Daily Technical Analysis by Kate Curtis from Trader's Way

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New Cable Downtrend? (February 20, 2018)

GBPUSD appears to be starting a new trend lower as price is creating a descending channel on its 4-hour time frame. Price is just testing the resistance, though, and might be due for a move back to support.

However, the 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. Then again, the gap between the moving averages is narrowing to signal a potential crossover.

Stochastic is in the oversold region to show that sellers might be exhausted. Turning higher could draw buyers back in and lead to a move past the channel resistance.

The dollar managed to outpace its peers even as traders were out on a holiday for Monday. US markets are scheduled to reopen today and a return in risk-taking could mean weakness for the safe-haven US currency once more.

There are no reports due from the US today and none are due from the UK as well. This could leave market sentiment in control of forex price action for the rest of the day, although it's worth noting that Brexit concerns are starting make their way to the headlines once more.

UK jobs data is up for release on Wednesday and a smaller increase in joblessness of 2.3K is eyed. The average earnings index could hold steady at 2.5% but an increase could prove bullish for the currency. FOMC minutes are due on Wednesday also, which might bring more volatility to the dollar.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Double Top (February 21, 2018)

EURAUD looks ready for a selloff as price is forming a double top reversal pattern on its 4-hour time frame. The pair has yet to break below the neckline at the 1.5650 minor psychological mark before confirming the downtrend.

The chart pattern is approximately 200 pips tall, so the resulting breakdown could be of the same height. However, the 100 SMA is still above the longer-term 200 SMA to signal that the path of least resistance is still to the upside or that the uptrend could carry on.

Stochastic is also pulling up from oversold levels to show that buyers are getting back in the game. In that case, another test of the tops around 1.5800 could be underway and perhaps even a break higher.

Euro zone economic data turned out mostly stronger than expected, with sentiment indicators showing a smaller than expected dip in confidence. The German ZEW economic sentiment index fell from 20.4 to 17.8 versus the estimated drop to 16.0 while the region's index dipped from 31.8 to 29.3 versus the estimated 28.4 figure.

Meanwhile, data from Australia was mixed but saw more upside surprises. Construction work done for the previous quarter sank 19.4% versus the estimated 9.8% drop while the MI leading index fell 0.2%. On the flip side, the wage price index grew by 0.6% versus the estimated 0.5% uptick.

Up ahead, PMI readings from the manufacturing and services sectors of Germany and France are due. Small dips are eyed as well, which could bring the region's overall readings down.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Reversal Pattern (Feb 23, 2018)

EURUSD could be in for a selloff as a double top pattern can be seen on its 4-hour time frame. Price has yet to break below the neckline at the 1.2200-1.2250 levels before confirming the potential downtrend. The chart pattern is approximately 300 pips tall so the resulting selloff could be of the same height.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, but the gap is narrowing to signal that a downward crossover is due. In that case, bearish momentum could take over soon.

Stochastic is pulling up so price could follow suit. Reaching overbought levels and turning back down could draw more sellers in and sustain the drop.

Euro zone economic data turned out weaker than expected in the previous London session as the German IFO business climate index fell from 117.6 to 115.4. The ECB meeting minutes contained a few hawkish remarks but the central bank's hesitation to commit to a tightening plan has led to some euro weakness.

Meanwhile, the dollar lost ground to its peers as risk appetite appeared to return to the markets. Bond yields ticked lower while equities and commodities chalked up gains, leaving the safe-haven currency to decline.

Up ahead, FOMC members Dudley, Williams, and Mester have testimonies scheduled so their monetary policy remarks could determine where the dollar might be headed next. Euro zone final CPI readings are also lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Uptrend Pullback (Feb 26, 2018)

USDCAD recently broke out of an inverse head and shoulders pattern on its 4-hour time frame and looks ready for an uptrend. Price could still pull back to a new rising trend line forming before gaining bullish traction.

Applying the Fib tool on the latest swing low and high shows that the 50% level lines up with the trend line and an area of interest around the 1.2600 mark. This is also in line with the 100 SMA, which is above the longer-term 200 SMA to signal that the path of least resistance is to the upside.

Stochastic is still on the move down, though, to show that selling pressure is present. In that case, the correction could go on until the oscillator hits oversold conditions and turns back up.

Canada's headline CPI turned out better than expected at 0.7% versus the 0.4% estimate, reviving talks of a BOC hike. Other underlying inflation measures also reflected a stronger pace of increase in price levels also.

Meanwhile, the US dollar also stayed supported for the most part of the previous week as risk aversion appeared to linger in the financial markets. There were no major reports out of the US economy on Friday but a few FOMC members gave testimonies.

There are still on major reports from the US economy today, with only a testimony from FOMC member Quarles lined up. Hawkish remarks could keep the dollar support and risk-taking in check, which could shore this pair higher.


By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Short-Term Downtrend (Feb 27, 2018)

EURJPY is trending lower inside a descending channel pattern and is about to test the resistance. This lines up with the 200 SMA dynamic inflection point, which adds to its strength as resistance.

The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. This suggests that the selloff is more likely to resume than to reverse.

Stochastic is on the move up but is also hitting overbought levels to show that buyers are getting exhausted. Turning lower could lead to a return in selling pressure that might take the pair back down to the channel support at 131.00.

ECB Governor Draghi was relatively optimistic in his latest testimony as he acknowledged that euro zone growth has been robust and that the labor market could see more improvements. However, he also warned that financial market volatility and currency movements warrant close monitoring.

As for the yen, the BOJ core CPI is due today and a slower pace of increase at 0.6% compared to the earlier 0.7% rise is eyed. This could keep traders on the lookout for more easing remarks from central bank officials.

Later today, the euro zone will print preliminary CPI readings from its top economies. German flash CPI could rebound by 0.5% while Spanish flash CPI could accelerate from 0.6% to 0.9%. There are no other reports due from Japan but yen pairs could be sensitive to dollar action resulting from new Fed Chair Powell's testimony.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Triangle Pattern (Feb 28, 2018)

GBPUSD has formed lower highs and higher lows, creating a symmetrical triangle pattern on its 1-hour time frame. Price is currently testing support and might be due for a bounce soon.

Stochastic is on the move up to signal that buyers are regaining the upper hand and could take the pair back up to the resistance at 1.4025. However, the 100 SMA is below the longer-term 200 SMA to show that selling pressure is present.

In that case, a break below the triangle support could happen and lead to a selloff for the pair. The chart pattern spans around 450 pips in height so the resulting breakdown could be of the same size.

Economic data from the US was mostly weaker than expected yesterday as durable goods orders data and the goods trade balance fell short of estimates. However, the dollar got a boost when new Fed Chairperson Powell gave his testimony and added a few more hawkish remarks that supported tightening expectations.

As for the pound, the downbeat outlook shared by Moody's UK Brexit Monitor weighed on the currency. “Consumer indicators are below five-year averages and household consumption growth has slowed since the Brexit referendum in June 2016. Lacklustre retail sales fell further below their five-year trend in January,” the report noted.

There are no major reports due from the UK economy today while the US has its preliminary GDP up for release. Analysts are expecting a downgrade from 2.6% to 2.5% while the preliminary GDP price index could stay unchanged. Chicago PMI and pending home sales are also due.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Long-Term Reversal Pattern (Mar 1, 2018)

USDCAD is forming another major reversal pattern, this time on its daily time frame. Price has yet to test the neckline around the 1.2900 major psychological level and break above it to confirm the potential uptrend.

The chart pattern spans around 850 pips in height so the resulting climb could be of the same height. The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, but the gap is narrowing to signal that an upward crossover is underway.

Stochastic is already indicating overbought conditions, which means that buyers are starting to feel exhausted. Turning lower could draw sellers back in and lead to a quick pullback.

Economic data from the US was mostly weaker than expected once more but the safe-haven Greenback managed to outpace its higher-yielding peers on account of risk aversion. Apart from that, new Fed head Powell's speech earlier in the week was more hawkish than expected as he highlighted factors supporting upside risks for the US economy.

Meanwhile, the Loonie was bogged down by falling oil prices resulting from a stronger dollar and a larger than expected build in stockpiles. The EIA reported an increase of 3 million barrels versus the estimated gain of 2.4 million barrels, and the recent Baker Hughes report showed more gains in oil rigs.

US core PCE price index is due today and a 0.3% uptick is eyed, slightly stronger than the earlier 0.2% increase. Personal spending and income numbers are also lined up, along with the ISM manufacturing PMI, which is expected to dip from 59.1 to 58.7.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Triangle Breakout (Mar 2, 2018)

GBPUSD broke below the bottom of its symmetrical triangle on the 1-hour time frame to signal that a downtrend is underway. Price is bouncing off the 1.3700 area, though, so a pullback might take place before the selloff gains traction.

Applying the Fib tool on the latest swing high and low shows that the 50% level is close to the broken triangle support around the 1.3900 major psychological mark. This is also around the 100 SMA dynamic resistance.

Speaking of moving averages, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. Stochastic is also indicating overbought conditions and turning lower could draw more sellers back in.

Sterling has been taking a heavy beating after the EU released its draft agreement on the post-Brexit relationship with the UK. EU officials insist on a common regulatory area at the border with Northern Ireland, something that UK officials have been opposing.

UK manufacturing PMI fell from 55.3 to 55.2, slightly better than the projected 55.1 figure, and the construction PMI is due today. However, the focus could be on PM May's speech as she is expected to share her thoughts on the EU draft agreement.

Meanwhile, the dollar is also on weak footing after Trump announced his plans to impose higher tariffs on steel and aluminum as this sparked trade war fears. Data from the US was mostly better than expected, though, with the ISM manufacturing PMI up from 59.1 to 60.8 versus the 58.7 forecast.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Double Top (Mar 5, 2018)

NZDUSD could be in for a long-term selloff as price formed a double top on its 4-hour time frame. The pair has yet to break below the neckline at the .7200 major psychological support to confirm the downtrend, which might last by around 220 pips or the same height as the chart formation.

The 100 SMA has crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. This suggests that bearish momentum is starting to kick in. Stochastic is also turning lower to confirm that sellers are taking control.

However, if support at the neckline continues to hold, price could still bounce higher to make another top around .7420 or probably test the nearby area of interest at .7280.

Economic data from New Zealand has been upbeat today as the ANZ commodity prices report showed a 2.8% gain in price levels, much higher than the earlier 0.7% uptick. This could lead to stronger inflationary pressures down the line, lifting the odds of an RBNZ hike at some point.

US ISM non-manufacturing PMI is due today and a strong result could lead to positive expectations for Friday's NFP. In that case, the dollar could keep advancing on higher Fed rate hike expectations for this month. On the other hand, disappointing figures could force the US currency to retreat.

Risk aversion has been in play for quite some time, with trade war fears also weighing heavily on commodity currencies. Recall that Trump plans on imposing higher tariffs on steel and aluminum imports to protect US producers. At the same time, global tightening prospects could dampen demand for commodities.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Resistance Turned Support (Mar 6, 2018)

EURAUD recently broke past the 1.5800 major psychological mark to signal that more gains are in the cards. However, price is stalling around 1.5925 and might be due for a pullback to the broken resistance.

Applying the Fib tool on the latest swing low and high shows that the 50% level is close to this area of interest. Stochastic is heading south so the correction could go on, but buying pressure could soon return as the oscillator is dipping into oversold territory.

The 100 SMA is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside. In other words, the rally is more likely to resume than to reverse. The 100 SMA is close to the 50% Fib while the 200 SMA is at the 61.8% Fib, adding to its strength as potential support.

Economic data from Australia has been weaker than expected today, with the current account deficit widening from 11 billion AUD to 14 billion versus the estimated 12.3 billion AUD shortfall. Retail sales also disappointed with a 0.1% uptick versus the estimated 0.4% gain.

The RBA interest rate decision is coming up next and no actual rate changes are eyed. Market watchers are likely to watch closely for any changes in rhetoric that could affect monetary policy expectations.

As for the euro, risk aversion during the London session weighed on European equities and the shared currency. Final services PMI readings were also mostly weaker than expected. Only the retail PMI is due today but traders may be positioning ahead of the ECB statement.

By Kate Curtis from Trader's Way