Daily Technical Analysis by Kate Curtis from Trader's Way

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EURJPY Ascending Channel (Feb 06, 2018)

EURJPY suffered a steep drop recently but is currently pausing at the bottom of its ascending channel on the 4-hour time frame. A bounce off this region could take price up to the resistance at 137.25-137.50.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, the uptrend is more likely to continue than to reverse. However, price has already moved below the moving averages' dynamic inflection points.

Stochastic is also moving down to show that sellers are in control, but the oscillator is dipping into oversold territory to signal exhaustion among bears. If buyers take over, support around 134.50 could keep losses in check.

The yen was the strongest performing currency in latest trading session as risk-off flows picked up and higher-yielding assets too hits. Concerns about inflation and global tightening were being pinpointed as the cause of the drop while others say that it was just a much-needed pullback.

The euro has managed to stay resilient against most of its other peers though, especially since Draghi acknowledged that economic growth has been broad-based in the region and that they are more confident about inflation. Still, he cautioned that it's too early to call victory just yet.

Only a few medium-tier reports are due from the euro zone next but strong data could continue to keep the shared currency afloat on expectations of ECB tightening. Meanwhile, the yen could take its cue from market sentiment.

By Kate Curtis from Trader's Way

 

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GBPUSD Spinning Top (Feb 07, 2018)

GBPUSD recently broke past the resistance of a long-term ascending channel, indicating that a steeper climb may be underway. Price has since pulled back to the broken resistance, which is now holding as support and seeing a spinning top reversal candle.

This area of interest lines up with the 38.2% Fibonacci retracement level, adding to its strength as potential support. The 100 SMA is above the longer-term 200 SMA as well, confirming that the path of least resistance is to the upside.

Stochastic is turning lower still, though, which means that there's plenty of selling pressure left. A larger correction could take GBPUSD to the lower Fib levels or back to the channel support at 1.3600 near the 100 SMA dynamic inflection point.

There were no major reports out of the UK recently but it's worth noting that the latest set of PMI readings across all sectors have been weaker than expected and showed a slower pace of expansion. Meanwhile, the US has seen stronger than expected NFP and ISM PMI readings, with leading indicators suggesting more gains.

There are no major releases from both the US and UK today. A couple of FOMC members, namely Williams and Dudley, are scheduled to give testimonies so their remarks could shape Fed tightening expectations.

Pound traders, meanwhile, could start pricing in expectations for the BOE Super Thursday. The central bank will make its policy announcement, release the minutes of their meeting, and also print their updated economic forecasts in the quarterly Inflation Report.

By Kate Curtis from Trader's Way

 

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EURUSD Long-Term Pullback (Feb 08, 2018)

EURUSD appears to be pulling back from its latest rally as price could correct to the ascending trend line or Fib levels on the daily time frame. The 50% retracement level is closest to the trend line around the 1.2150 minor psychological mark.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This suggests that the rally is more likely to continue than to reverse. Also, the shorter-term SMA is close to the ascending trend line to add to its strength as support.

However, the gap between the moving averages is narrowing to reflect weaker bullish momentum. Stochastic is also on the move down so sellers might have the upper hand for now, and buying pressure would return once the oscillator indicates oversold conditions.

The US dollar rebounded against most of its counterparts in recent sessions but analysts have doubts that it can hold on to its winnings. Data has been weaker than expected and FOMC officials have warned of the dangers of low inflation.

Meanwhile, the euro could draw support from news of a German coalition. Although full details are yet to be revealed, Merkel's CDU party and CSU allies were able to strike a deal with the SPD.

Apart from that, euro zone data has been mostly upbeat. German industrial production and French trade balance beat expectations then the German trade balance and ECB economic bulletin are lined up next. Only initial jobless claims and mortgage delinquencies are due from the US today.

By Kate Curtis from Trader's Way

 

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EURGBP Descending Channel (Feb 09, 2018)

EURGBP continues to trade lower as it bounced off the descending channel resistance on its 4-hour time frame. Price could keep dropping until the channel support around .8650, which might provide a countertrend opportunity.

Stochastic is already pulling up from the oversold region to indicate that buyers are regaining control of price action. However, the 100 SMA is still below the longer-term 200 SMA to confirm that the path of least resistance is to the downside.

The BOE was more hawkish in their recent policy statement, leading most market participants to price in another interest rate hike for later this year. For this particular decision, the UK central bank kept rates and asset purchases unchanged as expected.

In particular, the statement indicated that "The Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November report in order to return inflation sustainably to the target."

Euro zone data has been mixed, with Germany printing a couple of disappointing figures recently. Other top economies such as France and Italy are showing improvements.

French and Italian industrial production numbers are due today. As for the UK, manufacturing and industrial production data is due. The former could show a 0.3% uptick while the latter might see a 0.9% decline.

By Kate Curtis from Trader's Way

 

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EURAUD Triple Top (Feb 12, 2018)

A reversal may be brewing for EURAUD as the pair has formed a triple top formation on its 4-hour time frame and could be due for a break lower. Price is testing the neckline at the 1.5650 minor psychological mark and a move below this could send it down by at least 150 pips or the same height as the formation.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. This means that there's a chance the longer-term uptrend could still resume. However, the gap between the moving averages is narrowing to signal weakening bullish momentum.

Stochastic is pulling up from oversold levels, though, so buying pressure could be in play. This could take price up for another test of the resistance around the 1.5750 minor psychological mark.

There are no major reports due from the euro zone or Australia today, which suggests that market sentiment or geopolitical updates could push this pair around. Preliminary GDP readings from the region's top economies are lined up mid-week, along with the euro zone flash GDP.

Analysts are expecting to see another 0.6% expansion for Q4 2017 and a stronger than expected read could be enough to bolster ECB tightening expectations. Keep in mind, however, that policymakers have been more mindful of downside inflationary pressures and euro strength these days.

The Australian employment change for January could show a 15.2K increase in hiring, less than half as much as the previous month's 34.2K gain. Meanwhile, the unemployment rate is expected to stay unchanged at 5.5%.

By Kate Curtis from Trader's Way

 

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USDCAD Double Bottom (Feb 13, 2018)

USDCAD could be in for a long-term reversal from its selloff as price has formed a double bottom on its daily time frame. The pair has yet to test the neckline around the 1.2950 minor psychological level, though.

A break higher could send price up by an additional 800 pips or roughly the same height as the chart formation. For now, the 100 SMA is below the longer-term 200 SMA to suggest that the path of least resistance is to the downside or that the selloff would continue. However, the gap between the moving averages is narrowing to indicate weakening bearish momentum.

Stochastic is turning lower from the overbought zone to show that sellers could still take over. After all, the 100 SMA is holding as dynamic resistance and the 200 SMA could serve as a ceiling also.

The US dollar has been weaker against most of its peers in recent sessions as risk appetite is returning to the financial markets. Strangely enough, the Loonie was barely able to take advantage of the rallies and the pickup in crude oil prices stemming from a record OPEC compliance.

There are no major reports from both the US and Canada today, so sentiment could still be king. A continuation of the risk-on rallies could prove positive for the higher-yielding Loonie while a return in risk aversion could lead to more gains for this pair.

Later on, the US will release its CPI and retail sales data. Headline inflation could rise by 0.3% versus the earlier 0.1% uptick while the core figure could post a 0.2% gain. Headline retail sales could see a 0.5% gain versus the earlier 0.4% increase.

By Kate Curtis from Trader's Way

 

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EURAUD Range Resistance (Feb 14, 2018)

EURAUD has been trading sideways recently, finding support at the 1.5650 minor psychological level and resistance near 1.5800. Price just bounced off the top of the range and might be due for a test of support again soon.

The 100 SMA is above the longer-term 200 SMA on the 1-hour time frame to signal that the path of least resistance is to the upside. However, the gap between the moving averages is narrowing to reflect weakening bullish pressure. A downward crossover could bring more sellers back in.

Stochastic is also on the move down to show that sellers have the upper hand, but the oscillator is nearing oversold levels to signal that bearish presure is weakening and that a bounce off support may take place soon.

There were no major reports out of the euro zone yesterday but the shared currency managed to hold on to most of its gains and go for more. As for Australia, the NAB business confidence index improved from 10 to 12 to reflect more optimism.

Today has German and Italian preliminary GDP figures due early in the London session before the region's flash GDP reading is printed. Analysts are expecting to see another 0.6% expansion, but a stronger than expected read could boost ECB tightening expectations.

There are no reports due from Australia today as its next major report is the employment change for January due on Thursday's Asian session. Analysts are expecting to see a 15.3K increase in hiring for the month, lower than the earlier 34.7K gain, and no change in the 5.5% jobless rate.

By Kate Curtis from Trader's Way

 

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GBPJPY Ascending Channel (Feb 15, 2018)

GBPJPY recently bounced off the top of its ascending channel and is now making its way to support. Applying the Fib tool on the latest swing low and high shows that this lines up with the 61.8% retracement level around the 146.00 major psychological mark.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, support is more likely to hold than to break. The 200 SMA is close to the 50% Fib and might hold as dynamic support as well.

Stochastic is already indicating oversold conditions to show that selling pressure is exhausted. Turning higher could draw more buyers back in and lead to a bounce up to the channel resistance or swing high at 156.00.

UK CPI reports turned out stronger than expected this week, with the headline figure steady at 3.0% instead of dipping to the 2.9% consensus and the core figure rose from 2.5% to 2.7%.

Data from Japan was actually weaker than expected since GDP came in at 0.1% versus the 0.2% estimate and the 0.6% earlier expansion. However, the yen has been taking advantage of dollar weakness and enjoying most of the risk-off flows.

UK retail sales data is due on Friday and a 0.5% rebound is eyed after the earlier 1.5% drop. However, weaker than expected reports would show that higher price levels are starting to weigh on consumer spending and potentially overall growth.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Channel Breakdown (Feb 16, 2018)

EURJPY had been trading inside an ascending channel pattern and price has broken below support. This signals that a reversal from the uptrend is underway, although additional confirmation could still be needed from technical indicators.

The 100 SMA is still above the longer-term 200 SMA on the daily time frame, which means that the path of least resistance is to the upside. This means that the rally is more likely to resume than to reverse. However, price has also broken below the 100 SMA dynamic support to indicate a pickup in selling pressure.

Stochastic is indicating oversold conditions and looks ready to turn higher, which means that buyers might be ready to prop price up once more. This could lead to a pullback to the broken channel support before the selloff resumes.

The yen was one of the top performing currencies lately as the Japanese currency is taking advantage of dollar weakness. Data from Japan also turned out stronger than expected as the industrial production figure was upgraded from 2.7% to 2.9%.

There were no major reports out of the euro zone recently, although medium-tier figures have been mostly upbeat. ECB tightening expectations are in play but traders also seem wary of currency strength and its impact on inflation.

There are no major reports due from Japan and the euro zone for the remainder of the trading week, and with Chinese markets closed for Lunar New Year festivities, market liquidity is expected to be thin. Profit-taking could be a factor as well.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Downtrend Correction(February 19, 2018)

USDJPY recently broke below a major support zone, confirming that a downtrend is underway. Price appears to be finding support at current levels, though, so a pullback is also possible. Stochastic is on its way up to indicate that bears are taking a break.

Applying the Fib retracement tool on the latest swing high and low shows that the 61.8% level lines up with the trend line at 108.00 and a former support zone that could now hold as resistance. This also coincides with the 100 SMA dynamic resistance.

The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside or that the selloff is more likely to continue than to reverse.

Dollar weakness has been in play for the most part of the previous week, and the momentum could carry on as more issues pop up for the Trump administration. The ongoing investigation into Russia's involvement in the US elections is raising more concerns while worries about a fiscal deficit remain.

US banks are closed in observance of President's Day today, which means that liquidity is low and volatility could tick higher. This could also give equities reason to pause from their rallies.

Later in the week, the FOMC meeting minutes are up for release and any cautious remarks could mean another leg of losses for the US currency. There are no major reports due from Japan.

By Kate Curtis from Trader's Way