Daily Technical Analysis by Kate Curtis from Trader's Way

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GBP/USD: Break and Retest Scenario (April 9, 2013)

Thanks to weaker than expected U.S. jobs data, GBP/USD breached the 1.5250 minor psychological resistance on Friday and climbed all the way up to the 1.5350 mark. However, price action on Monday reveals that the rally ran out of steam as the pair pulled back during the day.

Currently, GBP/USD seems to be finding support at the former 1.5250 resistance, which is in line with the 38.2% Fibonacci retracement level. At the same time, stochastic has reached the oversold region and is starting to move back up, hinting at a possible rally for today.



U.K. data such as the manufacturing production report and the trade balance could be a catalyst for a rally if the actual figures come in stronger than expected. This would support the BOE’s decision to stay put with monetary policy and would put the U.K. in a better fundamental position compared to the U.S., which has just suffered a slowdown in hiring for March.

If you’re planning to catch the bounce, which has now shown a bit of momentum, make sure to place your stop below the 1.5200 major psychological level as volatility could still spike during the later sessions. Aiming for the 1.5350 previous highs would be good enough for a day trade.

By Kate Curtis from Trader's Way

 

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AUD/USD to Test 1.0600? (April 10, 2013)

AUD/USD seems to have breached the 1.0500 major psychological level already and appears poised to test the next resistance at 1.0600. Take note that this is in line with the top of the long-term range visible on the 4-hour or daily time frames.

Stochastic has already made its way into the overbought region, suggesting that a move down is possible later on. However, the oscillator has yet to turn from the overdone area and show momentum going south, so AUD/USD might still have a bit of room to climb.



Chinese data has been weak so far this week as the CPI failed to meet expectations. The inflation figure clocked in an annual 2.1% reading, lower than the estimate at 2.5% and the previous month’s reading of 3.2%. Chinese PPI also came in worse than expected at -1.9%, hinting at lower inflationary pressures in the coming months. Their trade balance also disappointed as the figure showed a 0.9 billion USD deficit instead of the projected 15.2 billion USD surplus.

If the 1.0600 level holds as resistance, AUD/USD might be on its way back to 1.0200 for the near term. Take note though that U.S. data, such as the FOMC minutes and the retail sales reports, could keep dollar buying at bay.

By Kate Curtis from Trader's Way

 

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AUD/USD Potential Retracement to 1.0500 (April 11, 2013)

AUD/USD suffered a quick selloff during today’s early Asian session when Australia printed weaker than expected jobs data. The actual report showed a 36.1K drop in hiring, worse than the estimated 6.1K decrease, bringing the jobless rate up from 5.4% to 5.6% for March. The previous month’s figure was revised upwards from 71.5K to 74.0K
though.



With that, AUD/USD might have a chance at testing the former resistance level around 1.0475 to 1.0500. This is in line with the 38.2% Fibonacci retracement level on the 1-hour time frame. Stochastic is pointing higher at the moment, suggesting a potential move up.

Take note though that, should the pair rally, the next area of resistance is located at the 1.0600 major psychological level. However, if weak Australian data continue to weigh the pair down for the rest of the trading sessions, a break below the Fib levels could mean AUD/USD is headed back for 1.0200.

By Kate Curtis from Trader's Way

 

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U.S. Retail Sales: Potential USD/JPY Correction (April 12, 2013)

USD/JPY has been stalling around the 99.50 minor psychological area for the past few days already, suggesting that yen bears may be running out of steam. After all, the pair has climbed by more than 600 pips over the past two trading weeks, which means that a correction could be in the cards.

The U.S. retail sales report due in today’s New York session could be the perfect catalyst for a pullback as the figures could come in weaker than expected, following the dismal NFP figures for the same month. March headline retail sales are expected to show a flat reading while the core version of the report is projected to post a 0.1% decline.



If USD/JPY sells off, it could quickly recover upon reaching the Fibonacci retracement levels, particularly those around the 96.50 to 97.00 former resistance area.

Right now, stochastic is still moving out of the overbought region, hinting at a move down south. Wait for the oscillator to reach the oversold zone and turn upwards before jumping in a long trade if you’re a cautious trader.

By Kate Curtis from Trader's Way

 

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EUR/USD: Long-Term Reversal Signals (April 15, 2013)

EUR/USD has been having a difficult time breaking past the 1.3100 major psychological resistance level. After all, this area has served as support and resistance in the past as plenty of buyers and sellers are keeping a close watch on this level.

On its daily time frame, EUR/USD looks ready to form a head and shoulders pattern with the right shoulder forming around the 1.3100 mark. That’s in line with the 38.2% Fibonacci retracement level. Take note that stochastic is in the overbought region on the same time frame as well.



The pattern is roughly 700 pips in height, which suggests that the potential breakdown could be the same. However, one might want to trade the actual formation of the right shoulder to catch the potential reversal early.

On shorter-term time frames, EUR/USD has been consolidating in between 1.3050 and 1.3100 so it might be more prudent to wait for a breakdown below the support level to ensure that enough downward momentum is taking place.

Note that Cyprus is still undergoing some challenges with its bailout situation as a recent debt sustainability report revealed that they’d need to look for an additional 6 billion EUR to weather the effects of the fiscal tightening measures on their economic growth. Some say that a second bailout might be in the works, which could be very negative for the euro.

By Kate Curtis from Trader's Way

 

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AUD/USD: Potential Retest of 1.0400 (April 16, 2013)

AUD/USD had a sharp selloff since Thursday last week as weak Chinese data and weak Australian data have been weighing the pair down. The recent release of the weaker than expected Chinese GDP, which came short at 7.7% instead of 8.0%, and the tumble in gold prices to their two-year lows pushed the pair below the 1.0400 major psychological support.



However, a retest might be in the cards as the pair bounced from the 1.0300 handle. It could retrace to the 38.2% Fib, which is in line with 1.0400, before heading back down to test or possibly break its recent lows.

Stochastic is still climbing though, which means bulls have enough energy to push the Aussie back up. For a swing trade, a stop above the Fibs might provide enough leeway and a target of 1.0200 would provide a good reward to risk ratio.

There are no major releases from both Australia and U.S. today so the current risk off market sentiment could keep this pair on a downtrend.

By Kate Curtis from Trader's Way

 

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GBP/USD: Head and Shoulders Pattern (April 22, 2013)

A potential reversal is looming on GBP/USD as the pair formed a complex head and shoulders pattern on the 4-hour time frame. The pair is currently testing the neckline around the 1.5250 minor psychological support level.

Take note that this area used to be a resistance level and is currently the 50% Fibonacci retracement level, which means that it could still act as support. However, stochastic is still making its way into the oversold area, suggesting further downside price action.



The catalysts for today are the U.S. existing home sales and BOE MPC member Tucker’s speech. U.S. existing home sales are projected to climb from 4.98M to 5.02M in March, which might be positive for the Greenback. Meanwhile, Tucker could express support for further asset purchases, which could weigh on the pound.

A sell stop order below the 1.5200 major psychological support would be a good level to enter and a target around 1.5000 could yield a reward to risk ratio of 2:1 with a 100-pip stop. The formation is roughly 200 pips in height, which suggests the breakdown could be 200 pips in size as well.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD Long-Term Support at 1.0200 (April 23, 2013)

The recent risk-off market environment has pushed AUD/USD down from the top of the long-term range around 1.0600 towards the bottom. Another test of the 1.0200 major psychological level could be in the cards for this week.

This level could hold as support if Australia’s quarterly CPI figure meets or beats expectations. The report is slated to show a 0.7% uptick, higher than the previous period’s 0.2% increase in price levels. On top of that, negative expectations for U.S. Q1 2013 GDP could keep the dollar rallies at bay.



Stochastic is already in the oversold zone, suggesting a potential bounce later on. In fact, a shallow bullish divergence seems to be forming as the previous low was matched with a higher low by the oscillator.

Since this is based on the daily time frame, a wide stop of 100 to 150 pips would work for a swing trade. Aiming for the middle of the range around 1.0400 would give a good reward to risk ratio of around 2:1 while going for the top of the range at 1.0600 would yield a much higher R:R.

By Kate Curtis from Trader's Way

 

[katetrades]

Shallow Retracement or Breakdown on EUR/USD (April 24, 2013)

EUR/USD is currently testing the 1.3000 major psychological area, as the path of least resistance is downwards. After all, fundamentals in the euro zone remain very weak as the region grapples with several financial and economic challenges.

Today’s release of the German Ifo business climate report could provide a catalyst for a stronger move down as a lower figure is expected.



The pair could still retrace to the 38.2% Fibonacci retracement level in line with a former support area. With all the negative factors weighing on the euro, a shallow retracement or a sharp breakdown could be likely.

If the pair eventually drops below the 1.3000 handle, a stronger downward trend could ensue and the next support level on the longer-term time frame is around the 1.2750 mark.

By Kate Curtis from Trader's Way

 

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GBP/USD: Trading the U.K. GDP Report (April 25, 2013)

On its 1-hour time frame, GBP/USD is testing the falling trend line connecting its recent highs from the second week of April. On top of that, the pair is also stalling around the 1.5300 major psychological level.

Perhaps the release of the U.K. GDP report for Q1 2013 will be the biggest market catalyst for today as this could send GBP/USD above the trend line or all the way back down to 1.5000. The report would confirm if the U.K. entered another technical recession for the third time in five years if it comes in negative. Analysts are expecting a 0.1% uptick to follow the 0.3% drop in Q4 2012, but the odds are tilted to the downside as the cold weather in January and March might’ve taken off a huge chunk of growth.



A straddle play could be your setup if you’re not biased in any direction and would just rather catch the overall momentum. The pair could make a strong break below the 1.5300 handle if the report misses expectations or it could rally above the 1.5350 minor psychological resistance if it comes in strong.

This report typically triggers a lot of volatility for the pound, so it make sense to have a wide enough stop of at least 50 pips to give the trade enough breathing room.

By Kate Curtis from Trader's Way