Daily Technical Analysis by Kate Curtis from Trader's Way

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NZDUSD Double Bottom (May 09, 2017)

NZDUSD could be in for a reversal from its selloff as the pair formed a double bottom pattern on its 1-hour chart. Price still has to test and breakout from the neckline at the .6960 level before confirming that an uptrend is in order.

The chart pattern is approximately 100 pips tall so the resulting breakout could be of the same size. The 100 SMA just crossed above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. Also, stochastic is pointing up and heading north so NZDUSD might follow suit.

However, US economic reports have been mostly stronger than expected in the past few days as the NFP report printed a higher than expected 211K gain in hiring versus the estimated 194K reading. Also, the Fed labor market conditions index enjoyed a large upgrade from 0.4 to 3.6 in March.

The main catalyst for this short-term setup might be the RBNZ decision, which could show a slight shift to a less dovish bias. Economic reports from New Zealand have been coming in mostly stronger than expected while the latest Global Dairy Trade auctions have reflected gains in dairy prices.

No actual policy changes are expected from the RBNZ this month so traders will pay close attention to any changes in rhetoric. Meanwhile, the US has its CPI and retail sales reports lined up at the end of the week.

By Kate Curtis from Trader's Way

 

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NZDUSD Potential Breakout (May 10, 2017)

NZDUSD has formed lower highs and higher lows on its 1-hour chart, creating a symmetrical triangle pattern. Price just bounced off support and could be due for a move back to resistance.

The 100 SMA is below the longer-term 200 SMA on this chart so the path of least resistance is to the downside. However, the moving averages could simply be oscillating so range-bound conditions could persist.

Stochastic is on middle ground but is on the move up to show that buyers are in control of price action. If a breakout happens, the pair could move by an additional 100 pips or the same height as the triangle pattern.

The main catalyst for the move could be the upcoming RBNZ interest rate statement. No actual rate changes are expected for now but traders could get some clues on future policy action based on any shift in rhetoric. Economic data from New Zealand has been mostly upbeat so policymakers could signal that they're not looking to cut rates anytime soon.

Only US import prices and the federal budget balance are lined up in the New York session so traders might turn their attention to political headlines. So far, North Korea's announcement about another missile test has kept risk-taking in check and investors are also wary about Comey's resignation.

By Kate Curtis from Trader's Way

 

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NZDUSD Long-Term Breakdown? (May 11, 2017)

NZDUSD has been trading inside what appears to be a falling wedge pattern on its daily chart. Price is currently testing support and seems to be pushing for a break lower, indicating that a steeper selloff is about to happen. Stochastic has made it out of the overbought zone to suggest a return in buying pressure, but the oscillator appears to be having difficulty sustaining its climb.

This wedge formation is approximately 600 pips tall so the resulting downtrend could be of the same size. The 100 SMA is below the longer-term 200 SMA on the daily chart so the path of least resistance is to the downside. Also, the 200 SMA lines up with the wedge resistance, adding to its strength as a ceiling in case the pair bounces back up.

A few hours back, the RBNZ made its interest rate decision and announced that it would be keeping rates unchanged at 1.75% as expected. The actual statement was not as upbeat as many expected, leading the Kiwi to tumble across the board. Policymakers also highlighted several uncertainties and gave no indication that they're looking to hike soon.

Meanwhile, the dollar has enjoyed some support from mostly upbeat US medium-tier reports and hawkish Fed rhetoric. Rosengren reiterated his view that three more rate hikes seem reasonable this year and even though he's not a voting member, US markets and bond yields closed mostly higher on these remarks.

Up ahead, US PPI and initial jobless claims are due but the bigger market-movers for the dollar might be the retail sales and CPI reports due on Friday. Only the Business NZ manufacturing index is lined up from New Zealand for the rest of the trading week but quarterly retail sales reports due over the weekend could lead to gaps in the next trading week.

By Kate Curtis from Trader's Way

 

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GBPAUD Channel Retracement (May 12, 2017)

GBPAUD is moving inside an ascending channel connecting its highs and lows since mid-April. Price just bounced off the resistance and could be due for a test of support at the 1.7400 major psychological level.

Using the Fib retracement tool on the latest swing low and high shows that this support area lines up with the 38.2% level while the 50% level coincides with the channel support. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is more likely to resume than to reverse.

Stochastic is pulling up from the overbought zone to indicate that buyers are regaining control of price action. However, the gap between the moving averages is narrowing to suggest that bullish momentum is fading. A break below the lowest Fib around 1.7300 could be enough to indicate that a downtrend is about to take place.

The BOE statement turned out less hawkish than expected even as the central bank kept monetary policy unchanged. Policymakers warned that Brexit risks could weigh heavily on consumer spending and living conditions due to subdued wage growth and rising price levels.

Economic data also turned out weaker than expected, with manufacturing production down 0.6% and industrial production down 0.5%. There were no reports released from Australia then, allowing the Aussie to take advantage of the pickup in commodities. However, these gains could be returned as China reported a steep fall in iron ore prices again.

By Kate Curtis from Trader's Way

 

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AUDUSD Descending Channel (May 15, 2017)

AUDUSD has been trending lower recently and is now moving inside a descending channel on its 4-hour chart. Price just bounced off support and is looking to pull back to the resistance at the .7450 minor psychological level.

This is in line with the 50% Fib and a broken support zone. A larger pullback could last until the channel resistance closer to the 61.8% retracement level and the 100 SMA dynamic resistance. This short-term MA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside.

Stochastic is also heading down from the overbought zone to indicate that selling pressure is about to pick up. If any of the nearby resistance levels hold, price could make its way back down to the swing low at .7325 or onto the channel support closer to the .7300 handle.

Economic reports from China and Australia have been mostly disappointing last week and the RBA statement did acknowledge these signs of a slowdown. Earlier today, China reported a lower than expected industrial production reading of 6.5% year-over-year versus the projected 7.0% gain and the earlier 7.6% increase. Fixed asset investment and retail sales also slowed significantly.

Over in the US, the dollar was bogged down by weaker than expected CPI and retail sales figures. Headline CPI came in at 0.2% versus 0.3% while core CPI printed a meager 0.1% uptick. Headline retail sales increased 0.4% versus 0.6% while core retail sales advanced by 0.3% versus 0.5% to signal that the consumer sector is not that strong yet.

By Kate Curtis from Trader's Way

 

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NZDUSD Shallow Channel (May 16, 2017)

NZDUSD has been gaining ground recently but could be due to resume its drop as it approaches the channel resistance. Price has been trading inside a shallow descending channel with the top around the .6930 level.

If this keeps gains in check, the pair could head back down to support at the .6800 major psychological mark. The 100 SMA is below the longer-term 200 SMA on the 1-hour time frame, signaling that the path of least resistance is to the downside. However, stochastic is turning up from the overbought zone to suggest that buyers are trying to regain the upper hand.

Over the weekend, New Zealand printed stronger than expected quarterly retail sales figures. This allowed the Kiwi to recover after bulls were disappointed by the less hawkish than expected RBNZ statement last week. Up ahead, PPI data and the Global Dairy Trade auction could lead to more volatility. Analysts are expecting to see gains in producer prices, which would likely translate to higher consumer inflation down the line.

As for the US, traders are starting to doubt that the Fed can hike rates in June after the Empire State manufacturing index slid from 5.2 to -1.0 instead of improving to 7.2. Underlying data showed declines in new orders and shipments. Building permits and housing starts, along with industrial production and capacity utilization, are lined up from the US today.

By Kate Curtis from Trader's Way

 

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EURJPY Uptrend Correction (May 17, 2017)

EURJPY is still trending higher and has recently broken past the resistance at the 124.50 minor psychological level. Price zoomed up close to the 126.00 resistance from there but could be due for a pullback before posting more gains.

Applying the Fibonacci retracement tool on the latest swing low and high reveals that the 61.8% retracement level lines up with the broken resistance that might now hold as support. The 100 SMA is above the 200 SMA to suggest that the uptrend could continue and is also close to the area of interest.

Stochastic is indicating oversold conditions so buyers could take over soon. A shallow correction could find support at the 38.2% Fib or 125.00 handle while a larger correction could last until the rising trend line support.

Euro zone economic data turned out mixed, with the region's flash GDP coming in line with expectations of 0.5% growth and Germany's ZEW economic sentiment posting a weaker than expected climb from 19.5 to 20.6 versus the consensus at 22.3. Euro zone trade balance and the region's ZEW index came in better than expected.

In Japan, core machinery orders posted a meager 1.4% gain versus the projected 2.6% jump. Revised industrial production data is due next and no change from the preliminary 0.5% uptick is eyed.

Market sentiment and US bond yields appear to be influencing yen price action as well, with the latest national security issues in the Trump administration dampening demand for the dollar and keeping the yen supported. However, the North Korea situation remains an issue and could weaken support for JPY as well.

By Kate Curtis from Trader's Way

 

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GBPUSD Countertrend Setup (May 18, 2017)

GBPUSD has been trending higher recently, moving inside an ascending channel visible on its 1-hour and 4-hour charts. Price just bounced off support and could be due for a test of resistance from here.

The 100 SMA is above the longer-term 200 SMA on the 4-hour chart so the path of least resistance is to the upside. However, stochastic is approaching the overbought zone to indicate a return in selling pressure so the ceiling might still hold. If so, a pullback to the channel support at 1.2925-1.2950 could offer a better long entry level.

UK economic data has been mostly stronger than expected, with CPI readings indicating a strong surge in headline and core inflation. Jobs data was also upbeat as the claimant count came in at 19.4K versus the earlier 33.5K increase while the unemployment rate edged down from 4.7% to 4.6%. The average earnings index advanced from 2.3% to 2.4% as expected to reflect a bit of wage growth.

Meanwhile, the dollar is currently being weighed down by political headlines as the focus has shifted to Trump's alleged intelligence information leak to Russia. An official probe has been ordered by the Justice Department, leading market watchers to worry that any fiscal reforms would likely be delayed by these issues. Initial jobless claims and the Philly Fed index are lined up today.

By Kate Curtis from Trader's Way

 

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GBPUSD Short-Term Channel (May 19, 2017)

GBPUSD enjoyed additional volatility recently but is still trading safely inside its ascending channel on the 1-hour time frame. Price just bounce off support and could be due for another test of resistance.

The 100 SMA is also above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, this short-term moving average lines up with the channel support, adding to its strength as a floor. However, stochastic is turning back down to suggest that another dip is possible.

Economic data from the UK has been stronger than expected this week. Headline and core CPI both beat expectations but traders had been wary of the consumer sector feeling the pinch from higher prices of goods. Jobs data still reflected upside momentum in hiring while the average earnings index and the latest retail sales figure reflected resilience among consumers.

However, the dollar made a pretty strong comeback in the latter sessions as the investigations on Trump's alleged intelligence information leak to Russia went on. Other government officials attempted to reassure that progress is still being made in terms of fiscal policy reform, leading to a bounce in US equities as well.

In terms of data, US initial jobless claims and the Philly Fed manufacturing index beat expectations. Only the CBI industrial orders expectations index is due from the UK today and there are no reports due from the US.

By Kate Curtis from Trader's Way

 

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EURJPY Broken Trend Line Retest (May 22, 2017)

EURJPY recently broke below its short-term ascending trend line to indicate that a reversal from the uptrend is in order. Price dipped to the 122.50 minor psychological support then pulled back up to the broken support, which might now keep gains in check.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the broken support zone. However, the 100 SMA is still above the longer-term 200 SMA on the 1-hour chart so there may still be room for some gains.

Stochastic is already turning down from the overbought area to suggest that selling momentum is about to kick in. If so, EURJPY could make its way back down to the swing low or create new ones.

Over the weekend, the focus was back on Brexit issues as the UK said that it is not willing to pay the bill that the EU is charging. This led to speculations that talks or even the Brexit itself might get delayed, lending some support for the shared currency. There's not much in the way of top-tier data from the euro zone today so traders might turn their attention to the speech by UK PM May.

As for the yen, Japan's trade balance came in weaker than expected at 0.10 trillion JPY versus the consensus at 0.25 trillion JPY. To top it off, the earlier reading was downgraded to show a smaller surplus of 0.11 trillion JPY. Still, market sentiment and US bond yields could drive yen pairs around.

By Kate Curtis from Trader's Way