Daily Technical Analysis by Kate Curtis from Trader's Way

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GBPUSD Major Correction (Nov 04, 2016)

GBPUSD is showing signs of a pullback from its selloff, possibly gearing up for a much-needed correction to the broken support around 1.2850-1.2900. Applying the Fib tool on the latest swing high and low on the daily time frame shows that this area lines up with the 61.8% Fibonacci retracement level.

The area of interest is also near the 100 SMA dynamic resistance, which might be enough to keep gains in check. The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to resume at some point.

Stochastic is still on the move up but is nearing the overbought levels, which suggests that buying pressure could be exhausted soon. Once the oscillator turns down from this region, sellers could take over and push price back to the swing low.

The British High Court ruled that the UK government would need to get the approval of parliament first before invoking Article 50. This could mean significant delays in starting the negotiation process with the EU, although this could provide lawmakers more time to iron out the details before splitting with the region. Keep in mind, though, that the government plans to appeal this decision to the supreme court next month.

Meanwhile, the BOE kept interest rates and bond purchases unchanged as expected. The statement also seemed less dovish than usual as policymakers were pleased by the recent progress in inflation, signaling that they might not need to ease again soon.

As for the US dollar, election-related uncertainties are still weighing heavily on stock markets and the currency. Data was mostly weaker than expected, with the ISM non-manufacturing PMI posting a sharper than expected drop led by a fall in its jobs index. Initial jobless claims, unit labor costs, and non-farm productivity also missed expectations.

By Kate Curtis from Trader's Way

 

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USDCAD Countertrend Setup (Nov 07, 2016)

USDCAD has been trending higher and moving inside an ascending channel on its 4-hour time frame. Price is currently testing the resistance and seems to be indicating that a test of support is in order.

Stochastic is indicating overbought conditions and is turning lower, which means that buyers are exhausted and allowing sellers to take over. In that case, the resistance at the 1.3400-1.3450 could keep further gains in check, possibly leading to a drop to the channel support at the 1.3100-1.3150 area.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is narrowing so an upward crossover might be due, possibly drawing more buyers to the mix. If buyers are eager to jump in, the mid-channel area of interest at the 1.3250 level could hold as support.

Economic data from the US came in slightly weaker than expected on Friday, as the NFP report printed a 161K gain versus the estimated 174K increase. The unemployment rate fell from 5.0% to 4.9% as expected while average hourly earnings rose 0.4% versus the 0.3% forecast.

As for Canada, jobs data came in above consensus, as the economy added 43.9K positions in October versus the estimated 10K drop. The Ivey PMI also beat expectations with a rise from 58.4 to 59.7, reflecting stronger industry growth. However, the trade balance showed a weaker than expected 4.1 billion CAD deficit versus the projected 1.7 billion CAD shortfall and the previous 2 billion CAD deficit.

Only medium-tier reports are due from the US today and none are due from Canada. The upcoming US elections could carry more weight in terms of dictating dollar price action, as higher odds of a Clinton victory could be positive for the dollar. Over the weekend, FBI director Comey announced that the agency found no evidence of wrongdoing in their investigation on Clinton's private email server.

By Kate Curtis from Trader's Way

 

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USDJPY Ascending Channel (Nov 08, 2016)

USDJPY is trending higher, moving inside an ascending channel on its 4-hour time frame. Price just bounced off the resistance late last week and is pulling back towards support at the 102.00 major psychological level.

The pair closed at the 50% Fibonacci retracement level on Friday then gapped higher over the weekend to move closer to the resistance at 105.00-105.50. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which suggests that a break higher could be possible.

Until price closes past the swing high, though, the correction could still be in play and USDJPY could fill the gap until it tests the 61.8% Fib closer to the bottom of the channel. Stochastic is already indicating overbought conditions so buyers are already feeling tired and could allow sellers to take it from here.

The US elections will likely be the biggest movers of price action for the week, as the conclusion of the FBI probe on Clinton's private email server over the weekend allowed risk appetite to return and the dollar to start the week stronger. Still, traders might book positions before the results start coming in, possibly leading to some dollar weakness.

Based on previous market movements, a Clinton victory could be positive for US markets and the dollar while a Trump victory could spur a flight to safety, which would favor the Japanese yen. Either way, volatility is likely to spike once the voting centers start sending in results so wide stops are warranted.

There are no major reports lined up from Japan for the day, leaving traders focused purely on the US elections. After this, the attention will turn to the next FOMC meeting in December, as US data hasn't been all that impressive and post-election risks could still keep central bank officials in a cautious mood.

By Kate Curtis from Trader's Way

 

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EURJPY Range Support (Nov 09, 2016)

The top of the range on EURJPY still held as a ceiling as risk aversion returned to the markets. Price is now making its way towards support at the 112.75 area and might even be poised for a break lower.

The moving averages are still oscillating, which suggests that the consolidation could carry on. Price is heading below these dynamic inflection points, an early indication that selling pressure is taking hold.

Stochastic turning down from the overbought zone to show a pickup in bearish momentum. There's still plenty of room for the oscillator to head south so sellers may be in control for some time. If price breaks below support, EURJPY could be in for a 300-pip drop, which is roughly the same height as the range.

The US election results are taking its toll on market sentiment, sending global futures down and spurring a flight to the safe-haven Japanese yen. So far, the growing lead by Republican nominee Donald Trump is sparking a lot of fear and uncertainty since his brash rhetoric could have repercussions on financial markets.

Data from the euro zone was also mostly weaker than expected, with German industrial production down 1.8% versus the projected 0.6% drop and both German and French trade balance printing worse than expected readings.

Data from Japan has been mixed, but it looks like the lower-yielding currency is taking its cue from risk sentiment above anything else. A Clinton victory could still yield a return in risk-taking, possibly allowing EURJPY to head back to the top of its range while a Trump win could lead to significant declines.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Uptrend Correction (Nov 10, 2016)

NZDUSD has sold off recently but appears to be approaching a rising trend line that's just forming on its 1-hour time frame. A bounce off this support area could lead to a test of the previous highs at the .7400 major psychological level or the creation of new ones.

The 100 SMA just crossed above the longer-term 200 SMA to show that buyers are taking control of price action. Stochastic is indicating oversold conditions to suggest that sellers are starting to get exhausted, possibly giving way to bulls later on.

In addition, the moving averages are close to the rising trend line and 61.8% Fib, which could be the line in the sand for any pullback. This also coincides with a former resistance area, which might now hold as support.

The RBNZ just cut interest rates by 0.25% to 1.75% as expected. RBNZ Governor Wheeler highlighted both improvements and weaknesses in the global and domestic economy, concluding that a lower exchange rate is needed for growth to be sustained enough to bring inflation to the middle of its target range.

Meanwhile, the US dollar is still recovering from the post-election selloff and has been lifted by the pickup in US equities. For now, it looks like investors are giving new US president Trump the benefit of the doubt and are pricing in potential upside for companies on his sweeping tax reform plan.

Apart from that, it's worth noting that both White House and Congress are under Republican control, which suggests smoother passage of laws without much gridlock. There's not much in the way of top-tier data from the US for the rest of the week so the focus could stay on the government's economic agenda.

By Kate Curtis from Trader's Way

 

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GBPJPY Descending Channel (Nov 11, 2016)

GBPJPY has staged a strong rally recently but is currently hitting the ceiling at the top of its descending channel pattern visible on the 4-hour chart. If this area keeps gains in check, price could head back towards support at the 122.00 area or at the mid-channel area of interest at 127.00.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is narrowing so an upward crossover might be due, possibly leading bullish pressure to pick up.

Stochastic is indicating overbought conditions, which suggests that buyers are exhausted for now. Selling momentum could return if the oscillator turns down from the overbought zone soon.

Sterling has been one of the stronger performers recently, as the pickup in risk appetite has allowed pound pairs to bounce off their lows. This has also forced the safe-haven Japanese currency to return its recent gains, with traders deciding to stay optimistic about global economic prospects.

Economic data from Japan has been in line with expectations today, as the tertiary industry activity index showed a 0.1% drop for September after staying flat in the previous month. There are no other reports due from Japan today so risk sentiment and profit-taking might push yen pairs around.

There are no reports due from the UK today as well. Several banks are closed for holidays so liquidity is thin, which could present opportunities for more volatile price action.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Long-Term Reversal? (Nov 14, 2016)

NZDUSD has been trading inside an ascending channel pattern on its daily time frame and is currently testing support at the .7100 major psychological level. A bounce off this channel bottom could lead to a move back to the top or until the recent highs at .7400.

On the other hand, a break lower could mark the start of a long-term downtrend for NZD/USD. Price is forming a head and shoulders pattern, which is a classic reversal signal, but it has yet to break below the neckline around .7000-.7050 to confirm the selloff.

Stochastic is heading south so sellers are in control of price action, but the oscillator is nearing the oversold area to show that bearish momentum could be exhausted soon. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside unless a downward crossover takes place.

Over the weekend, a strong earthquake hit Christchurch once more, leading many to speculate that the RBNZ might need to add stimulus again in order to keep the economy afloat. The central bank just cut interest rates by 0.25% in last week's rate statement and reiterated that a lower exchange rate is needed.

Meanwhile, the US dollar has been gaining ground after the elections as traders are pricing in the potential impact of Trump's leadership on businesses. In his campaign, the president-elect promised lower corporate taxes, healthcare overhaul, and banking deregulation, which could be positive for equities in the long run.

Up ahead, US retail sales, PPI, and CPI figures are all lined up for the week, including a speech by Fed head Yellen later on. Market watchers are now turning their attention to the December FOMC decision and rate hike expectations could keep the dollar supported. New Zealand has its GDT auction, quarterly retail sales and PPI due.

By Kate Curtis from Trader's Way

 

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USDJPY Major Correction (Nov 15, 2016)

USDJPY has completed its correction to the broken long-term trend line extending all the way back to 1998 so the reversal could resume from here. This coincides with the 50% Fibonacci retracement level on the swing low and high on the monthly chart, which seems to have held as strong support.

The 100 SMA is below the longer-term 200 SMA on this time frame, though, so the path of least resistance might still be to the downside. For now, the 200 SMA is holding as dynamic support.

Stochastic is indicating oversold conditions and is slowly turning higher. This could draw bulls back in the game, giving USDJPY more upside momentum until the next ceiling around the 110.00 level. A move past that area could eventually take USDJPY up to the swing high at 125.00.

Renewed optimism in the US economy after the elections has allowed the Greenback to regain ground against its forex peers. It seems as though investors are looking past the uncertainty and focusing on how lower corporate taxes and higher infrastructure spending could shore up profitability for US companies and overall economic growth.

Apart from that, traders are also turning their attention back to the projected 0.25% rate hike from the FOMC this December. There are several US reports on deck, namely retail sales, CPI, and PPI, so the outcomes could still influence rate hike expectations. Fed Chairperson Yellen also has a testimony lined up for Thursday, and this is expected to be a big mover for dollar pairs.

There are no major reports lined up from the Japanese economy, leaving the yen to return its previous risk-off gains. Besides, data from Japan hasn't been too impressive so the BOJ isn't expected to reduce its stimulus efforts anytime soon.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Short-Term Pullback (Nov 16, 2016)

USDCAD recently broke past the 1.3500 major psychological resistance and climbed close to the 1.3600 mark before pulling back. Applying the Fib tool on the latest swing low and high shows that the 50% level lines up with the broken resistance and area of interest.

Stochastic is heading lower so a larger correction might be due until the 61.8% level. However, the oscillator is already in the oversold region so sellers are tired and might let buyers take over. If so, the Fib levels could keep losses in check and push the pair back up to the swing high.

The 100 SMA is above the longer-term 200 SMA on this time frame, indicating that the path of least resistance is to the upside. The gap has widened, reflecting stronger bullish momentum. Price appears to be breaking below the 200 SMA dynamic support, though, so a break below the Fibs could take USDCAD to the next support at the swing low.

The Canadian dollar got a boost from stronger oil prices when newswires showed that the OPEC Secretary General is scheduling meetings with energy ministers from Iran, Venezuela, Ecuador, and Russia to come up with an output deal before the official meeting later this month.

However, a few countries have already expressed hesitation about cooperating and are even ramping up production ahead of an anticipated cap. With that, the cartel could still fail to come up with an agreement, possibly leading to another wave lower for crude oil.

Meanwhile, the US dollar has extended its gains after retail sales data beat expectations for October and saw upgrades for the previous month. CPI and PPI are still lined up for the week, along with a speech from Fed Chairperson Yellen.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Range Pullback (Nov 17, 2016)

A few days back, EURJPY broke out of its range visible on the 4-hour time frame and reached a high of 117.50. From there, price showed signs of a retracement and applying the Fib tool on the latest rally shows that the 38.2% level is close to the broken range resistance at 116.00.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside, which suggests that the rally could resume at some point. The moving averages could also hold as dynamic support near the 50% Fib.

Stochastic is heading down for now so sellers are in control of price action and could allow the correction to continue. Once the oscillator reaches the oversold area and turns higher, buyers could return to the game.

The euro has been turning lower against most of its peers as traders anticipate political uncertainty during the Italian referendum. Although this won't likely result in the country leaving the euro zone, it could still have repercussions on the country's banking sector and economic outlook.

There were no reports out of the euro zone yesterday while today has the final CPI readings due. Any downgrades could put more weight on the shared currency. The ECB minutes are also up for release today.

As for the yen, there have been no major reports released recently so the lower-yielding Japanese currency has been moving to the tune of market sentiment. Risk-off flows could continue to favor the yen while a return in risk-taking could lead to losses.

By Kate Curtis from Trader's Way