Daily Technical Analysis by Kate Curtis from Trader's Way

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USDJPY Triangle Pullback (Oct 07, 2016)

USDJPY recently broke outside its descending triangle pattern visible on the 4-hour time frame. Price found resistance around the 104.00 handle and might be ready for a pullback to the broken triangle resistance at the 101.50 minor psychological level.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with this broken triangle resistance and area of interest. This is also near the moving averages, which could hold as dynamic support levels.

However, the 100 SMA is below the longer-term 200 SMA, signaling that the path of least resistance is to the downside. The gap between these moving averages is narrow so a crossover could be possible. Stochastic is heading south from the overbought zone to show that bearish pressure is picking up and that a correction is due.

The main catalyst for this pair today would be the NFP release, which might show a 171K increase in hiring versus the previous 151K figure. Leading jobs indicators have been printing improvements so traders have set their expectations up for an upside surprise, which could support Fed rate hike expectations for December or even November.

A downside surprise, however, could spark a sharp dollar selloff as this would douse hopes for Fed tightening. Still, analysts believe that any reading over 100K could keep tightening expectations in play keep the dollar afloat.

Data from Japan has been mostly weaker than expected, ramping up speculations that the BOJ would have to increase stimulus at some point. Apart from that, bulls appear to be booking profits off their long positions and have run out of steam in pushing yen pairs down.

By Kate Curtis from Trader's Way

 

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EURAUD Short-Term Reversal (Oct 10, 2016)

EURAUD was recently in a downtrend before price formed an inverse head and shoulders pattern on its 1-hour time frame. Price has yet to break past the formation's neckline around the 1.4775 level before confirming the potential reversal.

The 100 SMA is above the longer-term 200 SMA on the 1-hour time frame, confirming that the path of least resistance is to the upside. Also, the gap between the moving averages is widening to reflect a buildup in bullish momentum. The 100 SMA appears to have held as near-term dynamic support as well.

Stochastic is pointing down to show that selling pressure is in play. If the 1.4775 area continues to keep gains in check, price could still sink to the lows near the 1.4600 handle.

There were no major reports out of Australia and the euro zone last Friday and no major ones are due today. However, central bank biases from both economies could keep the pair afloat. The RBA monetary policy statement kept its neutral tone, reflecting a smooth transition to the new leadership under Governor Philip Lowe.

Earlier last week, rumors swirled that the ECB was considering tapering its bond purchases even before the conclusion of its QE program, leading to a strong boost for the shared currency. However, Governor Draghi mentioned that no such discussions have taken place.

German trade balance, Italian industrial production, and euro zone Sentix investor confidence data are lined up for today, likely adding volatility to euro pairs. Japanese, US, and Canadian banks are closed for the holiday so the low liquidity environment could set the stage for another round of volatile moves.

By Kate Curtis from Trader's Way

 

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USDCAD Rising Wedge (Oct 11, 2016)

USDCAD has formed higher lows and higher highs, creating a rising wedge formation visible on its 4-hour chart. Price is currently testing the wedge support at 1.3185 and could be due for a breakout soon. If support holds, price could head back to the resistance at 1.3315.

The 100 SMA is above the longer-term 200 SMA, suggesting that the path of least resistance is to the upside. Also, the short-term moving average lines up with the wedge support, adding to its strength as a floor.

Stochastic is on the move down to show that sellers are in control of price action for now but the oscillator is nearing the oversold region. Once it turns from that area and moves higher, price could follow suit. A break in either direction could result to a move of at least 300 pips, which is roughly the same height as the chart formation.

US and Canadian banks were closed for their respective holiday yesterday, keeping liquidity thin for the pair. However, price was pushed around by movements in crude oil prices, as the commodity got a boost from Russian President Vladimir Putin's comments on cooperating with the OPEC should they decide to impose a production freeze or cut.

Another informal OPEC meeting is scheduled for the week but Iran and Iraq won't be attending, which suggests that no major decisions are likely to come from this gathering. Still, a stronger resolve to stabilize prices could lead to another boost for the commodity on this data-light week.

Jobs data from Canada came in better than expected for September, and so did the Ivey PMI reading. There's not much in the way of top-tier data from Canada this week while the US has the FOMC minutes and retail sales data due later on.

By Kate Curtis from Trader's Way

 

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EURAUD Range Support (Oct 12, 2016)

EURAUD has been selling off recently but could be due for a bounce as price is nearing the bottom of the range on its 1-hour time frame. If the bottom of the range at the 1.4550 minor psychological support keeps losses in check, the pair could head back up to the top of the range at 1.4750 or at least until the middle around 1.4650.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing so a downward crossover might be due, drawing more sellers to the mix and possibly triggering a downside break of support. If that happens, the pair could fall by an additional 200 pips or the same height as the rectangle formation.

Stochastic is already indicating oversold conditions so a bounce could be in order. The oscillator has yet to move out of the oversold region before indicating a return in buying momentum.

Economic data from the euro zone was stronger than expected in recent sessions. The region's ZEW economic sentiment index rose from 5.4 to 12.3 this month while the German ZEW index was up from 0.5 to 6.2, outpacing the consensus at 4.2.

As for Australia, its Westpac consumer sentiment index posted a strong 1.1% increase, a stronger pace of improvement compared to the earlier 0.3% uptick. An upbeat report from Moody's on the strength of the Australian economy is keeping the Aussie supported during the Asian session.

There are no other reports due from Australia for the rest of the day while the euro zone has its industrial production report and the French final CPI reading lined up.

By Kate Curtis from Trader's Way

 

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EURJPY Descending Channel (Oct 13, 2016)

EURJPY is trending lower on its 4-hour time frame, moving inside a descending channel formation. Price is currently testing the resistance around 116.00 and might be due for a selloff back to support at the 111.00 major psychological level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, price is already trading above both moving averages so an upward crossover could be possible. Price also seems to be finding support at these dynamic inflection points.

Stochastic is on the move up from the oversold region, also suggesting a return in buying pressure. In that case, price could attempt to break past the channel resistance and start a reversal.

European markets closed in the red yesterday even though medium-tier reports from the region came in line with expectations. This was likely due to resurfacing Greek debt concerns raised by ECB member Coeure. Apart from that, widening yield spreads between Germany and the US also spurred euro weakness.

Economic data from Japan has been mixed, with core machinery orders posting a smaller than expected 2.2% drop and preliminary machine tool orders showing a 6.3% slide, following the earlier 8.4% drop. The tertiary industry activity index is up for release today and a 0.2% decline is eyed.

There are no major reports due from the euro zone today, with only the German final CPI reading on the docket. Any headlines on the Brexit, yield spreads, or Greek debt could influence euro price action on a data-light day.

By Kate Curtis from Trader's Way

 

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EURUSD Correction Setup (Oct 14, 2016)

EURUSD recently broke below its descending triangle support at 1.1130 and has dipped to a low of 1.0988 before showing signs of a pullback. Applying the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level lines up with the broken support, which might now hold as resistance.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic is heading up, which means that buyers are in control of price action for now. In that case, a higher pullback could be possible and the line in the sand might be the top of the triangle around 1.1175-1.1200.

If any of these resistance levels hold, EURUSD could make its way back to the previous lows or lower. On the other hand, a move past the 1.1200 resistance could put the pair back on an uptrend.

Medium-tier economic reports from the US came in stronger than expected yesterday. Initial jobless claims stood at 254K, same as in the earlier week, and lower than the estimated 252K figure. Meanwhile, import prices posted the estimated 0.1% increase as expected, chalking up a rebound from the previous 0.2% dip.

Euro zone data has also been mostly in line with expectations for the week, with the ZEW economic sentiment readings released earlier on indicating a notable pickup in optimism. However, widening bond yield spreads between Germany and the US has highlighted the surge in demand for US assets, leading to a sharp drop for the shared currency midweek.

Up ahead, US retail sales and PPI numbers are due. Analysts are expecting to see a 0.6% gain in headline retail sales and a 0.4% uptick in core retail sales, representing rebounds over their previous readings. Producer prices are expected to post a 0.2% uptick for the headline figure and a 0.1% rise for the core figure. The preliminary UoM consumer sentiment for October is also lined up and a rise from 91.2 to 92.1 is expected.

By Kate Curtis from Trader's Way

 

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EURAUD Range Breakdown Correction (Oct 17, 2016)

EURAUD broke below support at the 1.4550 minor psychological level then dipped to the 1.4400 area before pulling up. Using the Fib tool on the latest swing high and lows shows that the 61.8% retracement level coincides with the broken range support, which might now hold as resistance.

The 100 SMA is below the longer-term 200 SMA on the 4-hour time frame, signaling that the path of least resistance is to the downside. The gap between the moving averages is widening, which means that bearish pressure is getting stronger.

Stochastic is on the move up for now, which means that buyers might be in control of price action, but the oscillator is nearing the overbought region. Once it turns lower from that area, selling momentum could return and allow any of the nearby Fib levels to keep gains in check.

There were no major reports out of the euro zone and Australia last Friday but China's inflation reports came in stronger than expected, providing support for the Australian dollar. Earlier in the week, though, trade data from China showed a sharp decline in both exports and imports so demand for Australia's raw material commodities could weaken.

Euro zone final CPI readings are up for release today, along with a speech from ECB Governor Draghi. This might set the tone for the ECB interest rate statement on Thursday, although no actual changes to monetary policy are expected. Still, policymakers are expected to address rumors that the central bank is considering winding down its asset purchases ahead of the program's end date.

As for Australia, the RBA minutes are up for release and this should provide more insight on whether or not the central bank would still adjust interest rates this year. Later in the week, Australia's job figures are up for release and a 15.2K increase in hiring is eyed.

By Kate Curtis from Trader's Way

 

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NZDUSD Long-Term Uptrend (Oct 18, 2016)

NZDUSD has been trending higher on its daily time frame, moving inside an ascending channel and currently testing support. Price seems to have bounced off the bottom of the channel and is headed back to the top at the .7650 minor psychological level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA is holding as dynamic support for the time being but a larger pullback could find its way to the 200 SMA dynamic support just below the bottom of the channel at .7100.

Stochastic is moving higher, which confirms that buyers are taking control of price action. If sellers take over, however, price could break below the channel support and start a reversal.

Earlier today, the quarterly CPI report from New Zealand printed a stronger than expected 0.2% gain versus the estimated flat reading. This undermined RBNZ official McDermott's remarks on weak inflation for Q3, signaling that the central bank might be in no rush to cut interest rates. Still, the latest reading was lower than the previous 0.4% gain.

Economic data from the US was weaker than expected on Monday, indicating a slowdown in the manufacturing sector. Industrial production was weaker than expected with a meager 0.1% uptick while the Empire State manufacturing index showed a surprise pickup in contraction instead of a return to industry growth.

US CPI reports are up for release today, with the headline figure likely to show a 0.3% increase and the core figure expected to post a 0.2% gain. Keep in mind that PPI readings beat expectations so there's a good chance that the CPI reports could be stronger than expected.

As for the Kiwi, New Zealand has another Global Dairy Trade auction lined up today and it might show a rebound in dairy prices after posting a 3% decline in the previous instance. China has a number of top-tier reports namely its GDP, retail sales, and industrial production figures due in the next Asian session and might also influence demand for the commodity-related NZD.

By Kate Curtis from Trader's Way

 

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GBPJPY Downtrend Pullback (Oct 19, 2016)

GBPJPY has been trending lower on its 1-hour time frame, moving below a descending trend line. Price bounced off the 124.75 area and is pulling up to test the trend line once more. Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the falling resistance.

A higher correction could last until the 61.8% Fib or the dynamic resistance at the 100 SMA. This is also close to a broken short-term support zone around the 130.00 major psychological level, which might keep gains in check moving forward.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is widening so bearish pressure is getting stronger. However, stochastic is still on the move up to show that buyers are in control of price action for now until the oscillator reaches the overbought zone and turns lower.

UK economic data came in better than expected, with the headline CPI up from 0.6% to 1.0% and the core CPI up from 1.3% to 1.5%. This was higher than the consensus at 0.9% and 1.4% respectively, as price gains were buoyed by a weaker pound in September.

For today, UK jobs data is due, with the claimant count change expected to show a 3.4K increase in joblessness, higher than the earlier 2.4K rise. The average earnings index is expected to hold steady at 2.3% while the unemployment rate is projected to stay unchanged at 4.9% as well. UK retail sales data is due on Thursday.

As for the yen, only Japan's all industries activity index is due, and it might show a 0.2% gain compared to the earlier 0.3% uptick. Earlier in the week, Japan's industrial production was downgraded from 1.5% to 1.3% to show a weaker pace of growth.

By Kate Curtis from Trader's Way

 

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USDCAD Short-Term Channel Bounce (Oct 20, 2016)

USDCAD is trending higher on its long-term and short-term charts, moving inside an ascending channel on its 1-hour time frame. Price dipped below the channel support but spiked right back up, indicating that buyers are putting up a fight.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In that case, USDCAD could move back up to the channel resistance at the 1.3300 major psychological level or higher. However, the gap between the moving averages is narrowing so a downward crossover might take place.

If that happens, selling pressure could pick up and trigger a break of the support at the 1.3100 major psychological level. Stochastic is on the move up to show that buyers are in control of price action but the oscillator is nearing the overbought region to reflect buyer exhaustion.

The Bank of Canada kept interest rates on hold at 0.50% as expected but Governor Poloz admitted that policymakers have "actively discussed" the idea of additional stimulus. The central bank also lowered its 2016 GDP forecast from 1.3% to 1.1% on weaker export activity.

In crude oil news, the EIA report showed a surprise draw of 5.2 million barrels from stockpiles, easing fears of an oversupply and driving crude oil back up again. Later on in the week, Canada is set to print its retail sales and CPI figures, which might underscore the BOC's dovish tone.

As for the dollar, US reports were mixed, as building permits beat expectations with a gain from 1.15M to 1.23M while housing starts fell from 1.15M to 1.05M instead of rising to 1.18M. US existing home sales are lined up, along with the Philly Fed index and the initial jobless claims.

By Kate Curtis from Trader's Way