Daily Technical Analysis by Kate Curtis from Trader's Way

[katetrades]

GBPNZD Countertrend Play (Jun 19, 2017)

GBPNZD has just bounced off its descending channel resistance and is making its way towards support. If the bottom at the 1.7300 handle holds, price could make another test of resistance. Stochastic is already indicating oversold conditions, which means that sellers are tired and could let buyers take over.

However, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside and the pair could be due for a break lower. In that case, price could establish a steeper selloff.

The pound drew some support from a surprisingly hawkish BOE decision but was unable to hold on to its gains versus the Kiwi, which is also waiting on a potentially hawkish central bank decision this week. Data from the UK economy has been mixed but inflation and consumer spending data signal that policymakers might need to tighten in order to keep growth supported.

Event risks for the week include headlines pertaining to Brexit talks and the Queen's speech. There are speculations on a "hard Brexit" or even the possibility of a "no deal" situation which could be bearish for the currency. On the other hand, smooth negotiations could stoke expectations that the UK can emerge with a beneficial deal that would be bullish for the pound.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDNZD Ascending Channel (Jun 20, 2017)

AUDNZD has been trending higher, moving inside an ascending channel visible on its 1-hour time frame. The pair has just bounced off support and could be due for a test of resistance soon.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. If bullish pressure is strong enough, a break past the resistance at 1.0600 could mark the start of a steeper climb. However, stochastic is already indicating overbought conditions and turning lower could indicate a return in selling momentum.

The main event for the Kiwi is the RBNZ decision later on this week, during which the central bank might keep rates on hold while giving some hawkish hints. However, a bit of jawboning is also expected since the currency has been outpacing most of its peers for the past few weeks.

As for the Aussie, the RBA meeting minutes are up for release. The central bank was mostly upbeat in their latest policy decision so the minutes could reinforce these views. For now, though, Moody's downgrade on big Australian banks due to housing conditions could limit the currency's gains.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Make or Break (Jun 21, 2017)

Cable is sitting right on the ascending channel support visible on its daily time frame. A bounce could take it back up to the resistance at the 1.3250 minor psychological level while a break could spur a longer-term selloff.

The 100 SMA has just crossed above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In addition, the moving averages are close to the channel support at the 1.2750 minor psychological level, adding to its strength as a floor.

Stochastic is treading lower but is approaching the oversold area to indicate weakening selling pressure and a potential return in bullish momentum.

Brexit risks are currently weighing on sterling these days as the UK government could get pushed around by EU officials. Note that PM May has yet to strike a coalition with the DUP to have a stronger front. The upcoming Queen's Speech could restore some confidence in the UK government and economy, which might be bullish for the currency.

As for the dollar, the recent slide in equities could dampen its gains once more as markets don't seem to be impressed by the Trump administration's push for fiscal reform. While FOMC member Dudley gave a hawkish testimony, other policymakers like Evans don't seem to be as upbeat.

By Kate Curtis from Trader's Way

 

[katetrades]

EURCAD Area of Interest (Jun 22, 2017)

EURCAD recently sold off but seems to be finding support at an area of interest visible on its daily time frame. Applying the Fib tool on the latest swing high and low also shows that the 38.2% level lines up with support at the 1.4800 mark.

The 100 SMA crossed above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. Stochastic is also turning up to indicate a return in bullish momentum, which might be strong enough to take the pair up to the swing high at 1.5300.

Crude oil prices have been on a decline lately and this seems to be taking its toll on the positively-correlated Canadian dollar, which has previously drawn support from hawkish BOC hints. US crude oil stockpiles posted a larger than expected draw of 2.5 million barrels but traders seemed more focused on rising output from Libya.

As for the euro, improved sentiment in the European region seems to be shoring up the shared currency for now. There were no major reports out of the euro zone and only the ECB Bulletin is lined up next. In Canada, the retail sales and CPI reports are lined up for Thursday and Friday, respectively.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Descending Channel (Jun 23, 2017)

EURJPY is trending lower on its 4-hour time frame and is currently testing the resistance of its falling channel. If the 124.00 handle holds as resistance, the pair could slide back to support at the 122.00 handle.

The 100 SMA is below the longer-term 200 SMA on the 4-hour chart so the path of least resistance is to the downside. In addition, these moving averages line up with the channel resistance, adding to its strength as a ceiling.

Stochastic is still on the move up, though, so there may be some buying pressure left. In that case, a break past the resistance could lead to a reversal from the ongoing selloff.

There have been no major reports out of the euro zone so far this week as traders are keeping close tabs on Brexit negotiations instead. Looking ahead, the PMI reports from the manufacturing and services sectors of Germany and France are lined up.

Analysts are expecting small dips in activity, which could push the shared currency lower against the safe-haven yen. Japan has its flash manufacturing PMI up for release and a climb from 53.1 to 53.4 is expected.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCHF Long-Term Range (Jun 26, 2017)

USDCHF has sold off recently but it could find strong support at a long-term range bottom around the .9500-.9550 levels. A bounce off this area could lead to a move back to the resistance at 1.0400 or at least until the mid-channel area of interest at .9900.

The 100 SMA is below the longer-term 200 SMA on the daily chart so the path of least resistance is to the downside. In that case, a break of support could be possible, sending the pair on a longer-term drop. Stochastic is also pointing down to show that sellers are in control of price action.

Economic data from the US turned out weaker than expected at the start of the week as headline and core durable goods orders both missed expectations. The former showed a 1.1% drop versus the projected 0.5% dip while the latter indicated a meager 0.1% uptick versus the projected 0.4% gain. Fed Chairperson Yellen's testimony is lined up next.

There have been no major reports out of Switzerland yet and none are due today. This signals that market sentiment and profit-taking could drive price action for the franc. The next major report is the UBS consumption indicator and it might show an improvement from the earlier 1.48 reading.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDJPY Double Bottom Breakout (Jun 27, 2017)

AUDJPY recently formed a double bottom pattern on its daily time frame to signal that a reversal from the selloff is underway. Price just broke past the neckline around the 84.50 minor psychological level to confirm that bulls are charging.

The chart pattern is approximately 300 pips tall so the resulting rally could be of the same size. However, stochastic is turning down from the overbought region to indicate a pickup in selling pressure. Also, the gap between the moving averages is narrowing to signal that sellers could regain the upper hand.

There are no major reports lined up from the Australian economy today so any big moves could be spurred by changes in market sentiment and commodity prices. In particular, a surge in iron ore prices could prove bullish for the Australian currency.

Meanwhile, there are no major reports due from Japan as well so yen price action could hinge on US bond yields and risk sentiment. Keep in mind that it's almost the end of the month and quarter so there could be a lot of profit-taking happening towards the end of the week.

By Kate Curtis from Trader's Way

 

[katetrades]

EURNZD Area of Interest (Jun 28, 2017)

EURNZD appears to be pulling up from its dive with the recent strong bounce, but this might represent a mere correction from the long-term slide. Applying the Fib tool on the latest swing high and low shows potential pullback areas.

In particular, the 50% retracement level could hold as resistance as this lines up with a former support zone. It also coincides with the 200 SMA dynamic inflection point. The 100 SMA is safely below the longer-term 200 SMA so the path of least resistance could be to the downside.

Stochastic is on its way up to suggest that buyers could be in control of price action for now. However, the oscillator is already dipping into the overbought zone to hint at rally exhaustion soon. If sellers take over, a drop back to the swing low could take place.

Earlier in the day, ECB Governor Draghi dropped hawkish hints in saying that the central bank might withdraw stimulus soon. This led to fresh speculations of tapering bond purchases, which could shore up the value of the shared currency.

Meanwhile, CFTC Commitments of Traders reports are hinting at extreme positioning for the Kiwi, which basically means that it could be hitting a top. In that case, profit-taking could weigh heavily on the currency at the end of the month and quarter.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Short-Term Channel (Jun 29, 2017)

EURGBP continues to trend higher after breaking past a major range resistance visible on its longer-term charts. On the 1-hour time frame, it can be seen that the pair is moving inside an ascending channel formation and is testing 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. In other words, support at .8800 is more likely to hold than to break, sending price back up to the .8900 area. Stochastic is also pulling up from the oversold area to signal a return in bullish pressure.

Earlier in the week, ECB head Draghi hinted that they could withdraw stimulus soon, sending the euro on a strong rally. However, these gains were quickly erased when policymakers signaled that the Governor's remarks may have been misinterpreted.

As for the pound, BOE head Carney's remarks also sounded more upbeat than usual as he mentioned that a global boom would make a rate hike necessary. The vote on the Queen's Speech could likely drive pound price action from here but this relatively hawkish statement could keep the currency afloat.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Countertrend Play (Jun 30, 2017)

The ascending channel on Cable's daily time frame is still intact and price is heading towards the resistance around 1.3400. A countertrend opportunity could arise if reversal candlesticks form around this area. In that case, a move back to support at the 1.2900 area could take place.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. Also, the moving averages are close to the channel support, adding to its strength as a floor. Stochastic is heading up to indicate the presence of buying pressure.

Hawkish remarks from a few BOE officials have shored up the pound in the past few days, along with the lack of negative Brexit updates. Even Governor Carney acknowledged that removal of stimulus could be necessary if inflationary pressures continue to dampen consumer spending.

As for the dollar, weaker expectations that the Trump administration could follow through on its reform agenda has weighed on the currency. The next rate hike isn't due until the fourth quarter of the year so some dollar weakness could be in the cards in the next few months.

Of course Brexit risks remain and there's always a good chance that tensions during talks could dampen demand for the UK currency. Low liquidity during the summer months could make this pair more sensitive to headlines.

By Kate Curtis from Trader's Way