Daily Technical Analysis by Kate Curtis from Trader's Way

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GBPUSD Channel Top (Jan 23, 2018)

Cable has been climbing steadily and is testing the top of its ascending channel visible on the daily chart. This could provide a countertrend opportunity for a pullback to the channel support or at least until the mid-channel area of interest.

The 100 SMA is above the longer-term 200 SMA on this time frame, so the path of least resistance is to the upside. This means that price could still make a strong break past the channel resistance and start a steeper uptrend.

However, stochastic is already indicating overbought conditions, so bulls must be exhausted. If selling pressure takes over, a pullback could be underway until the 1.3500 levels.

Brexit updates have mostly been bullish for the pound as the government is making more progress in drafting its transition plans. Data from the UK last week has mostly disappointed and this week has the jobs report due.

Analysts expect a lower claimant count change of 2.3K compared to the earlier 5.9K increase in joblessness. The unemployment rate could hold steady at 4.3% while the average earnings index could also stay at 2.5%. Stronger than expected results could lead to expectations of upbeat consumer spending and inflation numbers down the line.

As for the dollar, the currency barely drew support from news that the US government shutdown is over. Risk appetite is keeping a lid on the safe-haven currency's gains for now and there are no major reports due next.

By Kate Curtis from Trader's Way

 

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USDCAD Bearish Flag (Jan 24, 2018)

USDCAD has been treading mostly sideways in the past few days and is consolidating inside a bearish flag formation visible on the daily time frame. Price is currently testing the triangle support and a breakdown could send it to the lows around 1.2100.

On the other hand, an upside break could take it up to the resistance at 1.2900. The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, which suggests that a move lower is more likely to happen than a break higher. In addition, the 100 SMA could add an extra upside barrier around 1.2600.

Stochastic is pulling up from oversold levels, though, so bulls are taking over while bears are taking a break. In that case, USDCAD might still bounce back up to the top of the small triangle formation before picking a clear direction.

The Loonie was able to draw some support from more upbeat discussions on NAFTA as some key members of the negotiating teams acknowledged that progress is being made. Trump still looks willing to walk out if Canada or Mexico don't give in to U.S. demands in the auto industry but other sectors could see more developments.

In contrast, the dollar was the weakest currency for yet another day as risk-taking and weak data dragged it down. Safe-haven flows also moved to the Japanese yen and Swiss franc instead.

Up ahead, the crude oil inventories data could lead to more volatility for the oil-related Loonie and a buildup might be reported after the API capped off its streak of reductions. Analysts are still expecting a draw of 1 million barrels in the EIA report but there could be room for a downside surprise.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Trend Line Bounce (Jan 25, 2018)

This pair has been trending higher, moving above an ascending trend line on the 1-hour time frame and just bouncing off support. A rally could take it up to the latest highs near .7425 and beyond.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside or that the rally is more likely to continue than to reverse. Also, the 100 SMA has held as dynamic support as it lines up with the trend line.

Stochastic is also pulling up from oversold conditions to show that bullish momentum is returning. Another dip could find support at the trend line that's been holding since last year or at the 200 SMA line in the sand for the uptrend.

New Zealand printed weaker than expected quarterly CPI of 0.1% versus the estimated 0.4% gain and down from the previous 0.5% figure. Underlying data revealed that this was mostly due to lower retail prices and automobile costs, which could push RBNZ tightening expectations back further.

However, dollar weakness has been in play again after Treasury Secretary Mnuchin remarked in the Davos summit that a weaker dollar is good for trade. Fears of a trade war, particularly with China, have also weighed on the currency.

Apart from that, the presence of risk appetite in the markets has been bearish for the safe-haven dollar. US data also turned out mostly weaker than expected, keeping traders doubtful about the Fed's tightening plans this year.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Triangle Pullback (Jan 26, 2018)

USDCAD recently broke to the downside of its symmetrical triangle formation and fell to a low of 1.2240. Price has bounced since then and appears to be making a correction to the broken support around 1.2420.

Applying the Fib retracement tool on the breakout move shows that the 61.8% level is closest to the broken support but the pair seems to be finding resistance at the 50% level already. Stochastic is also on the move down to reflect a return in selling pressure.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. These moving averages are also close to the area of interest, adding to its strength as potential resistance. If it holds, the pair could fall back to the swing low or lower.

The US dollar drew some support in the New York session as US President Trump said that he sees the currency getting stronger and stronger. He also said that Treasury Secretary Mnuchin's remarks on a weaker dollar being good for trade as taken out of context.

Data from the US turned out mixed as the initial jobless claims rose from 216K to 233K but was better than the estimated 239K figure. New home sales sank from a downgraded 689K figure to 652K versus the estimated drop to 627K. Advance GDP data is due next and a 3.0% growth figure is eyed.

As for the Canadian dollar, the currency could find some support from oil prices and more positive updates from NAFTA. Retail sales turned out mixed as the headline figure disappointed but the core reading showed a 1.6% gain versus the estimated 0.8% uptick. Canada's CPI readings are lined up next.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Ascending Channel (Jan 29, 2018)

GBPJPY is trending higher and looks ready for a test of its ascending channel support. Applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with support at the 152.50 minor psychological level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This signals that the rally is more likely to resume than to reverse. In addition, the 100 SMA lines up with the 50% Fib at 153.00 and the 200 SMA is closer to the channel bottom.

Stochastic is still heading lower for now to indicate that selling pressure is in play. However, the oscillator is nearing oversold conditions to show that pound bears might be exhausted and buyers could take over.

A number of medium-tier reports are due from the UK for the first half of the week before the manufacturing and construction PMIs are released during the latter half. Apart from that, Brexit-related updates could also push the pound around.

Meanwhile, the Japanese yen doesn't have plenty of top-tier catalysts on deck, but it could take its cue from dollar price action stemming from the FOMC decision. Market sentiment and global bond yields could also dictate yen movement.

Medium-tier reports from Japan include household spending, retail sales, and the unemployment rate due in the next Asian session. The UK has net lending to individuals, mortgage approvals, and the BRC price shop index.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Range Support (Jan 30, 2018)

USDJPY has been moving back and forth inside a range with support at the 109.00 major psychological level and resistance at 114.00. Price is currently testing support and might be due for another bounce back to the top or halfway there.

Stochastic is already indicating oversold conditions and turning higher to signal a pickup in bullish pressure. A slight bullish divergence can be seen as price made lower lows while the oscillator had higher lows since January 12.

The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside, which suggests that support is more likely to hold than to break. Still, a move lower could lead to a drop of around 500 pips or the same height as the rectangle pattern.

The dollar rebounded against most of its counterparts in recent trading sessions as global tightening expectations picked up on remarks from a few central bank officials. Economic data turned out mostly upbeat, with the core PCE price index rising from 0.1% to 0.2% and the personal income figure up by 0.4% versus the 0.3% forecast. Personal spending, however, fell short at 0.4% versus the 0.5% consensus.

In Japan, data was weaker than expected. Household spending is down 0.1% on a year-over-year basis instead of the estimated 1.6% figure and the earlier 1.7% increase. The unemployment rate also ticked up from 2.7% to 2.8% but this was mostly due to an increase in the labor force and in the participation rate.

The US CB consumer confidence index is due today but the focus could be on the FOMC decision and NFP release later on. Most market analysts appear doubtful that the dollar bounce could last, although it could hinge on sentiment and bond yields from here.

By Kate Curtis from Trader's Way

 

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EURUSD Short-Term Trend Line Bounce (Jan 31, 2018)

EURUSD has been trending higher over the past few weeks and is currently above a steep rising trend line on its 1-hour chart. Price is bouncing off this support zone, which lines up with the 50% Fibonacci retracement levels, and is setting its sights on the swing high around 1.2525.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. This short-term moving average also appears to be holding as dynamic support, but a larger dip could still find a floor at the 200 SMA dynamic inflection point near the 61.8% Fib.

Stochastic is still on its way down and has yet to indicate oversold conditions, which means that sellers could still have the upper hand for now. This could keep the correction going until the oscillator turns up from oversold levels.

Economic data from the euro zone came in mixed, with French flash GDP up by 0.6% versus the estimated 0.5% expansion. German preliminary CPI turned out below expectations with a 0.7% drop, though, lower than the estimated 0.5% dip. The region's flash GDP came in line with estimates of a 0.6% growth figure.

The dollar struggled to hold its ground on risk aversion and rising US bond yields but wound up weakening to most of its rivals ahead of the State of the Union Address and FOMC decision. Month-end profit-taking could also be blamed for the dip.

Up ahead, the Chicago PMI and ADP non-farm employment numbers are also due and these could shape expectations for Friday's NFP report. Stronger than expected data, combined with hawkishness from the Fed, could allow the dollar to make a stronger rebound.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Ascending Channel (Feb 01, 2018)

AUDUSD continues to trend higher inside its ascending channel pattern on the 4-hour time frame. Price is currently testing the channel support and might be due for a bounce to the top.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. This means that the rally is more likely to resume than to reverse. Still, a break below the channel support could find a floor at the 100 SMA dynamic inflection point.

Stochastic is still on the move down to indicate that selling pressure is present. The oscillator is near oversold conditions, though, so sellers might want to take a break soon and allow buyers to take over. In that case, the pair could recover to the top of the channel near .8200.

Australia's quarterly CPI readings turned out slightly weaker than expected as the headline figure came in at 0.6% versus 0.7% while the trimmed mean CPI was at 0.4% versus 0.5%. Private sector credit also fell short of estimates at 0.3% versus 0.5%.

Meanwhile, data from China was mixed as the official manufacturing PMI fell from 51.6 to 51.3 while the non-manufacturing component improved from 55.0 to 55.3. The Caixin version of the manufacturing PMI held steady at 51.5 as expected.

Earlier today, data from Australia also turned out mixed. The AIG manufacturing index printed a gain from 56.2 to 58.7 while import prices popped up by 2.0% to reflect stronger inflationary pressure. Building approvals, however, slipped 20%.

The FOMC statement led to a bit of a boost for the dollar on stronger inflation expectations and the addition of the word "further" in projecting more tightening moves. The next event risk for the dollar could be the NFP release on Friday and the ADP report hinted at a potential upside surprise.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Channel Resistance (Feb 02, 2018)

USDJPY is trending lower on its 4-hour time frame, moving inside a descending channel pattern. Price is currently testing the channel resistance around 109.50 and might be due for a move back to the bottom or the swing low.

The top of the channel lines up with the 50% Fibonacci retracement level that might be enough to keep gains in check. A higher correction could last until the 61.8% Fib closer to the 100 SMA dynamic inflection point. This short-term moving average is below the 200 SMA so the path of least resistance is to the downside.

Stochastic is also turning lower from the overbought area to signal a pickup in selling pressure. A bearish divergence can be seen as price made lower highs while the oscillator had higher highs since mid-January.

Economic data from the US was mostly stronger than expected but this failed to give the dollar a strong lift. The ISM manufacturing PMI fell from 59.7 to 59.1 to reflect a slower pace of industry growth, but the reading was better than the 58.7 consensus. However, the jobs component posted a sharp decline, leading to downbeat expectations for the NFP.

Analysts are expecting to see an increase of 181K in hiring, slightly stronger than the earlier 148K gain. The ADP report has beat expectations, but it's also worth noting that the earlier figure was downgraded. Also, Challenger job cuts were up 37.7% for January.

As for the yen, data from Japan has been mixed, with the final manufacturing PMI enjoying an upgrade and retail sales beating expectations. Household spending and housing starts fell short of estimates while the jobs report showed promising components.

By Kate Curtis from Trader's Way

 

[TradersWay]

USDCAD Descending Channel (Feb 5, 2018)

USDCAD popped up from support around the 1.2250 minor psychological level to the 1.2400 area, which lines up with an area of interest. This could also serve as resistance of the new descending channel forming on the 4-hour time frame.

Stochastic is indicating overbought conditions to show that buyers are feeling exhausted and could let sellers take over. If so, the pair could fall back to the swing low or the bottom of the channel.

The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. This suggests that the selloff is more likely to continue than to reverse. However, price has already closed above the 100 SMA to signal strengthening bullish momentum.

Stronger than expected US economic data led to a dollar rally on Friday, with the NFP printing a 200K gain in hiring for January versus the estimated 181K increase. To top it off, the December figure was upgraded to 160K.

The unemployment rate held steady at 4.1% as expected while the average hourly earnings figure beat expectations with a 0.3% increase versus the estimated 0.2% uptick. The previous reading also enjoyed a positive revision to 0.4%.

The ISM non-manufacturing PMI is due today but might not have such a huge impact on the dollar since the jobs report was already released. Canada has its trade balance on Tuesday and its own jobs report lined up on Friday.

By Kate Curtis from Trader's Way