EURUSD has been consolidating lately, forming higher lows and lower highs to create a symmetrical triangle pattern on its 4-hour time frame. Price is currently testing the top of the pattern, which might continue to hold as resistance.
If so, EURUSD could move back to the bottom of the pattern at the 1.0875 level or perhaps go for a downside break. Stochastic is already indicating overbought conditions, which suggests that buying pressure is exhausted. RSI starting to move south so price might follow suit.
The moving averages are still oscillating for now, indicating indecision between buyers and sellers. An upside break from the triangle resistance could spur gains of around 300 pips, which is roughly the same height as the chart pattern.
Event risks for this trade include the NFP release on Friday, with analysts expecting weaker hiring gains of 192K compared to the previous 292K figure. Earlier labor indicators from the ISM surveys have indicated declines in the employment component, hinting at the possibility of a downside surprise.
Final services PMI readings from the euro zone’s top economies are up for release today, along with the US ADP non-farm employment change and ISM non-manufacturing PMI report. Strong data from the euro zone combined with weak readings from the US could be catalysts for an upside breakout.
ECB Governor Mario Draghi is set to give a testimony tomorrow and dovish remarks or hints of further easing could keep weighing on the shared currency. Other factors that could impact EURUSD action include changes in market sentiment, possibly driven by oil price moves.
By Kate Curtis from Trader’s Way
EURGBP recently broke to the upside of its long-term range pattern visible on the daily time frame then zoomed up to the .7750 minor psychological level before showing signs of a pullback. Using the Fib tool on the swing high and low shows that the 38.2% to 50% levels line up with the broken range resistance at .7400-.7450.
The 100 SMA is closer to the 61.8% Fib and this might act as a dynamic support area as well. In addition, this short-term moving average is above the longer-term 200 SMA, indicating that the uptrend is likely to carry on. If so, EURGBP could make another test of the highs at .7750 and possibly move further north until the .8000 levels.
Stochastic is still on the way down, which means that sellers are in control of price action and that further losses are possible. RSI is also on the move down, confirming that a correction is taking place. Once these oscillators reach the oversold area, a bounce could take place.
Event risks for this setup include the BOE events in today’s London trading session. The UK central bank will announce its monetary policy decision and no major changes are expected for now. Traders are likely to pay closer attention to the minutes of their meeting, as this would indicate if any member shifted to a more dovish bias.
In addition, the BOE Inflation Report is set to reflect any revisions in growth and inflation forecasts, with downgrades likely to weigh on pound price action. BOE Governor Carney has previously stated that they have no time line for hiking rates just yet, given the external risks from China and falling commodity prices. The possibility of a Brexit is also weighing on their decision.
As for the euro, the ECB is also expected to be more dovish in their next policy statement in March. ECB Governor Draghi has hinted that they might announce an actual expansion of their easing program then, something that might limit the euro’s gains.
By Kate Curtis from Trader’s Way
USDCAD has been selling off lately but it is closing in on the rising trend line visible on the daily time frame. Price could make a test of the 1.3500-1.3600 support area, which is in line with the 61.8% Fibonacci retracement level based on the latest swing high and low.
In addition, the long-term trend line coincides with the 100 SMA dynamic support. This moving average is above the longer-term 200 SMA, confirming that the climb could carry on.
Stochastic is already indicating oversold conditions so sellers might need to take a break and let buyers take over. Similarly, RSI is nearing the oversold levels also, which suggests a potential return in buying pressure.
Catalysts for a bounce include the upcoming US NFP release, which is expected to show a 189K gain in hiring, lower than the previous 292K increase. Canada is also set to print its jobs report and might show a 5.2K rise in employment, weaker than the previous 22.8K increase.
Other possible risks include the rumored OPEC special meeting this month, as several member nations have been urging for production cuts. Arab states have stubbornly refused to give in to these calls but a possible compromise might still lift crude oil and the correlated Loonie.
The BOC hasn’t announced any plans to ease monetary policy just yet but Fed officials have suggested that they might not be able to hike rates so soon again. For now, this is keeping the dollar weak, along with the rebound in risk appetite.
By Kate Curtis from Trader’s Way
AUDUSD has been trending higher lately, moving inside an ascending channel on its 1-hour time frame. Price is currently testing support at the .7100 major psychological level and might be due for a bounce to the top.
The 100 SMA is above the longer-term 200 SMA, confirming that the uptrend is likely to carry on. In that case, a test of the channel resistance at the .7300 handle might take place. Stochastic and RSI are both moving out of the oversold regions, indicating that buyers are taking control of price action.
However, a downside break of support might still be possible, taking AUDUSD for a reversal from its previous uptrend. In that case, a drop to the channel lows at .6800 could be seen.
Chinese markets are closed for the holiday today, which suggests that a bit of consolidation might take place. Earlier today, Australia reported a 1.0% gain in ANZ job advertisements, which is a leading indicator for employment.
There are no major reports due from the US. Last Friday, the NFP report chalked up a smaller than expected increase in hiring but the underlying data suggests that the labor market slack is being absorbed. Labor force participation improved while average hourly earnings rose higher than expected.
Market sentiment could determine where price might head next from here, although the path of least resistance might be to the downside due to strong demand for the dollar on upbeat US fundamentals.
By Kate Curtis from Trader’s Way
USDJPY appears to have a made a convincing break below the head and shoulders neckline on its daily time frame. This suggests that the pair could be in for more longer-term losses, possibly amounting to around 900 pips or the same height as the chart formation.
The 100 SMA crossed below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. Also, stochastic and RSI are both on the way down and still haven’t made it to the oversold area, which means that there’s more bearish pressure left.
However, a price bounce might still be possible if market conditions shift once more. This could spur a pullback to the broken support around 116.50 to 117.00 before price resumes its drop.
Event risks for this setup include Fed head Yellen’s speech tomorrow, as any remarks on policy could push the dollar in a strong direction. Fed officials last week have already pointed out that the inflation outlook is looking grim and that dollar gains might continue to put a lid on price pressures, reducing hopes of a rate in March.
Jobs data came in below expectations on the surface but underlying components such as the participation rate and the average hourly earnings showed that some of the slack is being absorbed.
US retail sales reports are up for release on Friday and strong figures for the month of January could allow the dollar to regain ground while weak data could lead to more losses. Analysts are expecting to see a 0.1% uptick for the headline figure and flat core figure.
By Kate Curtis from Trader’s Way
GBPUSD has sold off recently but is still gradually trading higher on the 1-hour time frame. A rising channel can be seen connecting the latest lows and highs of price action.
Price is currently testing the channel support and might be due for a bounce back to the top. The 200 SMA lines up with the bottom of the channel at the 1.4400-1.4450 psychological levels, which might keep losses in check. If a rally takes place, a test of the 1.4700 major psychological resistance could happen.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. However, stochastic and RSI are both on the move down, hinting at a buildup in bearish pressure. If sellers take over, a break of the channel support could be seen.
Event risks for this setup include Fed Chairperson Yellen’s speech later today, as she might drop more hints on when the next Fed rate hike might take place. Dovish remarks could mean losses for the dollar while upbeat comments could spur gains.
Another potential catalyst is the UK manufacturing production report, which might print a flat reading. Previous reports have come in weaker than expected so there’s a good possibility of a downside surprise.
Risk sentiment appears to favor the lower-yielding dollar at the moment as traders are also pricing in lower odds of a BOE rate hike for this year or early next year. Recall that their latest policy meeting minutes showed that officials voted unanimously to keep rates unchanged this time.
By Kate Curtis from Trader’s Way
EURGBP recently broke past a resistance area at the .7650 minor psychological level then climbed to the .7850 area before showing signs of a pullback. Price is drawing support at the 38.2% Fib based on the latest swing low and high, although a larger pullback to the 61.8% Fib closer to the area of interest might be possible.
The 100 SMA is still above the longer-term 200 SMA, confirming that the path of least resistance is to the upside and that the uptrend could carry on. The 100 SMA appears to have held as a near-term dynamic support while the 200 SMA coincides with the 61.8% Fib.
Stochastic is heading up but is nearing the overbought area so a selloff could still take place. RSI is also heading higher and is currently on middle ground, indicating that buyers are gaining control.
Data from the euro zone has been coming in weaker than expected, as the latest industrial production figures from the top economies all indicated contraction. Preliminary GDP readings from Germany, Italy, and the region are up for release on Friday and another round of weak data could spur more losses for the shared currency.
Analysts are expecting to see a 0.3% growth figure from Germany and also a 0.3% GDP reading from Italy. Overall, the region is also expected to show a 0.3% expansion for the last quarter of 2015.
However, data from the UK has also been mostly weaker than expected, as the latest manufacturing production report also missed expectations. There are no major reports up for release from the UK for the rest of the week, but Brexit talks could also weigh on the pound.
By Kate Curtis from Trader’s Way
EURJPY has been trending lower on its longer-term time frames but the opportunity for a countertrend setup is emerging. Price is currently testing the bottom of its descending channel visible on the 4-hour and daily charts and might be due for a bounce.
If support at the 127.00 handle holds, a rally to the channel resistance around 129.50 to 130.00 might take place. This is also in line with the 100 SMA, which has served as a dynamic resistance level in the past. This moving average is still below the longer-term 200 SMA, confirming that the downtrend is likely to carry on and that the path of least resistance is to the downside.
Stochastic and RSI are still moving lower but both oscillators are already nearing oversold levels. This suggests that selling pressure could fade soon and euro bulls could take over, especially with profit-taking activity likely to take place before the trading week closes.
Event risks for this setup include the preliminary GDP releases from the euro zone and its top economies such as Germany and Italy. A 0.3% growth figure is eyed for the region, although a weaker than expected reading might spur more losses for the shared currency.
Concerns about the banking sector in Europe are currently weighing on euro zone equity markets, along with the resurfacing possibility of a Grexit. IMF officials have noted that the country has yet to come up with an economic reform plan that can effectively trim its deficit.
Also, the threat of intervention from the Bank of Japan or Japanese government officials is keeping the yen’s gains in check. Speculations that authorities are already watching forex moves very closely and might be prepared to act if necessary have already triggered a strong bounce for EURJPY in yesterday’s late European session.
By Kate Curtis from Trader’s Way
USDJPY has been trending lower in the past few days, moving below a descending trend line on its 1-hour time frame. Price looks ready to test this falling resistance area once more, as this lines up with the 50% Fibonacci retracement level and 100 SMA dynamic resistance.
If this area keeps gains in check, price could head back to the previous lows at 111.00 or perhaps much lower. A higher pullback to the 61.8% Fib at 115.50 could still be possible but this might be the line in the sand when it comes to a correction. A break above this area or the 200 SMA could mean the start of a reversal.
Also, the 100 SMA is safely below the 200 SMA for now so the downtrend is likely to carry on. Stochastic is already indicating overbought conditions and so is RSI, which means that bearish momentum could pick up soon.
Event risks for this setup include BOJ Governor Kuroda’s speech in parliament, as he might have some remarks concerning yen strength. Recall that Japanese authorities have recently pointed out that they’re watching the yen’s FX moves closely and with urgency, leading to speculations of potential currency intervention.
Data from the US came in stronger than expected on Friday, as the headline retail sales figure logged in a 0.2% gain versus the projected 0.1% uptick while the core figure indicated a 0.1% uptick instead of staying flat. Import prices showed a smaller than expected 1.1% decline compared to the estimated 1.4% slide.
US banks are closed for President’s Day today so the low liquidity during the US session might spur more volatile price action.
By Kate Curtis from Trader’s Way
EURAUD has been trending higher these days and is moving inside a rising channel on its 4-hour time frame. Price is currently testing the bottom of the channel, which might hold as support and trigger a bounce back to the resistance at 1.6300.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance could still be to the upside. In addition, the 200 SMA lines up with the channel support, adding to its strength as an inflection point.
Meanwhile, stochastic and RSI are both indicating oversold conditions, which suggests that buyers could take over. Bullish divergences can also be seen, as price made higher lows while the oscillators made lower lows.
Earlier today, Australia released the RBA meeting minutes which didn’t trigger such a bearish reaction from the Aussie, even when policymakers kept the door open for additional rate cuts. However, risk appetite appears to be in play as Chinese investors just returned from their Spring Festival holidays.
Yesterday, ECB head Draghi testified before a parliamentary committee on economic affairs, reiterating that they’d might have to reevaluate their QE program in March. He stressed that the central bank won’t hesitate to act if necessary, and that policymakers would base their decision on the impact of falling commodity prices on domestic inflation, as well as the risks from the global financial turmoil.
ZEW economic sentiment figures are due from the euro zone today while Australia has its jobs numbers up for release on Thursday.
By Kate Curtis from Trader’s Way
GBPUSD suffered a sharp selloff in recent trading and is currently consolidating. A bearish flag continuation pattern can be seen on the 1-hour time frame, signaling another round of potential losses for the pair.
The mast of the flag is approximately 220 pips in height so the resulting breakdown could be of the same size, taking GBPUSD down to 1.4080-1.4100. A break below the current 1.4300 levels could be enough to signal that more losses are in the cards.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. However, stochastic and RSI are both indicating oversold conditions and are turning higher, suggesting that bearish pressure is fading and that profit-taking might take place.
If so, an upside breakout could lead to a rally to the nearby resistance at the 1.4450 minor psychological mark, which previously served as near-term support.
Catalysts for a breakout include the UK jobs figures, with the claimant count expected to show a 2.9K increase in joblessness compared to the previous 4.3K rise. Of particular importance is the average earnings index, which is slated to fall from 2.0% to 1.9%, underscoring the BOE’s view that domestic price pressures are still weak.
Meanwhile, the unemployment rate is expected to fall from 5.1% to 5.0% although this might be spurred by a drop in labor force participation. Stronger than expected data could allow GBPUSD to recover while weak results could spur another leg lower.
As for the US dollar, the FOMC minutes are up for release and these could push the majors in a strong direction. Recall that Fed officials have been wary of falling commodity prices and global financial risks these days so market watchers could be setting up for a downbeat release.
By Kate Curtis from Trader’s Way
NZDUSD had previously been trading inside a symmetrical triangle formation but broke to the downside. Price then dipped to a low of .6550 before showing signs of a pullback.
Using the Fib tool on the breakout move shows that the 50% level lines up with the broken triangle support around the .6650 minor psychological mark. This could keep gains in check and allow price to resume its drop, possibly to the previous lows at .6550 or much lower. A higher retracement could last until the 61.8% Fibonacci retracement level, which might be the line in the sand for any corrections.
The 100 SMA is slightly below the 200 SMA, indicating that the path of least resistance is to the downside and that further losses are possible. Stochastic is already indicating overbought conditions and RSI is approaching the 80.0 level so sellers might take over soon.
Earlier today, New Zealand printed declines in its producer input and output prices, hinting at weaker inflation prospects down the line. The PPI input figure showed a 1.2% drop while the PPI output figure showed a 0.8% decline.
In the US, the FOMC minutes spurred a bit of a selloff for the dollar, as Fed officials highlighted the increased downside risks to growth and inflation. However, data from the US economy such as PPI and industrial production beat expectations, indicating that it is still on solid footing.
Up ahead, the US Philly Fed index and initial jobless claims data are up for release. The former is expected to improve from -3.5 to -2.9 while the latter could come in at 275K, slightly higher than the previous 269K in claimants.
By Kate Curtis from Trader’s Way
GBPAUD has been trending lower, moving below a descending trend line connecting the latest highs of price action. The pair seems to be in the middle of a pullback and using the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the trend line.
In addition, the highest Fib also coincides with the 100 SMA, which is below the 200 SMA and indicating that the downtrend is set to carry on. The moving averages are edging farther apart, suggesting a pickup in bearish pressure.
If any of the Fib levels hold as resistance, price could head back to the recent lows at the 1.9900 major psychological support. On the other hand, a break above the trend line and Fib resistance around the 2.0400 area could signal a potential reversal.
Data from the UK has been mixed when it comes to jobs and inflation reports. The headline CPI came in line with expectations and rose from 0.2% to 0.3% while the core CPI fell from 1.4% to 1.2%. UK claimant count decreased more than expected but the jobless rate was unchanged at 5.1% and the average earnings index fell from 2.0% to 1.9%.
UK retail sales data is due today and another weak reading could mean more pound losses. Analysts are expecting to see a 0.8% rebound from the previous 1.0% decline, although the weakness in wage growth could weigh on consumer spending.
As for the Australian dollar, commodity prices and overall risk sentiment appear to be the major drivers of price action. Dashed hopes of an oil production freeze agreement weighed on risk appetite recently, dragging the Aussie lower, but continued attempts to reach a deal could renew support for commodity currencies.
By Kate Curtis from Trader’s Way
USDCAD has formed lower highs on its 1-hour chart and has been finding support at the 1.3650-1.3700 area, creating a descending triangle chart pattern. Price appears to have found resistance at the top of the formation once more and might be due for another test of support.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. If bearish pressure is strong enough, a downside break of support might even take place, taking USDCAD lower by an additional 400-500 pips, which is roughly the same height as the chart pattern. On the other hand, if the triangle bottom still holds as a floor, another bounce to the resistance at 1.3750-1.3800 might take place.
Stochastic is on the move down, which means that sellers are still in control, but the oscillator is already nearing the oversold area. RSI is also heading south and approaching the 20.0 mark, which suggests that buying pressure might return soon.
Data from the Canadian economy came in mixed last Friday, as CPI readings came in stronger than expected but retail sales reports fell short of estimates. In the US, CPI readings came in higher than projections.
There are no major reports due from the US or Canada today, which suggests that oil headlines could influence price action. In recent reports, Iran has confirmed that they had been able to raise output by 500,000 barrels per day as promised after the Western sanctions were lifted earlier in the year. This makes it more difficult for other oil producers to commit to capping production, as larger nations have specified that they’d only cooperate if other nations do so.
With that, the path of least resistance in terms of fundamentals might be to the upside, especially since oil companies in Canada are starting to feel the pinch of falling prices. Speculations of a March hike could still keep the dollar afloat against its peers.
By Kate Curtis from Trader’s Way
NZDUSD had previously been moving inside a descending triangle pattern, finding support around .6575 then forming lower highs on its 1-hour chart. Price recently broke past the triangle resistance and zoomed up to the .6725 level before showing signs of a pullback.
Applying the Fib tool on the latest swing low and high shows that the 50% retracement level lines up with the broken resistance around .6650. This might hold as support moving forward, with the 61.8% Fib as the line in the sand for any correction, and push price back up to the previous highs and beyond.
The 100 SMA is still below the longer-term 200 SMA for now but an upward crossover appears to be brewing. In that case, more buyers could push the pair higher one RSI and stochastic turn up from the oversold regions. For now, these oscillators are still heading south, which means that sellers are in control.
There are no major events due from both the US and New Zealand for today, leaving market sentiment mostly responsible for price action. So far, it looks like the pickup in commodity prices led by crude oil is keeping risk appetite in play, supporting the higher-yielding Kiwi.
In addition, the recent shift to a less hawkish stance by Fed officials is dampening hopes for March rate hike and is weighing on dollar demand. The US preliminary GDP reading is up for release on Friday and a downgrade from 0.7% to 0.4% is eyed, likely dragging the dollar lower.
Fears of a global economic slowdown stemming from China have also faded recently, although that’s probably because other economic concerns like the Brexit are dominating the headlines. For now, it looks like the Kiwi could keep drawing support from the risk-on flows before more top-tier reports are released next week.
By Kate Curtis from Trader’s Way
EURAUD had been trending higher on its 4-hour time frame, trading inside an ascending channel connecting the latest highs and lows. However, price made a downside break of support recently, indicating that a reversal might take place.
Price dipped to a low of 1.5160 before showing signs of a pullback. Using the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken trend line around 1.5575. A larger retracement could last until the 50% Fib at the 1.5700 major psychological mark or the 61.8% Fib at 1.5835.
The 100 SMA is still above the 200 SMA for now but a downward crossover appears imminent, signaling that further declines are likely. Stochastic is pointing up, suggesting that buyers are taking control, while RSI is heading north as well. Once these oscillators reach the overbought levels, selling pressure could resume.
Earlier today, Australia printed a couple of weaker than expected quarterly reports. Construction work done for Q4 2015 fell 3.6%, worse than the projected 2.1% drop and the previous 1.8% slump. The wage price index rose 0.5%, short of the projected 0.6% increase.
Yesterday, Germany’s Ifo business climate index posted a weaker than expected reading of 105.7 versus the projected fall from 107.3 to 107.0. There are no major reports due from the euro zone today but expectations of additional ECB easing in March could continue to dampen demand for the shared currency.
Private capital expenditure data is due from Australia on Thursday and a 3.1% decline is eyed. Weaker than expected results could mean more losses for the Aussie, especially since risk aversion appears to be back in the markets.
By Kate Curtis from Trader’s Way
USDJPY has been trending lower recently, moving below a descending trend line connecting the latest highs of price action on the 1-hour chart. Price is currently testing this trend line and might be due for another drop.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to carry on. This moving average is also near the trend line, adding to its strength as a resistance area.
Meanwhile stochastic is heading higher but is nearing the overbought region, indicating weaker buying pressure and a possible return in bearish momentum. RSI is also close to the overbought levels.
The US recently released a bunch of downbeat economic reports, starting from its flash services PMI which indicated industry contraction. New home sales also came in weaker than expected.
For today, the durable goods orders data is due, along with the initial jobless claims report. Another round of weak data could mean more losses for the US dollar. Analysts are expecting to see a 3.0% rebound in headline durable goods orders and a 0.2% uptick in core durable goods orders.
As for the yen, Japan’s Tokyo core CPI and national core CPI figures are up for release next. Weak readings could revive talks of additional BOJ easing, which might also weigh on the yen. Analysts are expecting to see a flat reading for the Tokyo core CPI and a 0.2% decline for the national core CPI.
By Kate Curtis from Trader’s Way
GBPJPY has been trending lower across multiple time frames, moving below a descending trend line on its 4-hour forex chart. Price is currently pulling up to the resistance area and might be ready to resume its drop to the previous lows at 154.75.
Using the Fib tool on the latest swing low and high shows that the 38.2% level lines up with the 158.25 area and the falling trend line. A larger retracement could last until the area of interest around 160.50, which might be the line in the sand for any short-term retracement. RSI is still on middle ground on its way up, which suggests that there may be some buying pressure left.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. Stochastic is still on the move up but is almost in the overbought region already, suggesting that buying pressure could weaken soon.
Earlier today, CPI readings from Japan came in mixed, with the Tokyo core CPI showing a 0.1% drop instead of staying flat and the national core CPI staying flat instead of posting the projected 0.2% drop.
Data from the UK came in weaker than expected yesterday, although the preliminary GDP reading showed no change from the previous 0.5% estimate. Preliminary business investment showed a sharp 2.1% drop instead of the estimated 0.6% gain.
Brexit fears are also weighing heavily on the pound, as leaving the EU could mean more financial and economic uncertainty. The referendum is scheduled for June, which suggests that traders have enough time to price in this possibility.
By Kate Curtis from Trader’s Way
AUDUSD has been trending higher in the past weeks, trading above an ascending channel on its 1-hour time frame. Price is currently testing the trend line support and might be due for a bounce or a break.
A bearish flag appears to have formed right after the sharp selloff, indicating that a continuation of the drop might be seen, likely taking AUDUSD down by an additional 100 pips or the same height as the flag’s mast. However, oscillators are indicating oversold conditions so a bounce might still be possible.
In that case, a move up to the channel resistance at the .7250 minor psychological level might take place. The 100 SMA is still above the 200 SMA for now, suggesting that the path of least resistance is to the upside.
Data from the US came in mostly stronger than expected last week, with the US preliminary GDP reading upgraded from 0.7% to 1.0% instead of being downgraded to the estimated 0.4% figure. Personal spending and income reports also beat expectations with gains of 0.5% each.
Earlier today, Australia printed weaker than expected company operating profits data, as the figure fell 2.8% in the last quarter of 2015. The MI inflation gauge fell 0.2% after previously gaining 0.4% while private sector credit showed a 0.5% uptick as expected.
Up ahead, the Chinese PMI releases and RBA statement could serve as strong catalysts for a move tomorrow, as downbeat results could spark a longer-term selloff. Australia’s GDP, trade balance, and retail sales data are also up for release later on in the week.
By Kate Curtis from Trader’s Way
GBPAUD has been trending below a descending trend line on its 4-hour time frame and seems to be ready for a pullback. Price bounced off the 1.9300 area and might retrace to an area of interest near the trend line.
Applying the Fib tool on the latest swing high and low shows that the 61.8% level is closest to the trend line and former support around 2.0100. This is also near the 100 SMA dynamic inflection point. If this area holds as resistance, GBPAUD might make its way back to the previous lows or much lower.
The 100 SMA is below the longer-term 200 SMA, confirming that the selloff is likely to carry on. However, stochastic and RSI are still on the move up for now, which means that buyers are in control of price action. Once these oscillators turn down from the overbought levels, more sellers could push price down.
Earlier today, PMI readings from China came in mostly weaker than expected, reviving speculations of additional PBOC easing. The official manufacturing PMI fell from 49.4 to 49.0 while the non-manufacturing PMI dropped from 53.5 to 52.7 to indicate weaker industry expansion. The Caixin version of the manufacturing PMI declined from 48.4 to 48.0 to show a sharper pace of contraction.
Up ahead, the RBA is set to announce their interest rate decision and no actual changes are expected for now. In their previous statements, the RBA kept a steady bias but a shift to a more dovish stance could spur more Aussie losses.
As for the UK, PMI readings from the manufacturing, services, and construction sectors are lined up this week. Both the manufacturing and services industry could report weaker growth, which might feed into Brexit concerns for businessmen.
By Kate Curtis from Trader’s Way
