Daily Technical Analysis by Kate Curtis from Trader's Way

[katetrades]

USDCAD Countertrend Setup (Oct 21, 2016)

USDCAD bounced off the ascending channel support around the 1.3100 area recently and is on its way to test resistance at 1.3300-1.3350. If this area holds as a ceiling, price could head back down for another test of support.

The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. If so, price could make an attempt to break past the channel resistance and go for a sharper climb. However, stochastic is already indicating overbought conditions so sellers could take over once the oscillator heads south.

Economic data from the US has been mixed yesterday, with initial jobless claims missing expectations and the existing home sales report printing upbeat results. There are no major reports up for release from the US today.

The BOC refrained from cutting interest rates in their latest monetary policy statement but Governor Poloz hinted that officials actively discussed the idea of more stimulus. The central bank also downgraded growth and inflation forecasts for the year, citing a weaker outlook for export activity as well.

In contrast, Fed rate hike expectations for November or December are still in play, supporting the US dollar. With that, this counter trend setup could prove to be risky as an upside breakout seems possible, unless any other catalysts materialize. Canada has its retail sales and CPI figures lined up so strong readings could allow the Loonie to recover.

Crude oil price gains have been supporting the positively correlated Canadian dollar, as inventories data have shown surprise declines in stockpiles, further easing fears of an oversupply. Speculations about an oil output deal for the November OPEC meeting could continue to support the oil-related Loonie.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Channel Pullback (Oct 24, 2016)

EURJPY has been trending lower, moving inside a descending channel visible on its 1-hour time frame. Price is bouncing off the channel support and might be due for a test of resistance around the 113.50 minor psychological level.

Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the channel resistance and is also near the dynamic inflection point at the 100 SMA. This short-term moving average is below the longer-term moving average so the path of least resistance is to the downside.

Stochastic is on its way up but seems to be crossing down, which suggests the presence of weakening bullish pressure. If sellers take over, price could resume its drop to the previous lows near the 112.00 handle or lower until the channel support.

Euro zone flash PMI readings are due today from the manufacturing and services sectors of France and Germany. Small improvements are eyed, with all indices expected to show a slightly faster pace of industry expansion. Weaker than expected results, however, could spur stronger losses for the shared currency.

The ECB refrained from making any monetary policy adjustments last week but this turned out to be a disappointment for bulls who were expecting some confirmation that QE tapering had been discussed. Instead, Draghi suggested that their bond purchase program could even go past the March 2017 end-date.

Earlier today, Japan reported a rise in its flash manufacturing PMI from 50.4 to 51.7, outpacing the consensus at 50.6. Later on in the week, CPI and spending data are lined up from Japan, with another batch of strong readings likely to keep the Japanese currency supported.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Daily Uptrend Pullback (Oct 25, 2016)

EURGBP is still trending higher on its daily time frame, just slightly above the rising trend line connecting the recent lows of price action. Price is making a pullback to this support area, which lines up with the 38.2% to 50% Fibonacci retracement levels around .8800-.8900.

A bounce off this support zone could lead to a climb back to the previous highs at .9200 while a break lower could spark a larger correction. The 61.8% Fibonacci retracement level lines up with a broken resistance area, which might hold as support moving forward.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. However, stochastic is pointing down to show that sellers are in control for the time being and that further losses are possible until the oscillator reaches the oversold area.

Economic data from the euro zone was mostly stronger than expected yesterday. Only the French flash services PMI fell short of estimates as it fell from a downgraded 53.3 figure to 52.1 instead of improving to 54.1. The rest of the manufacturing and services PMIs from Germany, France, and the rest of the region showed stronger improvements.

Germany's IFO business climate index is due today and a rise from 109.5 to 109.6 is eyed. Also on today's schedule is a speech by ECB Governor Draghi who could reiterate that they're not looking to taper asset purchases just yet.

As for the pound, the UK CBI industrial order expectations showed a fall from -5 to -17 versus the projected rise to -2, reflecting weakening demand. BOE Governor Carney has a testimony lined up today and any hints on monetary policy could bring volatility to EURGBP.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Triangle Pullback (Oct 26, 2016)

EURAUD recently broke below the short-term triangle consolidation pattern. Price dipped to a low of 1.4125 before showing signs of pulling up and using the Fib tool on the breakout move shows that the 61.8% level is close to the broken triangle support.

The 100 SMA is below the longer-term 200 SMA, which confirms that the path of least resistance is to the downside. Also, the 100 SMA coincides with the broken symmetrical triangle support, adding to its strength as a potential ceiling.

Stochastic is still pulling up, which means that sellers are exhausted and letting buyers take over at this point. A bit of bullish divergence can be seen as price made lower lows while stochastic had higher lows. Once the oscillator makes it to the overbought level, sellers could get back in the game and push for a drop to the previous lows.

Earlier in the day, Australia printed a much stronger than expected quarterly CPI for Q3. Price levels were up 0.7%, stronger than the earlier 0.4% gain and the estimated 0.5% increase. The trimmed mean CPI came in line with estimates of a 0.4% gain, possibly enough to ensure that the RBA won't need to cut interest rates in the near future.

Data has been strong for the euro as well, with the German Ifo business climate index beating expectations at 110.5 versus 109.6 and the earlier 109.5 figure. On Monday, flash manufacturing and services PMI readings from Germany and France have been mostly stronger than expected.

ECB head Draghi confirmed that stimulus will stay in place until the region hits its inflation targets, mentioning that their easing program has done a fine job of warding off deflation. Up ahead, Australia still has data on import prices and PPI due while the euro zone will have its flash CPI readings from its top economies on Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Inverse Head and Shoulders (Oct 27, 2016)

EURJPY could be in for a reversal from its selloff, as the pair formed an inverse head and shoulders pattern on its 1-hour time frame. Price already broke past the neckline at the 114.00 major psychological mark and might climb by around 150 pips, which is the same height as the chart formation.

The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance is to the downside. An upward crossover, however, could draw more buyers to the mix and allow the climb to gain traction. Note that price is already trading above these moving averages, which might hold as dynamic support levels moving forward.

Stochastic is pointing down to show that sellers are in control of price action for now. Once the oscillator reaches the oversold region and turns higher, buying pressure could return.

Sources have shared that the ECB is mulling some adjustments to their QE program, which is likely to extend past the March 2017 end-date. This could include lightening restrictions on the availability and size of purchases, making it easier to boost liquidity in the region.

Data from the euro zone hasn't been so bad so far this week, as most of the manufacturing and services PMI from Germany and France came in better than expected. German IFO business climate was also better than expected but the GfK consumer climate index fell short of estimates.

There are no reports due from the euro zone and Japan today, as the top-tier reports are all lined up on Friday. From Japan, we've got consumer spending and CPI readings which could set the tone for the BOJ statement next week. Euro zone has its preliminary GDP and CPI reports from Germany, France, and Spain.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Double Top (Oct 28, 2016)

AUDUSD could be in for a quick reversal from its uptrend, as the pair formed a double top on its 1-hour time frame. Price failed in its last two attempts to break past the .7700 major psychological level and is currently testing the neckline support at .7600.

A break below this level could send the pair down by around 100 pips, which is roughly the same height as the chart formation. On the other hand, if support holds, another bounce towards the .7700 resistance could be seen. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.

Stochastic is pulling up, which means that buyers are taking control of price action. Near-term resistance is located around the middle of the formation and the dynamic inflection points or moving averages, which could draw sellers back in the game if the oscillator indicates overbought conditions then.

Australia printed a stronger than expected headline CPI for Q3, indicating a 0.7% increase in price levels versus the projected 0.5% uptick and the previous 0.4% gain. However, other inflation-related reports have missed expectations, which suggests that there's still some downside pressure on price levels. PPI posted a bleak 0.3% gain, half as much as the estimated 0.6% increase, while import prices fell 1.0% versus the estimated 0.7% drop.

As for the US, medium-tier reports have mostly been coming in better than expected, reflecting enough momentum for the US economy. Flash manufacturing and services PMI have printed upbeat readings for October, which suggests that the economy is off to a good start for the quarter.

US advanced GDP data is due today and a 2.5% growth figure is expected for Q3, much faster than the earlier 1.4% expansion. Stronger than expected results could further reinforce rate hike expectations and dollar demand while weak data could lead to a decline for the currency.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Range Resistance (Oct 31, 2016)

EURJPY has been moving sideways on its 4-hour time frame and is making its way closer to the range resistance at the 116.00 major psychological level. If it holds as a ceiling, price could head back south to the range support at 112.50-113.00.

The 100 SMA is above the longer-term 200 SMA on this chart for now so the path of least resistance is to the upside. However, the gap between the moving averages is narrow so a downward crossover could be possible, indicating a return in selling pressure.

Stochastic is indicating overbought conditions and is turning lower, also indicating that buyers are exhausted and could let sellers take over sooner or later.

Data from Japan was mostly stronger than expected on Friday, as inflation and consumer spending showed some improvements for October. On the other hand, euro zone data was mixed, with France reporting weaker than expected CPI and GDP. Spain and Germany printed stronger than expected CPI.

Earlier this week, Japan reported weaker than expected preliminary industrial production and retail sales data. The former showed a flat reading instead of the estimated 0.9% gain while the latter printed a 1.9% year-over-year decline versus the estimated 1.7% drop.

Euro zone flash CPI estimates are up for release today and strong data could be enough to assure market watchers that the ECB won't adjust its easing program yet. Analysts are expecting to see a rise from 0.4% to 0.5% for the headline figure and no change in the core figure at 0.8%. German retail sales and Italian CPI figures are also due today.

By Kate Curtis from Trader's Way

 

[katetrades]

EURCAD Ascending Channel Resistance (Nov 01, 2016)

EURCAD has been trending higher on its 4-hour time frame and moving inside an ascending channel. Price has moved past the mid-channel area of interest and is making its way to the resistance around the 1.4900 major psychological level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the resistance could keep gains in check. If so, EURCAD could eventually make its way back towards support at 1.4500 or at least until the middle of the channel at 1.4700.

Stochastic is on the move up, which means that buyers still have enough energy to push higher. Once the oscillator reaches the overbought zone and turns lower, sellers could return and force the pair to give back its recent gains.

Economic data from the euro zone came in line with expectations yesterday, signaling that the ECB might not need to ramp up stimulus just yet. Headline CPI flash estimates came in at 0.5% as expected while the core CPI flash reading stood at 0.8%. The region's GDP estimate came in at 0.3% as expected.

Canada's inflation reports came in mixed, with the RMPI posting a surprise 0.1% decline versus the estimated 0.5% gain and the IPPI coming in line with the projected 0.4% uptick. However, crude oil price action turned out to be a bigger driver of Loonie movement, as record high OPEC output pushed the commodity down.

Doubts that the OPEC can implement an output deal by the November 30 meeting have been weighing on crude oil and the oil-related Canadian dollar, although inventory data has shown some reductions in stockpiles. Canada's monthly GDP is due today and a 0.2% growth figure is eyed, slower than the earlier 0.5% expansion.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Descending Channel (Nov 02, 2016)

AUDUSD is starting to trend lower on its 1-hour time frame, moving inside a descending channel and just bouncing off the resistance at .7650. Price seems to have its sights set back on the bottom of the channel at the .7550 minor psychological support.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff could carry on. However, the pair is encountering an area of interest around the middle of the channel and the dynamic inflection points at the moving averages.

Stochastic is pointing down to show that sellers are in control of price action, but the oscillator is already dipping into the oversold region to show that bearish momentum might be exhausted. If buyers take over at this point, AUDUSD could make another test of the channel resistance or perhaps break higher.

Earlier in the week, the RBA decided to keep interest rates unchanged as expected while giving some upbeat remarks on commodity prices and their jobs outlook. Prior to this, China printed stronger than expected PMI readings for both manufacturing and non-manufacturing sectors, hinting at stronger demand for Australia's raw material commodities down the line.

In today's Asian session, the Australian economy reported a sharp 8.7% tumble in building approvals, worse than the projected 2.8% drop and the earlier 1.8% slide. As for the US, the ISM manufacturing PMI came in line with expectations but election-related uncertainties are currently dampening the currency's gains.

For today, the FOMC will have its monetary policy statement but they are expected to stop short of actually hiking interest rates. Later on in the week, the NFP report for October will be released and this could confirm whether or not the Fed will hike in December. Also, any headlines concerning the US elections could also drive dollar action, as odds favoring Trump could weigh on US assets.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Support Turned Resistance (Nov 03, 2016)

EURAUD recently broke below support around the 1.4600 major psychological level then dropped to a low of 1.4125. From there, price showed signs of a pullback and is currently testing the 61.8% Fibonacci retracement level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also the gap between the moving averages is widening, indicating stronger selling pressure. The 200 SMA lines up with the 61.8% Fib, adding to its strength as resistance, but a higher pullback could last until the 1.4600 area.

Stochastic is indicating overbought conditions and is starting to turn lower, reflecting a return in bearish momentum. If any of the resistance levels hold, EURAUD could make its way back to the previous lows or lower.

Australia printed a stronger than expected trade balance, as the deficit narrowed from a positively revised 1.82 billion AUD shortfall to 1.23 billion AUD. This was caused by a 2% gain in exports, indicating stronger external demand, and a 1% drop in imports.

Prior to this China printed upbeat PMI readings from the manufacturing and non-manufacturing sectors. The official manufacturing PMI rose from 50.4 to 51.2 while the Caixin version showed a rise from 50.1 to 51.2. The official non-manufacturing PMI climbed from 53.7 to 54.0 while the Caixin version rose from 52.0 to 52.4.

The RBA also gave a relatively optimistic statement this week, citing improvements in commodity prices and trade activity while giving an upbeat outlook for the jobs market. More details are due on Friday, along with Australia's retail sales report. Data from the euro zone has been mostly upbeat as well, but the region faces uncertainties from the Brexit and its troubled banking sector.

By Kate Curtis from Trader's Way