Daily Technical Analysis by Kate Curtis from Trader's Way

[katetrades]

GBPJPY Short-Term Uptrend (Dec 16, 2016)

GBPJPY is still trending higher, moving above a rising trend line on its 1-hour chart and getting ready for another test of support. The trend line coincides with a former resistance at the 146.00 to 146.50 levels, which might hold as support from here.

The 100 SMA lines up with the rising trend line, adding to its strength as a floor. This is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside. The gap between the moving averages is widening so bullish momentum is getting stronger.

Stochastic is indicating oversold conditions, which means that sellers need to take a break and let buyers take over. GBPJPY could move up to the previous highs around the 148.50 minor psychological resistance or higher.

The BOE was less upbeat than expected in their latest policy meeting, citing that price pressures and growth could be subdued in the coming year. They had a unanimous vote to keep interest rates and asset purchases unchanged but warned that adjustments could go either way depending on Brexit risks.

Still, economic data from the UK has been mostly stronger than expected this week. Headline and core CPI came in better than expected and printed faster gains in price levels while the claimant count showed a smaller increase in joblessness. The average earnings index advanced from 2.4% to 2.5% to reflect stronger wage growth while retail sales came in line with expectations of a 0.2% uptick.

As for the yen, the Fed's decision to hike rates and indicate room for three more increases next year could push the currency on another leg lower. The BOJ is scheduled to announce its monetary policy statement early next week and could give more details on their yield-targeting measures.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Setup (Dec 19, 2016)

EURAUD made another bounce off its support at the 1.4125-1.4150 area late last week and looks ready for a test of resistance at the 1.4500 major psychological mark. If this holds as a ceiling, the pair could head back to the bottom of the range once more.

The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside or that the top of the range is more likely to keep gains in check than break. Stochastic is heading lower, also suggesting that sellers are regaining control of price action.

Note, however, that the gap between the moving averages is narrowing so an upward crossover might take place. If this goes on, buyers could gain more traction and push for a break above the range resistance.

Just the other week, the ECB decided to extend its QE program end-date to December 2017 even though they reduced the amount of monthly asset purchases for that extension period. This was viewed as an overall dovish move that would keep a lid on the euro's gains.

However, the RBA could be mulling some additional easing itself since data from the Land Down Under has been disappointing lately. For one, the GDP report for Q3 printed a surprise contraction in growth. On the other hand, jobs data and underlying components of the trade balance indicated improvements.

Also, data from China has been mostly in line with expectations so demand for Australia's raw material exports could be sustained. With that, the euro is still on weaker footing compared to the Aussie so the range could continue to hold.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Ascending Trend Line (Dec 20, 2016)

USDJPY is still trending higher, moving above an ascending trend line on its 1-hour time frame and gearing up for a test of support. Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level lines up with the trend line and 116.00 level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA lines up with the 50% Fib and appears to be holding as dynamic support while the 200 SMA is closer to the trend line and 61.8% Fib level.

Stochastic is heading north so USDJPY could follow suit, possibly making its way up to the swing high at 118.65 from here or all the way up to the 120.00 major psychological resistance.

The BOJ monetary policy statement is coming up and traders are expecting no changes in their quantitative easing program. Back in September, the BOJ already announced its decision to shift from aiming for 2% inflation to targeting the yield curve so any details on how they plan to achieve this could weigh on the yen.

Meanwhile, the FOMC just hiked interest rates by 0.25% and projected three more increases for next year, keeping fundamentals in favor of the US dollar. Data from the US was weaker than expected yesterday, as the flash services PMI posted a surprise decline, but Fed Chairperson Yellen had a few more upbeat remarks on the labor market.

Remaining releases from the US economy this week are the new home sales and final GDP reading for Q3. Another batch of upbeat readings could lead to more gains for the dollar. No other reports are due from Japan for the next few days.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Descending Channel (Dec 21, 2016)

EURAUD has been trending lower on its 1-hour chart, moving inside a descending channel connecting the latest highs and lows. Price just bounced off the channel resistance at the 1.440 major psychological level and could head back to support near 1.4100.

However, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This suggests that another test of resistance could be in order or that the pair could push for an upside breakout.

Stochastic is indicating oversold conditions and is turning higher, also suggesting that buyers could take control of price action. A move past the channel resistance could lead to a climb to the next ceiling at the 1.4500-1.4550 area.

Investor confidence in the euro zone has taken a dip after the recent terror attacks in Germany, Turkey and Switzerland. Aside from that, Italy's banking sector troubles are still in the spotlight as the government might need to bail out its largest banks. To top it off, the ECB's decision to extend its QE program to December 2017 could further dampen the euro's gains.

As for the Australian dollar, tensions between China and the US have weighed on the commodity currency, even as the former already returned the latter's drone it seized from the South China Sea. Expectations of weaker commodity prices and business activity down the line, stemming from the Fed's tightening moves, are also dragging the higher-yielding currency down.

Data from Australia has been slightly weaker than expected, as the MI leading index printed a flat reading, down from the earlier 0.1% uptick. The RBA minutes expressed some concern about the currency's gains and its impact on local inflation and export growth.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDNZD Descending Triangle (Dec 26, 2016)

AUDNZD formed lower highs and found support at the 1.0400 major psychological level, creating a descending triangle visible on its 1-hour chart. Price is on its way to test the bottom of the triangle and might be due for a bounce.

However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that a breakdown could happen and take the pair lower by around 300 pips or the same height as the chart formation. In addition, the moving averages line up with the triangle resistance, adding to its strength as a ceiling.

Stochastic is indicating oversold conditions, which means that sellers are already tired and could allow buyers to regain control of price action. A break higher could lead to a 300-pip rally as well.

There were no reports from both Australia and New Zealand last Friday but economic reports have been stronger for the latter earlier in the week. New Zealand printed a stronger than expected GDP reading of 1.1% for Q3 versus the projected 0.8% growth figure.

In addition, RBNZ head Wheeler recently confirmed that they have no plans of lowering rates further anytime soon. He also hinted that they're no longer as concerned about a strong Kiwi as they used to be.

On the other hand, the RBA minutes still noted that the appreciating AUD could complicate the transition going on in the economy. This suggests that the Australian central bank might continue to jawbone or even consider lowering interest rates in the future. Apart from that, the US-China tensions have been weighing on sentiment for the world's second largest economy and Australia's top trade partner.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDJPY Major Correction (Dec 27, 2016)

NZDJPY broke past the long-term resistance at the 78.00 handle a couple of months back before staging a steady ascent to 83.50. Price seems to be struggling to keep up its climb from here so a pullback might be due.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the broken range resistance, which might now hold as support. The 100 SMA just crossed above the longer-term 200 SMA to indicate that the path of least resistance is to the upside and that the uptrend could resume at some point.

Stochastic is still heading lower so price could follow suit. However, the oscillator is already dipping into the oversold area so sellers might need to take a break and let buyers take over. Once stochastic turns up from the oversold area, bullish pressure could be revived.

Economic data from Japan all came in weaker than expected, signaling that the BOJ might need to ramp up its stimulus efforts in order to boost growth and inflation. Household spending sank 1.5% on a year-over-year basis instead of posting the projected 0.2% uptick while the unemployment rate rose from 3.0% to 3.1%.

Deflation is still a concern in Japan, with the Tokyo national core CPI printing a 0.6% drop versus the projected 0.4% decline in price levels. National core CPI is down 0.4% versus the estimated 0.3% dip. The BOJ core CPI and Japanese housing starts data are lined up next.

In contrast, New Zealand recently printed a stronger than expected GDP figure of 1.1% versus the 0.8% consensus. However, tensions in the Asian region between China and Taiwan are currently dampening investor sentiment for commodities.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Countertrend Setup (Dec 28, 2016)

USDCAD is still moving inside an ascending channel on its daily time frame but is closing in on the resistance around the 1.3600 major psychological mark. If this area keeps gains in check, price could head back to the channel support.

Stochastic is already indicating overbought conditions, which suggests that bullish momentum is exhausted and that sellers could take over as buyers book profits. RSI is still heading up so there may be some potential gains left but the oscillator is nearing the overbought region as well.

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 channel support at the 1.3250-1.3300 level, adding to its strength as a floor.

Economic reports from the US came in stronger than expected as markets reopened yesterday. The CB consumer confidence index rose from an upgraded 109.4 reading to 113.7 versus the 108.9 consensus while the Richmond manufacturing index improved from 4 to 8, outpacing the estimate at 5.

Canadian banks were still closed for the holiday yesterday and there were no reports to boost the Loonie. There are still no reports due from Canada today while the US has its pending home sales report on tap. Meanwhile, crude oil price action could influence the positively-correlated Loonie for the time being, and a bit of risk aversion in the markets is weighing on the higher-yielding currency.

By Kate Curtis from Trader's Way

 

[katetrades]

EURCAD Retracement Setup (Dec 29, 2016)

EURCAD recently broke below the support around the 1.4350 minor psychological level and reached a low of 1.3800 before pulling back up. Applying the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken support, which might now hold as resistance.

The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. These moving averages are closer to the 50% Fib, which might also serve as a ceiling.

Stochastic is still on the move up to show that buyers are in control of price action for now. Once the oscillator reaches the overbought zone and turns lower, selling pressure could return and push EURCAD to the previous lows.

There have been no reports from both the euro zone and Canada recently, as price action seems to have taken its cue from the updates in the Italian banking crisis and crude oil movements. However, the Loonie seems to be shrugging off recent gains in the commodity as traders still have doubts that the OPEC deal would be effective.

Only low-tier reports are lined up from the euro zone today, and these are data on private loans, M3 money supply, and the Italian 10-year bond auction which might provide some insight on the country's finances.

There are no reports lined up from Canada today so Loonie traders could continue to take their cue from oil prices or risk sentiment. So far, it seems as though higher-yielding currencies have been on the back foot as traders prefer safe-havens.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Range Setup (Jan 02, 2017)

EURJPY has been trading sideways recently, finding support at the 121.70 area and resistance at 123.75. Price just bounced off the resistance and is on its way towards support or at least until the middle of the range where the moving averages are located.

The 100 SMA seems to be crossing above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This means that EURJPY could bounce off the mid-channel area of interest at 122.50 before heading back up to the resistance.

Stochastic is in the oversold area and is starting to turn higher, possibly indicating a return in bullish pressure. If buyers are strong enough, they could push for a break of the ceiling and a rally of around 200 pips or the same height as the range formation.

Final manufacturing PMI readings are due from the top euro zone economies today and strong improvements could lead to more gains for the shared currency. Not much gains are expected from Germany and France, but Spain and Italy could show increases.

Japanese banks are closed for the holiday so the thin liquidity could limit any moves from yen pairs. Then again, this low liquidity environment could be grounds for volatile action if there are strong catalysts.

Japanese banks will still be closed tomorrow so this situation could persist until then, leaving yen pairs sensitive to market sentiment. Over the weekend, China reported a dip in their manufacturing and non-manufacturing PMIs so risk appetite could be weak.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Channel Retracement (Jan 03, 2017)

NZDUSD has been trending lower on its 4-hour time frame, moving inside a descending channel connecting its latest highs and lows. Price is currently testing the channel support and could be due for a pullback to the resistance, which lines up with the .7100 major psychological level.

Applying the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the channel resistance. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. These moving averages, which might hold as dynamic resistance, are closer to the 38.2% Fib at the .7000 handle.

Stochastic is on the move up to show that buyers are taking control of price action. This confirms that a pullback from the recent selloff might be due until the oscillator reaches the overbought zone and turns lower.

US banks will reopen after the holiday today so another round of dollar rallies is expected. The US ISM manufacturing PMI is up for release and a climb from 53.2 to 53.7 is eyed, indicating a faster pace of industry expansion. More importantly, traders will look at the jobs component to have an idea of how Friday's NFP release might fare.

The NFP report is expected to show a 175K increase in hiring for December, slower than the earlier 178K gain. Still, this might be enough to assure market watchers that the Fed will be on track towards hiking interest rates a few more times this year. If not, the dollar could retreat against its counterparts unless the FOMC minutes due midweek give the currency a fresh boost.

New Zealand will hold its bi-weekly GDT auction and a rebound in dairy prices could mean renewed Kiwi strength. Earlier today, the Caixin manufacturing PMI printed a gain from 50.9 to 51.9 for China so this could keep risk-taking in play.

By Kate Curtis from Trader's Way