Daily Technical Analysis by Kate Curtis from Trader's Way

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AUDUSD Short-Term Range (Feb 15, 2017)

AUDUSD bounced off support around the .7615 area once more and is now making its way back to the top of its short-term range visible on the 1-hour time frame. Price could find resistance near .7700 and head back to the bottom again.

The 100 SMA crossed above the longer-term 200 SMA to show that the path of least resistance is to the upside, keeping price supported until it tests the ceiling or perhaps breaks higher. In that case, the pair could head north by an additional 100 pips or roughly the same height as the chart formation.

Stochastic is also heading north so AUDUSD could follow suit but is closing in on the overbought area. Once the oscillator hits this region and turns lower, selling pressure could increase and trigger another move towards support or even a breakdown.

The US dollar has gained strong support on Fed Chairperson Yellen's hawkish remarks, affirming that a March interest rate hike could be possible. She downplayed the recent miss in average hourly earnings, citing that tightening labor market conditions could keep upside pressure on wages. Other Fed officials and FOMC voting member Kaplan echoed this upbeat sentiment and confirmed that three rate hikes could be possible this year.

However, the Aussie has also been able to put up a strong fight, thanks to the less dovish than expected RBA statement last week. The central bank acknowledged that commodity prices have been picking up and that China's performance continues to improve, something that was supported by the latest batch of data. Since China is Australia's largest trading partner, this could mean higher demand for commodity products.

By Kate Curtis from Trader's Way

 

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AUDUSD Countertrend Play (Feb 16, 2017)

AUDUSD has been trending higher on its short-term time frames, moving inside an ascending channel on its 1-hour chart. Price is currently testing the resistance at the .7700 major psychological level and might be due for a selloff back to the channel support at .7650.

The 100 SMA is above the longer-term 200 SMA on this time frame, which means that the path of least resistance is to the upside, and the gap between the two is getting wider to indicate stronger bullish momentum. In addition, the 200 SMA lines up with the channel support, adding to its strength as a floor.

Stochastic is already heading south from the overbought zone to indicate a pickup in selling pressure. However, if buyers remain in play, price could still move past the resistance and go on a sharper climb.

The dollar gave back some of its recent gains to its peers after Fed Chairperson Yellen sounded less hawkish in her second testimony. Market watchers focused on her remarks on weak investment spending and productivity, which are dampening wage growth and inflationary pressures. Data from the US, namely retail sales and CPI, all came in stronger than expected while industrial production chalked up a surprise 0.3% drop versus the estimated 0.1% uptick.

This was less upbeat compared to her earlier speech, which revealed that she is also looking to tighten sooner rather than later. In that testimony, she pointed to the progress in terms of achieving the Fed's dual mandate of full employment and 2% inflation. Other Fed officials are supporting this view, with a couple of voting members also citing that they could vote to hike soon.

As for the Australian dollar, the currency is enjoying strong support from the less dovish RBA statement last week and improved data from China. CPI and PPI figures beat expectations for January, signaling stronger inflationary pressures and potentially higher demand. Australia's jobs figures also turned out stronger than expected, with the economy adding 13.5K versus 9.7K jobs in January and the jobless rate improving from 5.8% to 5.7%.

By Kate Curtis from Trader's Way

 

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EURAUD Downtrend Pullback (Feb 17, 2017)

EURAUD has been trending lower and has recently broken below support around the 1.3800-1.3850 area. Price has dipped to 1.3725 before showing signs of a correction, and applying the Fib tool on the swing high and low on the 1-hour chart shows that the 50% level lines up with the area of interest, which could keep gains in check and push price back to the swing low.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 200 SMA coincides with the highest Fib, adding to its strength as the line in the sand for this selloff. Stochastic is in overbought territory and looks ready to turn lower, possibly drawing more sellers to the mix.

On the other hand, a break past the 61.8% Fib and 1.3850 area could signal that buyers are putting up a fight and that a larger pullback to the 1.4000 major psychological level could be in the cards.

Economic data from Australia turned out stronger than expected, as the employment change figure came in at 13.5K versus the projected 9.7K increase. This brought the jobless rate down from 5.8% to 5.7%.

In Europe, recent top-tier reports haven't been so upbeat as the preliminary GDP readings from its top economies turned out below expectations. German ZEW economic sentiment also fell, indicating weaker confidence in growth prospects.

Only the euro zone current account balance is lined up next and there are no other reports due from Australia for the rest of the week. Still, the commodity currency could continue to draw support from risk appetite and China's improved economic outlook while the euro could be weighed down by financial troubles in Greece and Italy, as well as foreseen risks from France's elections.

By Kate Curtis from Trader's Way

 

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USDJPY Broken Channel Correction (Feb 20, 2017)

USDJPY recently broke above its descending channel visible on the 1-hour time frame, indicating that it's done with its downtrend. Price climbed up to a high of 115.00 before pulling back and applying the Fib tool on its latest swing high and low shows that the 61.8% retracement level lines up with the broken channel resistance.

The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. Price also seems to have bounced off the 200 SMA dynamic support, which is also near the channel resistance, and might be on its way back to the swing high.

Stochastic is pulling up from the oversold territory, which means that bullish pressure is building up once more. Stronger buying momentum could take USDJPY past the swing high onto the next ceiling around 115.50 and beyond.

US banks are closed for the holiday today so liquidity could be low and range-bound conditions could be in play. Over the weekend, Japan printed a weaker than expected trade surplus of 0.16T JPY compared to the estimated 0.28T JPY figure and the earlier 0.33T JPY surplus.

Japan's flash manufacturing PMI is up for release tomorrow and a drop from 52.7 to 52.1 to reflect a slower expansion in the industry. A weaker than expected read could reflect a sharper slowdown, which could be bearish for the Japanese yen.

As for the US, the flash manufacturing PMI is due and a rise from 55.6 to 55.8 is eyed, which would be indicative of a faster pace of growth. Traders are also on the lookout for Trump's tax reform plan as a truly "phenomenal" announcement could lead to more gains for US equities and the dollar.

By Kate Curtis from Trader's Way

 

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GBPUSD Descending Triangle (Feb 21, 2017)

GBPUSD formed lower highs and found support at the 1.2400 major psychological level recently, creating a descending triangle chart pattern. Price just bounced off the resistance and is moving closer to testing support.

The pair is also approaching the peak of the pattern, which means that a breakout could happen sooner or later. The chart pattern is approximately 300 pips tall so the resulting breakout could be roughly the same size. The 100 SMA is currently below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the moving averages are close to the triangle resistance, adding to its strength as a ceiling.

Stochastic is on the move down, indicating a pickup in selling pressure. However, the oscillator is already dipping into the oversold region, which means that buyers could get back in the game soon and push for a bounce off support or a break higher.

The main event risk for the pound could be the Brexit debtes going on in the House of Lords, as any indication that leaders might cause additional delays would extend the period of uncertainty for the UK economy. On the other hand, clearing this hurdle fairly smoothly could spur a relief rally for the pound.

Data from the UK has been mostly weaker than expected last week, as the consumer sector showed signs of lagging on slow wages combined with rising price levels. Prior to this, industry PMI readings also showed some weakness. This week, the second GDP estimate is due and a downgrade could also increase downside pressure on GBPUSD.

As for the dollar, futures are pointing to a higher open for stocks and sustained gains for the week as top retailers are scheduled to report earnings. Traders are also looking out for Trump's tax announcement, which might also be positive for equities and the dollar.

By Kate Curtis from Trader's Way

 

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EURGBP Head and Shoulders (Feb 22, 2017)

EURGBP formed a long-term reversal pattern visible on its daily time frame, signaling that price is done with its climb and that a selloff could be due. The pair is still testing the neckline support at .8400-.8450 at the moment but a break lower could send it down by 700 pips or the same height as the chart formation.

The 100 SMA is still above the longer-term 200 SMA for now so the path of least resistance might still be to the upside. However, the gap between the two is narrowing, indicating that buying pressure is weakening and that a downward crossover could take place soon. Price is already moving below the 200 SMA dynamic support to show that bears are taking control.

Stochastic is close to the oversold region, which means that sellers are taking a break for now. A move higher could take the pair up for a quick bounce to the .8500 area or the 100 SMA dynamic inflection point before selling pressure picks up.

The euro has been selling off recently due to political issues in Italy and France, along with debt troubles in Greece and Italy. Even though flash manufacturing and services PMIs came in better than expected yesterday, the shared currency failed to gain any traction as it was dragged down by headlines.

On the other hand, the pound is staying resilient in hopes that the government's Brexit plans can push through without a glitch through the House of Lords. The debates are still ongoing and traders are on edge for the outcome, but sources are saying that the timeline of triggering Article 50 by the end of next month is still a go.

UK public sector net borrowing was weaker than expected at a 9.8 billion GBP deficit while the BOE inflation report hearings confirmed that Carney isn't sold on hiking just yet. The UK second estimate GDP is due today and any revisions to the preliminary 0.6% growth figure could push the pound in a strong direction.

By Kate Curtis from Trader's Way

 

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EURJPY Descending Channel (Feb 23, 2017)

EURJPY is trending lower on its 4-hour chart, moving inside a descending channel connecting the latest highs and lows of price action. The pair is bouncing off support at the moment and may be due for a test of resistance.

The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. In addition, the gap between the moving averages is getting wider, which means that bearish pressure is getting stronger. The 100 SMA is around the mid-channel area of interest, adding to its strength as a ceiling in the event of a shallow pullback, while the 200 SMA dynamic resistance is closer to the channel top at 121.00.

Stochastic is on the move up to indicate that buyers are regaining control of price action from here, but it could be indicative of a return in bearish pressure once it reaches the overbought area and turns down.

Uncertainties all over Europe could keep gains in check for the shared currency, although the latest updates in the French political scene have led to a strong bounce. Headlines revealed that a poll gave the lead to Le Pen's rival Macron who also gained the backing of influential French politician Bayrou. This could increase their odds of winning the run-off against Le Pen and possibly move the spotlight away from Frexit concerns.

Economic reports from the region haven't all been bad as the latest batch of flash manufacturing and services PMIs from Germany and France printed stronger than expected results. The German IFO business climate index also beat expectations by rising from 109.9 to 111.0 instead of dipping to 109.6.

Meanwhile, data from Japan has been mixed as the all industries activity index printed a sharper than expected 0.3% decline versus the estimated 0.2% dip while the flash manufacturing PMI printer a higher than expected read of 53.5. Aside from that, the yen seems to be taking advantage of safe-haven flows while traders remain uneasy about buying the dollar.

By Kate Curtis from Trader's Way

 

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NZDUSD Short-Term Reversal Signal (Feb 24, 2017)

NZDUSD failed in its last two attempts to break below the .7150 minor psychological level, creating a double bottom formation visible on its 1-hour chart. Price has yet to break above the neckline around the .7250 level to confirm the reversal.

If that breakout materializes, NZDUSD could climb by at least 100 pips or the same height as the chart formation. The 100 SMA is below the longer-term 200 SMA, though, so the path of least resistance is to the downside. If the resistance holds, another bottom could form at .7150.

Stochastic is on the move down to reflect the presence of selling pressure, which might also bring more sellers to the mix, but buying pressure could return once the oscillator makes it out of the oversold region and turns higher.

The dollar is looking weaker against most of its peers as traders are running out of excitement for the Trump administration's fiscal policy reform plans. According to Treasury Secretary Mnuchin, it will take until 2018 or so before the impact of the policy changes kick in and GDP growth could reach 3% at best, not the 4% expansion promised during the election campaign.

US data has been mostly in line with expectations but traders are playing it cautiously as the FOMC minutes specified that their March decision hinges mostly on the outcome of jobs and inflation reports before meeting. As such, any major disappointments could dose hopes for a hike while strong readings could revive dollar demand.

As for the Kiwi, the currency was barely hit by the 3.2% drop in dairy prices during the latest Global Dairy Trade auction. Over the weekend, New Zealand printed stronger than expected PPI input and output prices, indicating positive pressures on overall inflation down the line and lesser need for the RBNZ to cut.

By Kate Curtis from Trader's Way

 

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GBPUSD Short-Term Range (Feb 27, 2017)

GBPUSD sold off sharply last Friday but appears to be finding support at the bottom of its short-term range at the 1.2400 major psychological level. Stochastic is already indicating oversold conditions, which means that sellers are exhausted and that buyers are likely to take over price action.

In that case, the pair could make it all the way back up to the range resistance at the 1.2570 area. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, these moving averages are also oscillating to show that range-bound conditions could stay in play.

A break below support could push price down by around 170 pips or the same height as the chart formation. Similarly, a break higher could bring the pair up by 170 pips or so. The moving averages are also around the middle of the range, potentially acting as near-term areas of interest.

Over the weekend, headlines indicated that UK Prime Minister May could move to end the free movement of migrants in March, reminding market watchers that Brexit negotiations are likely to kick off around that time as well. May is also expected to announce that EU migrants who have moved to the UK before the cutoff date will have their rights protected as long as British citizens living in other parts of Europe are given the same.

In the US, anticipation for Trump's tax plan is building up once more this week as the US President has a speech scheduled mid-week. If his announcement turns out positive for corporate America, the dollar could continue to advance against its peers since this could also be a point in favor of a March Fed rate hike.

Other event risks for the week include UK construction and services PMI, as well as the US preliminary GDP reading. FOMC policymakers Yellen, Fischer, Evans, and Powell have speeches lined up on Friday.

By Kate Curtis from Trader's Way

 

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EURGBP Descending Channel (Feb 28, 2017)

EURGBP has been trending lower, moving inside a descending channel connecting the latest highs and lows on the 4-hour time frame. Price is currently testing the resistance near the .8500 major psychological level and might be due for a move back towards the channel support at .8400 or lower.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 100 SMA lines up with the channel resistance and is holding as a dynamic inflection point at the moment.

Stochastic is already turning lower from the overbought zone so selling pressure is kicking in, also confirming that a move towards the channel support is likely. However, if price still pops higher, the 200 SMA dynamic resistance at .8550 could keep gains in check.

The main event risk for the UK is the outcome of the Brexit debates in the House of Lords. UK PMI readings from the construction and services industries are also lined up and downbeat results or signs of a slowdown could mean more losses for the pound.

Scottish referendum talks are also weighing on sterling at the moment since this could add fresh issues to the already complicated Brexit negotiations. Scottish FM Sturgeon mentioned that they might call for a vote in reaction to the UK's triggering of Article 50 by March.

Meanwhile, the euro is also under some selling pressure due to the happenings in French politics. Polls are suggesting that Macron could widen his lead against Le Pen and diminish odds of a Frexit, which could spark increased uncertainty in the region. French consumer spending, preliminary CPI and GDP readings are due today.

By Kate Curtis from Trader's Way