Daily Technical Analysis by Kate Curtis from Trader's Way

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GBPAUD Descending Channel Resistance (Nov 18, 2016)

GBPAUD has been trending lower, moving inside a descending channel on its 4-hour chart. The recent rally has allowed price to test the channel resistance once more, possibly bringing it back down to the lows at the 1.5800 handle or until the channel support.

Price is also finding resistance around the 50% Fibonacci retracement level at the 1.6800 mark, which lines up with a broken support. However, the 100 SMA seems to be crossing above the longer-term 200 SMA to indicate that buyers are about to take control of price action.

Stochastic is indicating overbought conditions, though, so a downward move might be due. In this case, bearish pressure could pick up and force the rally to reverse. A break past the 61.8% Fib, on the other hand, could confirm that bulls have won over.

UK retail sales came in much stronger than expected, reflecting a 1.9% jump in consumer spending versus the projected 0.5% uptick. The previous report was also upgraded to show a 0.1% uptick from the previously reported flat reading.

Prior to this, UK reports were mostly weaker than expected, as the CPI reports printed declines instead of small upticks from the pound's depreciation. Jobs data was also weaker than expected as claimants rose but the jobless rate improved to record lows.

Meanwhile, data from Australia was also weaker than expected, as the employment change report showed a 9.8K increase versus the projected 20.3K gain. There are no reports due from Australia or the UK today but BOE members have testimonies lined up.

By Kate Curtis from Trader's Way

 

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EURAUD Reversal Pattern (Nov 21, 2016)

EURAUD has formed a double bottom on its 1-hour time frame, signaling that price may be tired from its drop. The pair has yet to break past the neckline around 1.4550-1.4600 before confirming the potential climb.

The chart pattern is approximately 400 pips tall so the resulting breakout could be of the same size. However, the 100 SMA is below the 200 SMA to show that the path of least resistance is to the downside. Stochastic is also indicating overbought conditions, which means that buyers need to take a break and let sellers take over from here.

In that case, EURAUD could make its way back to the nearby support at the 1.4100-1.4150 area. A bounce off this region could trigger another test of resistance while a surge in bearish pressure could spur a breakdown.

The euro is currently weighed down by concerns about the French elections and Italian referendum. Over the weekend, former French President Nicholas Sarkozy lost the majority and has endorsed Francois Fillon who will go head to head with Le Pen, who is rumored to push for a French exit from the euro zone.

Data from Australia has been mostly weaker than expected, with the RBA minutes hinting that an accommodative policy stance could be maintained. Aside from that, yuan devaluation also appears to be dampening the Aussie's gains since this move is keeping a lid on iron ore prices abroad.

The euro zone has flash PMI readings lined up this week while Australia has its quarterly construction work done report due for release. Market sentiment could play a key role in price action as it had for the past few weeks.

By Kate Curtis from Trader's Way

 

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USDCAD Reversal Signal (Nov 22, 2016)

USDCAD seems to be tired from its climb, as a double top pattern formed on its 1-hour time frame. Price is still testing the neckline at the 1.3400 major psychological level before conrfirming this reversal signal.

A break below the 1.3400 neckline could push the pair down by at least 150 pips or the same height as the chart formation. On the other hand, if support holds, another move towards the 1.3550 area could take place.

The 100 SMA just crossed below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic seems to be turning up so a return in buying pressure could be seen.

The Canadian dollar is relying on crude oil price rallies for now, as optimistic expectations for an OPEC output deal are currently shoring up prices. In the technical talks this week, sources are saying that there has been some progress even though some concerns about Iran remain. They also noted that several members are willing to give Iran some flexibility with its production levels to make up for lost output when sanctions were still in place.

As for the dollar, Fed Chairperson Yellen strengthened hopes for a December rate hike in last week's testimony. She explained that the central bank would need to tighten monetary policy to give room for increased fiscal stimulus without running the risk of an overheating economy.

FOMC minutes are up for release this week and this could further boost hopes for a Fed hike next month. However, this may have been long priced in so traders might have a larger reaction to OPEC-related updates ahead of the November 30 meeting.

By Kate Curtis from Trader's Way

 

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AUDUSD Triangle Correction (Nov 23, 2016)

AUDUSD recently broke below the descending triangle support visible on its 4-hour time frame. Price found support near the .7300 major psychological level then started to pull up. Applying the Fib tool on the latest swing high and low shows the potential correction levels.

The 61.8% Fibonacci retracement level is closest to the broken triangle support around the .7600 handle while the 38.2% Fib is near a broken support at .7500. The 100 SMA crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside, and these moving averages coincide with the 61.8% Fib to add to its strength as a ceiling.

Stochastic is already indicating overbought conditions, which means that buyers are already getting exhausted. Once the oscillator turns down from the overbought region, sellers could take control and push AUDUSD back to the .7300 lows or lower.

Earlier today, Australia reported a 4.9% slump in construction work done for the third quarter. This was much worse than the estimated 1.5% slide, indicating weaker demand for metals and other raw materials.

Meanwhile, medium-tier reports from the US economy have been stronger than expected. Last week, Fed Chairperson Yellen confirmed the strong likelihood of a December rate hike since they'd need to adjust monetary policy to give room for increased fiscal stimulus from the incoming Trump administration.

Up ahead, FOMC minutes are up for release but this might not have much of an impact since this meeting took place weeks ago. Profit-taking ahead of the Thanksgiving long weekend is expected so AUDUSD might pull up higher before resuming its drop. US durable goods orders are also lined up today.

By Kate Curtis from Trader's Way

 

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USDCAD Downtrend Channel (Nov 24, 2016)

USDCAD appears to be starting a new trend down, creating a downtrend channel on its 1-hour time frame. Price just bounced off the 1.3400 support area and is making its way back up to the resistance at 1.3500.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic is indicating overbought conditions and has crossed lower, also suggesting that price could resume its slide.

However, price is above the moving averages at the moment so the bearish pressure isn't that strong. Also, the gap between the moving averages is pretty narrow so the indicators could merely be oscillating to reflect range-bound action.

The FOMC minutes confirmed that majority of policymakers think it's appropriate to hike interest rates relatively soon. Many cautioned that the economy runs the risk of overheating if they don't tighten monetary policy before reaching full employment, citing that a rate hike would also support the Fed's credibility.

Crude oil still seems to be supported, as Iraq has expressed willingness to cooperate in an OPEC output deal. According to their Prime Minister, they can make up for revenue with higher oil prices even with lower volumes. Also, crude oil inventories indicated a surprise draw of 1.3 million barrels versus the estimated buildup of 0.3 million barrels.

Data from the US economy has been mixed, although durable goods orders posted impressive gains. US banks are closed for the Thanksgiving holiday today so profit-taking could force the dollar to retreat.

By Kate Curtis from Trader's Way

 

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EURGBP Countertrend Setup (Nov 25, 2016)

EURGBP has been trending lower on its short-term time frames, moving inside a descending channel on the 1-hour chart. Price is currently testing the range support and might be due for a bounce back to the resistance around the .8560 levels.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, these moving averages are around the middle of the channel so they might hold as near-term resistance.

Stochastic is heading up to show that buyers are in control of price action for now. Once the oscillator reaches the overbought zone and turns lower, sellers could regain control and push price back down, perhaps even spurring a break below support.

Economic data from the euro zone has been mostly upbeat this week, with majority of the flash manufacturing and services PMIs coming in better than expected. German Ifo business climate data yesterday showed no change at 110.4 versus the estimated rise to 110.6.

As for the UK, the government's Autumn Forecast Statement appears to have reassured businessmen and investors that fiscal support can keep the economy afloat during the Brexit. The Chancellor assured that they won't be cutting pension benefits and that they'll increase spending on infrastructure as well.

The UK second GDP estimate is up for release today and no change from the earlier 0.5% estimate is eyed. Preliminary business investment data is also up for release and a strong increase could boost confidence in the UK economy while a drop sharper than the expected 0.2% decline could mean losses for the pound.

By Kate Curtis from Trader's Way

 

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USDJPY Short-Term Correction (Nov 28, 2016)

USDJPY is trending higher on its 1-hour chart, moving above an ascending trend line connecting the latest lows of price action. Price is currently testing this support area, which lines up with the 61.8% Fibonacci retracement level and the 100 SMA dynamic inflection point.

A bounce off this trend line and area of interest could spur a move back up to the swing high near the 114.00 handle. On the other hand, a break lower could lead to a test of the next area of interest at the 110.00 handle, which lines up with a former resistance and the 200 SMA.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is on the move down to show that bears are in control of price action but the oscillator is already dipping into the oversold zone to suggest that selling pressure is about to be exhausted.

US traders are set to return from their Thanksgiving holiday and might be ready to provide a fresh boost for the Greenback. There are no US reports on the docket today, as the main event risks are the US preliminary GDP release on Tuesday and the non-farm payrolls report due on Friday.

Fed rate hike expectations could continue to keep the dollar afloat in the coming weeks, unless economic data severely disappoints. Leading jobs indicators such as the ADP non-farm employment change and ISM manufacturing PMI release could provide clues on how the NFP report might turn out.

As for the yen, Japanese data came in line with expectations last Friday and showed a 0.4% fall in price levels for both Tokyo and the national level. Household spending, retail sales, and unemployment rate figures are lined up today and downbeat results could mean more yen weakness.

By Kate Curtis from Trader's Way

 

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GBPUSD Short-Term Range (Nov 29, 2016)

GBPUSD has been moving sideways, finding support around 1.2365 and resistance at the 1.2500 major psychological level. Price is making its way back to support after a recent bounce from the top of the range.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which suggests that the bottom of the range could keep losses in check. Stochastic is also turning up from the oversold area to indicate a return in buying pressure.

However, a surge in bearish momentum could trigger a break below the range support and a 135-pip drop for the pair, which is roughly the same height as the rectangle formation. Similarly, a break past the top of the range could yield at least 135 pips in gains.

Event risks for the day include the US preliminary GDP release, which could see an upward revision from 2.9% to 3.0% for Q3. The CB consumer confidence index is also due and a rise from 98.6 to 101.3 is expected.

Only medium-tier reports are lined up for the pound today, as the main UK event for the week is set for Wednesday when the BOE bank stress test results will be released. BOE Governor Carney will also provide an assessment of financial risks, which would likely include his take on the Brexit.

Keep in mind that Carney has been reiterating his anti-Brexit sentiments recently, holding meetings with top finance and business leaders in the UK to lobby for an extension before PM May invokes Article 50. He would likely use this week's Financial Stability Report as a platform to highlight the Brexit risks to banking and businesses.

By Kate Curtis from Trader's Way

 

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USDCAD Descending Channel (Nov 30, 2016)

USDCAD is still trending lower, moving inside a descending channel on its 1-hour chart and bouncing off resistance. Price is now making its way back down towards support at the 1.3300 to 1.3350 area, although it could encounter a near-term floor at 1.3400.

The moving averages are oscillating so the range-bound action could continue. The 100 SMA is slightly above the longer-term 200 SMA so the path of least resistance is to the upside, suggesting that another test of resistance could be in the cards.

Also, stochastic is heading up from the overbought zone to indicate that buyers are regaining control of price action. Price could move up to the 1.3480 area or the top of the channel and perhaps attempt to break higher, depending on the event risks.

Data from the US came in stronger than expected, as the Q3 GDP reading was upgraded from 2.9% to 3.2% while the CB consumer confidence showed a large jump this month. On the other hand, Canada's current account deficit came in wider than expected.

Canada's monthly GDP reading is due today and a 0.1% uptick is eyed, lower than the earlier 0.2% expansion. However, the bigger driver of price action could be the OPEC meeting, as an output deal could mean strong gains for the oil-related Loonie.

For now, energy ministers don't seem ready to reach a deal yet, as Iran has stated that it won't participate in a production cut. Iraq mentioned that it won't cooperate unless all the other members are on board. The lack of an agreement could mean more losses for oil and the Canadian dollar.

By Kate Curtis from Trader's Way

 

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USDJPY Ascending Trend Line (Dec 01, 2016)

USDJPY continues to trend higher, moving above a rising trend line on its 1-hour time frame. Price recently broke past the resistance around the 113.50 minor psychological level and zoomed up to the 114.50 area before pulling back.

Applying the Fib tool on the latest swing low and high shows that the 61.8% Fib is close to the 113.00 handle while the 38.2% Fib is closer to the previous swing high. If any of these levels hold as support, price could make its way back to the previous highs and beyond.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Also, the 100 SMA is near the rising trend line, adding to its strength as support. Stochastic is turning down from the overbought zone, though, so sellers are taking control while buyers are taking a break.

Economic data from the US was mostly upbeat yesterday, as the ADP non-farm employment change reading hinted at an upside NFP surprise while the Chicago PMI posted a sharp climb. Personal income was higher than expected but personal spending lagged.

Earlier today, Japan reported a small upgrade in its final manufacturing PMI from 51.1 to 51.3 to reflect a slightly faster pace of expansion in the industry. Prior to this, preliminary industrial production missed estimates of a 0.2% increase and posted a 0.1% uptick instead.

US initial jobless claims and ISM manufacturing PMI are up for release, setting the tone for Friday's NFP report. A stronger than expected read could seal the deal for a December Fed rate hike, although this scenario appears to have been well-priced in already.

By Kate Curtis from Trader's Way