold than to break.

Stochastic is still heading north to reflect the presence of bullish momentum that might take price up to the triangle resistance. But if buyers are strong enough, they could push for an upside break and 200-pip climb, which is roughly the same height as the chart formation.

The main event risk for the Loonie might be the OPEC meeting as the cartel is widely expected to announce an extension of their output deal. However, since this scenario has been long priced in, profit-taking could ensue during the actual event and force the oil-related currency to retreat.

Meanwhile, the dollar has the US preliminary GDP on deck and any major revisions could dictate its direction. Traders are also waiting for more updates on tax reform as lawmakers reconvene to discuss the proposal.

Canada also has its jobs data due later in the week and stronger than expected data could keep the currency supported. Downbeat results, on the other hand, could lead to losses as traders continue to push back rate hike expectations.

By Kate Curtis from Trader's Way

 

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EURUSD Neckline Correction (Nov 28, 2017)

EURUSD recently broke past the neckline of a complex inverse head and shoulders pattern visible on the 4-hour time frame. Price looks ready for a retest of the broken resistance around 1.1800-1.1850.

This lines up with the 50% to 61.8% levels, which might keep losses in check and allow more buyers to join in the rally. The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside, but an upward crossover appears to be brewing to draw more bulls in.

Stochastic is heading down from the overbought level to signal that sellers are in control of price action for now. However, the oscillator is moving close to oversold levels and turning back up could reflect a return in bullish momentum.

The dollar has been able to regain some ground against its peers when US President Trump stoked confidence in tax reform progress ahead of the Senate vote that might happen as early as Thursday this week. This could revive hopes that tax cuts could be implemented before the end of the year, which would be positive for businesses and overall economic performance.

Data from the US has also been stronger than expected as new home sales rose from 645K to 685K versus expectations at 627K. The dollar dipped slightly on Kashkari's remarks but managed to recover when incoming Fed head Powell's speech indicated decisiveness to act in order to contain economic risks.

Meanwhile, the euro has managed to shrug off previous political jitters from Germany as signs point to a coalition being formed. Data from the region has also been mostly upbeat last week and traders are setting their sights on another pickup in inflation to be reported in the days ahead.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Area of Interest (Nov 29, 2017)

EURAUD previously broke past the resistance at 1.5600 then zoomed up to a high of 1.5696 before retreating. This could be a correction from the uptrend if the pair finds support at the Fib levels.

The 50% retracement level already seems to be holding as support as it lines up with the 200 SMA dynamic inflection point. 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 resume than to reverse.

In that case, price could make its way back up to the swing high or higher while stochastic makes its way out of the oversold area to reflect a return in bullish momentum.

Euro zone reports have been mostly stronger than expected last week but this week's set has failed to impress so far. The German GfK consumer climate index held steady at 10.7 instead of improving to the 10.8 consensus. German import prices, however, ticked up by 0.6% versus the projected 0.4% gain.

Traders might be paring risk ahead of the flash CPI releases later in the week as this could have a significant impact on ECB rate hike expectations. Today has the German preliminary CPI and French preliminary GDP, along with the Spanish flash CPI.

As for the Aussie, the major reports aren't due until Thursday. These are the private capital expenditure, private sector credit, and building approvals figures. Chinese official PMI readings are also due that day.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Range Support (Nov 30, 2017)

EURGBP has been on the decline but could be due for a bounce once it tests the range support near the .8750 minor psychological level. Stochastic is on the move down to show that selling pressure is in play, but the oscillator is nearing oversold levels to signal a potential return in buyers.

The 100 SMA is also above the longer-term 200 SMA on the 4-hour time frame so the path of least resistance is to the upside, which suggests that the range support is more likely to hold than to break. If so, another bounce back to the resistance at .9015 could be underway.

Improving sentiment towards Brexit is currently supporting the pound against its counterparts as negotiating parties appear more amicable in reaching a deal. To top it off, UK data has been stronger than expected as net lending to individuals came in at 4.8 billion GBP versus the estimated 4.5 billion GBP figure.

In the euro zone, the ECB Financial Stability Review outlined risks associated with a stronger euro and higher interest rates. The rest of the review was generally upbeat in terms of economic assessment and outlook.

German retail sales and unemployment rate are due today, along with French and Italian preliminary CPI. However, traders might pay closer attention to euro zone CPI flash estimates as strong gains could renew expectations for an ECB hike next year. The headline reading is projected to climb from 1.4% to 1.6% while the core figure could rise from 0.9% to 1.0%.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Triangle Retest (Dec 01, 2017)

USDCAD recently broke out of a long-term descending triangle pattern to signal that an uptrend is underway. Price hit resistance around the 1.2900 mark and is starting a correction to the broken triangle resistance.

Applying the Fib tool on the latest swing low and high on the 4-hour time frame shows that the 61.8% retracement level lines up with the broken resistance around the 1.2750 minor psychological level. This is also close to the moving averages' dynamic inflection points.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. However, stochastic has been indicating overbought conditions for some time, which means that buyers are exhausted and might allow sellers to take over for a while.

Economic data from the US has been mostly stronger than expected, with personal spending and income both surpassing expectations and initial jobless claims printing a lower increase in unemployment. Traders are paying close attention to tax reform progress in Senate, which is due to have a full vote on their version of the bill this week.

Support from Senator John McCain has buoyed the dollar higher on stronger hopes of seeing the bill approved, but the next challenge is merging with the version of the House before moving to the White House for Trump's signature. Rumors that Secretary of State Tillerson is about to be replaced on account of differences with Trump in dealing with North Korea has still kept geopolitical risks in play.

As for the Canadian dollar, traders seem to have shrugged off the OPEC deal extension as this scenario has been widely expected. Crude oil dipped on the likelihood of seeing a review in June, which means that the deal could still be called off if the market overheats then.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Short-Term Channel (Dec 04, 2017)

EURAUD has been trending higher on its 1-hour chart and is moving inside an ascending channel. Price seems to be gearing up for a test of support around the 1.5600 handle and technical indicators are signaling that a bounce would take place.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 200 SMA is also in line with the channel support, adding to its strength as a floor.

Stochastic is starting to pull up from the oversold area to signal a return in bullish momentum. In that case, EURAUD could make its way back up to the resistance near the 1.5800 major psychological level.

Data from Australia has been mostly weaker than expected so far this week, with quarterly company operating profits down 0.2% versus the projected 0.3% uptick. The MI inflation gauge is down from 0.3% to 0.2% while ANZ job advertisements rose another 1.5%.

Last week's set of reports from the euro zone have been mixed but some have fallen short of estimates. For instance, headline and core flash CPI readings printed gains but were a notch short of the consensus. German retail sales and French consumer spending were also weaker than expected.

The Spanish unemployment change report and region's Sentix investor confidence index are up for release today, and stronger than expected reports could revive the shared currency's strength. Australia has retail sales, the RBA statement, GDP, and trade balance all due this week.

By Kate Curtis from Trader's Way