Daily Technical Analysis by Kate Curtis from Trader's Way

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GBPUSD Bearish Channel (Mar 7, 2018)

Cable is trending lower inside a descending channel on its 1-hour time frame and looks prime for a pullback. Price is currently testing the 50% retracement level at the 1.3900 major psychological level and could head back down to the swing low or the channel support around 1.3650-1.3700 soon.

A larger pullback could last until the 61.8% Fib closer to the channel resistance at the 1.3950 minor psychological level. This is also close to the 200 SMA dynamic resistance.

Stochastic looks ready to turn south to show a return in bearish pressure. The 100 SMA is also below the longer-term 200 SMA, which confirms that the path of least resistance is to the downside or that the selloff could continue.

There were no major reports out of the UK yesterday and PM May's recent speech on Brexit has been somewhat reassuring, allowing sterling to regain some ground. Also, the services PMI beat expectations with a climb from 53.0 to 54.5 earlier this week.

As for the dollar, fears of a trade war or retaliation from other nations on Trump's plans to impose higher tariffs on steel and aluminum imports have been a bearish factor. Although government officials tried to give some words of reassurance earlier in the US session, the resignation of economic adviser Gary Cohn revived trade concerns.

Cohn has been instrumental in maintaining diplomatic trade relations, despite tension with China, Canada, and Mexico. His resignation could leave stronger protectionist sentiment in the White House, which would prove bearish for the dollar.

By Kate Curtis from Trader's Way

 

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USDCAD Short-Term Selloff (Mar 8, 2018)

USDCAD formed a double top reversal pattern on its 1-hour time frame, signaling that the rally could be over. Price has yet to break below the neckline at 1.2865 to confirm the potential selloff. The chart pattern is approximately 140 pips tall so the resulting breakdown could be of the same height.

The 100 SMA is still above the longer-term 200 SMA, though, so the path of least resistance is to the upside. This suggests that the uptrend is more likely to continue than to reverse. Stochastic is indicating oversold conditions, which means that sellers are exhausted and buyers could take over.

In this case, price could still bounce off the neckline support to form another top at the 1.3000 area or perhaps even break higher to indicate a continuation of the longer-term rally.

The US dollar rebounded against most of its rivals in the latest US session on reports that the Trump administration could give exemptions to Canada and Mexico when it comes to higher trade tariffs on steel and aluminum. However, NAFTA negotiations are still ongoing so Canada's trade sector could still face risks.

This was highlighted in the latest BOC decision, during which the central bank kept rates unchanged as expected but cited uncertainties coming from Trump policies. Still, policymakers cited that the labor market is tightening and that inflation is running close to their 2% target.

The Loonie also drew support from a smaller than expected build in US EIA crude oil stockpiles even as Baker Hughes has been reporting consecutive gains in oil rig counts. Both Canada and the US are set to print their jobs reports on Friday and this could determine where USDCAD could be headed next.

By Kate Curtis from Trader's Way

 

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USDCAD Uptrend Pullback (Mar 9, 2018)

USDCAD is trending higher on its 4-hour time frame and is trading above an ascending trend line. Price looks ready for a pullback and applying the Fib tool on the latest swing low and high shows that the 38.2% level is closest to the trend line at 1.2850.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This means that the uptrend is more likely to continue than to reverse. The 100 SMA is close to the trend line support as well, adding to its strength as a floor in the event of a deeper pullback.

Stochastic is heading south, though, which means that selling pressure is in play. This could keep the correction going for some time until the oscillator reaches oversold levels and turns higher.

The US dollar gained some ground to most of peers when Trump tempered his tough talk on tariffs, easing fears of a trade war. He conceded that Canada could be exempted from higher tariffs on steel and aluminum imports while NAFTA negotiations are ongoing.

The focus shifts back to economic data today as both the US and Canada will release their jobs figures. Canada's employment change could show a 21.3K gain hiring after the earlier 88K decline, keeping the jobless rate steady at 5.9%.

Meanwhile, the US could report a 205K increase in hiring for February, slightly faster than the previous month's 200K gain. This might bring the jobless rate down from 4.1% to 4.0%. Analysts are also keeping close tabs on the average hourly earnings figure, which might post a 0.2% uptick.

By Kate Curtis from Trader's Way

 

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AUDUSD Channel Resistance (Mar 12, 2018)

AUDUSD is trending lower on its 4-hour time frame and is testing the top of the descending channel. If this holds as resistance, price could fall back to support at the bottom of the channel around the .7650 minor psychological support.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the selloff is more likely to resume than to reverse. The 200 SMA lines up with the top of the channel to add to its strength as resistance.

Stochastic is moving up to show that buying pressure is present but the oscillator is also in the overbought zone to signal that buyers are getting exhausted. If sellers are able to take over, the downtrend could resume.

Economic data from Australia came in mostly weaker than expected in the previous week. Both the current account balance and retail sales reports printed lower readings while the GDP was also a miss. The RBA refrained from making any changes to interest rates as well.

Meanwhile, US jobs data turned out stronger than expected at a gain of 313K versus the consensus at 205K. The earlier figure also enjoyed an upgrade from 200K to 239K while the unemployment rate was unchanged at 4.1%. Average hourly earnings also fell short with a 0.1% uptick versus the estimated 0.2% gain and the earlier 0.3% increase.

US CPI, PPI, and retail sales figures are all up for release this week and stronger than expected results could prop the dollar higher. There's not much in the way of major reports from Australia, although China's data dump on Tuesday's Asian session could have a significant impact on AUD price action.

By Kate Curtis from Trader's Way

 

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EURAUD Rising Wedge (Mar 13, 2018)

EURAUD is slowly trending higher inside a rising wedge formation visible on the 4-hour time frame. Price just bounced off the resistance and might be due for a pullback to support around the 1.5450 minor psychological level.

Stochastic is on the move down to show that sellers have the upper hand, but the oscillator is also dipping into oversold territory to signal exhaustion among sellers. Turning higher could lead to a bounce off the nearby inflection points.

The 100 SMA is still above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This means that the uptrend is more likely to continue than to reverse. The 100 SMA lines up with the bottom of the wedge as well, adding to its strength as support.

Economic data from Australia has been mostly weaker than expected last week while today's NAB business confidence index release showed a decline from 11 to 9. Both the RBA and ECB kept policy unchanged, with the latter removing its phrase on increasing QE before Draghi tried to downplay the move.

Only French private payrolls and the Italian unemployment rate are up for release today. This suggests that euro pairs could be more sensitive to data from its counterparts. So far, the pickup in risk appetite has been positive for the Aussie.

By Kate Curtis from Trader's Way

 

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GBPAUD Range Setup (Mar 14, 2018)

GBPAUD is moving sideways recently, finding support at the 1.7600 major psychological level and resistance at 1.7900. Price is halfway through its bounce to the top of the range, hitting some short-term resistance at the current area of interest.

Stochastic is already indicating overbought conditions, which means that buyers are feeling exhausted. If sellers take over, another move to the range support could be underway.

However, the 100 SMA is still above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This means that the rally is more likely to resume than to reverse, but the gap is narrowing to signal slowing buying pressure.

Economic data from Australia has been mostly weaker than expected in the previous week but data from its top trade partner, China, has been upbeat. This could mean stronger appetite for raw material commodities down the line, which could prop up the Australian economy.

There are no major reports from both Australia and the UK today and for the rest of the week, which suggests that the range would likely hold. Keep in mind, however, that the pound could still be very sensitive to Brexit-related updates while the Aussie could be pushed around by overall market sentiment.

By Kate Curtis from Trader's Way

 

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EURGBP Channel Support (Mar 15, 2018)

EURGBP is trending higher on its 4-hour time frame, moving inside an ascending channel and currently testing support. A bounce could take it back up to the resistance at the .9000 major psychological level. Stochastic is already moving up from the oversold region to signal a return in bullish momentum.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, support is more likely to hold than to break. The 200 SMA also lines up with the bottom of the channel to add to its strength as a floor.

The euro was dragged lower by another round of cautious remarks from ECB head Draghi, who reminded that inflationary pressures are still weak and that policymakers haven't discussed their next moves just yet. ECB member Praet also said that they cannot declare "mission accomplished" yet when it comes to inflation.

There have been no major reports out of the UK but sterling has been one of the better performers, likely on account of upbeat data and fading Brexit concerns. There are still no reports lined up from the UK economy today.

As for the euro, only the final CPI readings are due until the end of the week, so disappointing reports could have an even stronger drag on the shared currency. Upgrades, on the other hand, could still keep ECB tightening expectations in play.

By Kate Curtis from Trader's Way

 

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USDJPY Descending Triangle (Mar 16, 2018)

USDJPY has formed lower highs and found support at the 105.60 level, creating a descending triangle pattern on its 1-hour time frame. Price just bounced off resistance and could be due for a test of support soon.

The 100 SMA is above the longer-term 200 SMA for now but the gap has narrowed enough to signal a likely downward crossover. This could draw more sellers in and possibly even lead to a break of the triangle support.

Stochastic is already indicating oversold conditions, though, so a bounce is also possible. However, since price is nearing the peak of the formation, it could also make sense to wait for a breakout instead. The chart pattern is around 200 pips tall so the resulting rally or selloff could be of the same height.

The dollar gained some support in recent sessions due to mostly upbeat data, but it was still only second to the yen in terms of being a top performer. There have been no major reports out of Japan but it seems that traders prefer the yen as a safe-haven bet.

Nonetheless, it's worth nothing that the FOMC decision is coming up next week so traders must also be pricing in their expectations for an interest rate hike. Still, any protectionist remarks from Trump tend to inspire a flight to safety, which tends to be more positive for JPY than the dollar.

By Kate Curtis from Trader's Way

 

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AUDUSD Countertrend Play (Mar 19, 2018)

AUDUSD has been trending lower and moving inside a descending channel on its 1-hour time frame. Price bounced off the resistance and is setting its sights on the channel support around the .7650 minor psychological level.

The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. However, the gap has narrowed enough to show that a downward crossover is about to take place, drawing more sellers in.

Stochastic, on the other hand, is signaling weakening selling pressure as the oscillator has reached oversold areas and is turning back up. In that case, support might still hold and lead to a bounce back to the channel resistance.

There were no reports from Australia last Friday and none are due today so market sentiment could push the commodity currency around. Meanwhile, the dollar saw mostly stronger than expected industrial production and consumer sentiment data last week.

Fears of a trade war are still in play and have been positive for the safe-haven dollar while weighing on the higher-yielding Aussie. The FOMC statement is also coming up this week and traders could keep pricing in expectations for an interest rate hike.

By Kate Curtis from Trader's Way

 

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USDCAD Simple Retracement (Mar 20, 2018)

USDCAD is still trending higher, moving above an ascending trend line visible on its 4-hour time frame. Price is stalling around the 1.3100 handle and looks prime for a pullback to the uptrend line.

Using the Fib tool on the latest swing low and high shows that the 38.2% level lines up with the rising support zone around the 1.3000 major psychological mark. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the rally is more likely to resume than to reverse.

Stochastic is indicating overbought conditions and is turning lower to reflect a return in selling pressure. A larger correction could also find support at the 50% Fib, which is close to a former resistance area.

There were no reports out of the US economy on Monday as traders are pricing in expectations for the FOMC decision later this week. A 0.25% interest rate hike is widely expected and even more hawkish hints could lift the US currency.

Meanwhile, the Loonie appears to be taking its cue from NAFTA updates and trade war fears. Oil has been slightly higher but the positively-correlated currency has failed to follow suit. Canadian retail sales and CPI figures are due on Friday.

By Kate Curtis from Trader's Way