Daily Technical Analysis by Kate Curtis from Trader's Way

NZDUSD has been trending higher recently, moving above an ascending trend line on its 4-hour time frame. Price found resistance around the .7050 minor psychological level and might be due for another test of the trend line.

Applying the Fib tool on the latest swing high and low shows that the support area is around the 50% to 61.8% retracement levels just above the .6900 major psychological support. In addition, the 61.8% Fib lines up with a former resistance and potential support zone, as well as the 100 SMA.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is still on the move down so there may be a bit of selling pressure left while RSI is also heading south so price could follow suit. Once these oscillators reach the oversold regions and turn higher, buying momentum could return and push NZDUSD back up to the previous highs.

Risk appetite has supported the higher-yielding commodity currencies since the start of the week despite the lack of agreement in the Doha meetings. In New Zealand, the GDT auction yielded a 3.8% gain in dairy prices, stronger than the previous 2.1% increase. Visitor arrivals rebounded 4.1% after falling by 1.2% in the previous period.

As for the US, the Philly Fed index and initial jobless claims are up for release today. The former is expected to fall from 12.4 to 8.1, indicating a weaker pace of growth in the industry. Meanwhile, the latter could come in at 265K, slightly higher than the previous 253K increase.

Next week, both the US Fed and RBNZ are set to make interest rate decisions. No actual changes are expected from these central banks, although the FOMC might highlight the recent weakness in inflation and consumer spending.

By Kate Curtis from Trader’s Way

AUDUSD has been trending higher and moving inside an ascending channel on its 4-hour time frame. However, price is currently testing the resistance around the .7900 major psychological level and might be due for a test of support at .7700.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, RSI is on the move down so sellers might be in control at the moment. Stochastic is already in the oversold area so selling pressure might fade soon.

If so, price could find support at the mid-channel area of interest at the .7800 major psychological level just above the 100 SMA. Stronger bullish momentum could trigger an upside break of the channel resistance and spur a sharper rally for AUDUSD.

Data from Australia was slightly weaker than expected yesterday, as the quarterly NAB business confidence index fell from 5 to 4. As for the US, data came in mixed, with the Philly Fed index printing a disappointing -1.6 figure versus the projected 8.1 reading and the initial jobless claims posting a smaller than expected increase.

There are no major reports up for release from the US or Australia today, which suggests that market sentiment could stay in play. Risk appetite has weakened yesterday when commodity prices retreated and US earnings turned out mixed.

Next week the FOMC has its interest rate statement lined up and traders might be positioning for a downbeat announcement since data from the US has been mostly weaker than expected.

By Kate Curtis from Trader’s Way

USDJPY broke out of its double bottom formation on the 1-hour time frame, signaling that a reversal from the previous downtrend is about to take place. However, price has encountered resistance near the 112.00 major psychological level and might be due for a pullback.

Using the Fibonacci retracement tool on the latest swing low and high shows that the 61.8% level lines up with the broken double bottom neckline, which might now hold as support. This is also near the moving averages, which usually act as dynamic support areas.

The 100 SMA is above the longer-term 200 SMA on the 1-hour time frame, confirming that the path of least resistance is to the upside. However, stochastic and RSI are still heading south so USDJPY could follow suit. Once these oscillators reach the oversold region and turn higher, buyers could push price back up to the previous highs.

Event risks for this setup this week are the central bank decisions in the US and Japan. The Fed is set to make its monetary policy announcement on Wednesday while the BOJ will have its statement on Thursday. No actual policy changes are expected from the Fed while some traders are predicting that the Japanese central bank could announce additional stimulus following the recent earthquakes.

Keep in mind as well that the BOJ’s previous rate cut to negative territory didn’t have a sustained impact on the Japanese currency while jawboning attempts from finance officials also spurred further appreciation.

Top-tier reports from Japan are also lined up towards the end of the week, which suggests additional volatility for USDJPY. These include preliminary industrial production and retail sales data. As for the US, its advance GDP reading is due on Thursday and slower growth of 0.7% is eyed.

By Kate Curtis from Trader’s Way

GBPJPY had been trading below a descending trend line on its 4-hour time frame earlier this year before an upside breakout took place, signaling a potential reversal. In addition, a complex double bottom pattern has formed and price is currently testing the neckline resistance at 161.00-162.00. A bullish flag can be seen so an upside break from this consolidation formation could confirm another potential rally.

The 100 SMA is still below the longer-term 200 SMA for now so the path of least resistance is to the downside. Also, stochastic is indicating overbought conditions so profit-taking could bring price down. RSI is also pointing down and might indicate a return in selling pressure.

A pullback to the broken trend line around 156.00 could be possible before the pair resumes its climb. This is close to the moving averages, which might hold as dynamic support levels from here. A move back below the trend line, however, could keep GBPJPY on its long-term downtrend.

The main catalyst for this trade this week is the BOJ interest rate decision on Thursday’s Asian trading session. Traders are speculating that policymakers could increase their stimulus efforts to counter yen strength, which is dampening domestic inflation, and to support earthquake rebuilding plans.

Data from the Japanese economy has been mostly weak, particularly when it comes to manufacturing and consumer spending. Inflation has also been subdued and far from the government’s targets.

Meanwhile, anti-Brexit comments have been supporting the pound, especially if these could swing the votes in favor of staying in the EU. Opinion polls are still showing a pretty even split lately and data from the UK has also been mostly weak.

By Kate Curtis from Trader’s Way

NZDUSD has been trending higher and moving inside an ascending channel on its 4-hour chart. Price is currently bouncing off the channel support around the .6800 major psychological level and might be due for a climb to the resistance at .7050-.7100.

The 100 SMA is above the 200 SMA and is currently holding as a dynamic support area. In addition, stochastic is on the move up so price might follow suit. RSI is also heading north and a bullish divergence can be seen, as price made higher lows from the beginning of the month while the oscillator drew lower lows then.

A return in selling pressure, however, could trigger a drop below the rising channel support and a longer-term reversal for NZDUSD. Stochastic may reach the overbought region soon and allow profit-taking to take place.

Earlier today, New Zealand reported a smaller than expected trade balance. The surplus came in at only 117 million NZD versus the estimated expansion from 367 million NZD to 405 million NZD. Report components show that exports were down by 1.2% while imports were down by 3.2%.

Up ahead, the Australian quarterly CPI report is due and a 0.3% increase in price levels is eyed. This would be slower compared to the previous period’s 0.4% gain. Stronger than expected results could also mean gains for the Kiwi since Australia is New Zealand’s closest trade partner.

Perhaps the bigger catalyst for price action among dollar pairs today is the FOMC statement, as traders are eager to find out if the Fed is still planning on tightening in June. Data from the US economy has been mostly weaker than expected in the past few weeks so there’s a good chance that policymakers could take a cautious stance and trigger a bit of weakness for the dollar.

Another major event risk for this pair is the RBNZ interest rate statement, as market watchers are still split in expecting the central bank to hold or cut rates. Further Kiwi jawboning might also be possible since NZDUSD appreciated since their previous policy announcement.

By Kate Curtis from Trader’s Way

EURJPY has been moving sideways on its 4-hour time frame, finding resistance around 127.50 and support at the 122.00 major psychological level. Price is currently testing the bottom of the range, still deciding whether to make a bounce or a break.

A bounce could take price back up to the range resistance or the area of interest around 126.50. Meanwhile a break below support could spur a longer-term selloff for the pair.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. However, stochastic and RSI are both indicating oversold conditions sellers might take a break and let buyers take over. Keep in mind that the end of the week and month usually spurs profit-taking activity.

Earlier in the week, the BOJ decided to keep monetary policy unchanged instead of adding to its stimulus efforts or lowering deposit rates further. A number of market watchers were also expecting negative lending rates but were disappointed to find out that the Japanese central bank is sitting on its hands.

Data from the euro zone came in mixed. The German preliminary CPI printed a 0.2% decline as expected while the Spanish flash CPI showed a sharper than expected drop of 1.1% versus the projected 0.7% dip. Meanwhile, the German unemployment change report showed a 16K drop in joblessness instead of the estimated 1K rise.

French preliminary GDP and CPI, German retail sales, and the Spanish flash GDP are up for release today. Also due are the euro zone flash CPI estimates, which should provide clues on whether the ECB might need to increase its stimulus program or not. Weaker than expected readings could push EURJPY lower before the end of the week.

By Kate Curtis from Trader’s Way

EURGBP recently made a break below a rising trend line, indicating that price was in for a reversal. The pair bounced off support around .7735 and seems to be making a correction from its drop.

Applying the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level lines up with the broken trend line, which might now hold as resistance. Meanwhile, the moving averages are in between the 38.2% and 50% Fib levels.

The 100 SMA is starting to cross below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. Also, stochastic is indicating overbought conditions while RSI is starting to turn lower, indicating a return in bearish pressure. In that case, EURGBP could head back to the previous lows or much lower.

Euro zone flash CPI readings came in weaker than expected on Friday, leading traders to price in stronger odds of additional ECB easing. The headline estimate fell from 1.0% to 0.8% versus expectations at 0.9% while the core figure showed a 0.2% decline. However, the preliminary GDP beat expectations at 0.6%. Other medium-tier reports from the region’s top economies came in stronger than expected, except for the German retail sales report which showed a 1.1% drop.

There have been no major reports out of the UK on Friday but its medium-tier releases were mostly disappointing. Still, the anti-Brexit sentiment may be influencing voters’ decisions and might lead them to favor staying in the EU during next month’s referendum.

This week, the UK PMI releases could serve as catalysts for the pair, with strong data likely to renew support for the pound. Another batch of medium-tier reports are lined up from euro zone economies.

By Kate Curtis from Trader’s Way

NZDUSD has been trending higher on its 4-hour time frame, moving inside an ascending channel patter. Price already bounced off support and is nearing the channel resistance at the .7100 major psychological mark.

If this resistance holds, price could make its way back towards support at the .6950 minor psychological level. Stochastic is already indicating overbought conditions so a selloff might be in order. RSI is also in the overbought area as well and might turn lower to draw more bears in the mix.

However, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This could take NZDUSD past the channel resistance to start a sharper climb, depending on how today’s New Zealand events play out.

The Global Dairy Trade auction is scheduled in the late US session and a decline in dairy prices could spur losses for the Kiwi. The index has risen for the past couple of auctions and analysts are doubtful that this can be sustained.

Soon after, the quarterly jobs report is due and a 0.6% uptick in hiring is eyed. This would be a slower pace of growth compared to the earlier 0.9% gain. In addition, the unemployment rate is expected to rise from 5.3% to 5.5%.

As for the US dollar, the downbeat ISM manufacturing PMI has weighed on its gains yesterday, as the index fell from 51.8 to 50.8 instead of falling to just 51.6. There are no major reports out of the US economy today but FOMC official Mester has a testimony lined up.

By Kate Curtis from Trader’s Way

EURAUD could be in for a reversal from its selloff, as price formed a double bottom pattern on the 4-hour time frame and broke above the neckline. Price is trading past the resistance at 1.5100 and could be in for more gains.

However, the 100 SMA is below the 200 SMA so the path of least resistance might still be to the downside. If so, EURAUD could pull back to the broken neckline or drop all the way down to the bottoms at 1.4450-1.4500.

Stochastic has been indicating overbought conditions for quite some time, indicating that buyers are exhausted and that selling pressure is building up. Bears could take control once the oscillator falls from the 80.0 area. Similarly RSI is in the overbought region and is starting to turn lower.

Earlier in the week, the RBA decided to cut interest rates by 0.25% citing weak inflationary pressures are their main reason for easing. They added that global uncertainties remain and that the domestic economy is still in the middle of rebalancing.

Data from China, Australia’s main trade partner, came in mostly weaker than expected. The official manufacturing PMI dipped from 50.2 to 50.1 while the Caixin version slipped from 49.7 to 49.4. The non-manufacturing PMI fell from 53.8 to 53.5.

As for the euro, the lack of top-tier data has given the shared currency to advance on relatively upbeat medium-tier readings. Final PMI figures came in mostly in line with expectations while services PMI readings are due today. Also lined up is the Spanish unemployment change figure.

By Kate Curtis from Trader’s Way

GBPUSD has been trending higher recently, moving above a rising trend line on its 4-hour time frame. Price found resistance near the 1.4750 minor psychological level and seems to be in the middle of a correction.

Applying the Fibonacci tool on the latest swing low and high shows that the trend line is near the 61.8% Fibonacci retracement level, which might be the line in the sand for any correction. A smaller pullback could last until the 50% Fib level, which coincides with a former resistance level and is close to the 1.4400 major psychological support.

The 100 SMA, which is also near the 50% Fib, is above the longer-term 200 SMA so the uptrend is likely to carry on. Meanwhile, stochastic is indicating oversold conditions so selling pressure might be exhausted and buyers could take over. RSI is starting to turn higher from the oversold level to indicate a return in buying pressure.

Event risks for this setup include the UK services PMI release today. A drop from 53.7 to 53.6 is eyed, and this would indicate a slight slowdown in industry expansion. A higher than expected reading could allow the pair’s rally to resume as this sector accounts for nearly two-thirds of overall economic growth in the UK. Earlier in the week, the UK manufacturing PMI and construction PMI both showed declines and fell short of expectations.

As for the US dollar, the ADP non-farm employment change fell short of expectations as well, with the actual reading showing a mere 156K gain in hiring versus the estimated 205K increase. On the other hand, the ISM non-manufacturing PMI beat expectations by rising from 54.5 to 55.7, outpacing the consensus at 54.7.

The next main catalyst for the US dollar is the non-farm payrolls report due on Friday. Analysts are expecting to see a 203K gain, lower than the previous 215K increase, which might still be enough to keep the unemployment rate steady at 5.0%.

By Kate Curtis from Trader’s Way

GBPAUD has been trending lower on the 4-hour time frame, moving below a descending trend line connecting the latest highs of price action. Price looks ready for another test of this trend line soon and technical indicators are suggesting that the resistance could hold.

The 100 SMA lines up with the trend line and might serve as a dynamic resistance level also. In addition, this moving average is below the longer-term 200 SMA so the path of least resistance is to the downside. In that case, GBPAUD could fall back to its previous lows at 1.8350.

Stochastic is indicating overbought conditions so buying pressure might be exhausted soon. However, this oscillator hasn’t crossed down to indicate a return in selling pressure just yet. Similarly RSI is in the overbought area but hasn’t turned lower.

The RBA recently cut interest rates by 0.25% in response to a weaker inflation outlook. Their recently released monetary policy statement showed a downgrade to inflation forecasts, which suggests that there’s scope for further easing.

However, the reports released from the Australian economy yesterday showed stronger than expected results. Retail sales rose 0.4%, outpacing the forecast at 0.3%, while the trade deficit narrowed due to a pickup in exports.

Data from the UK has also been mostly weaker than expected. Manufacturing, construction, and services PMI all fell short of estimates and indicated a slowdown in activity. Still, the election in London has inspired anti-Brexit sentiments once more, keeping the currency afloat so far.

By Kate Curtis from Trader’s Way

AUDUSD has been selling off in the past weeks but is currently finding support at the 50% Fibonacci retracement level on the 4-hour time frame. This lines up with an area of interest or former resistance around the .7300 major psychological mark.

If this area holds as support, a bounce back to the previous highs at the .7800 levels could be seen. This area of interest lines up with the 100 SMA, which might also hold as dynamic support. In addition, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside.

Also, stochastic is indicating oversold conditions, which means that sellers are already exhausted and that buyers could take over from here. A bullish divergence can be seen, with stochastic making lower lows since December last year and price making higher lows.

Last Friday, the non-farm payrolls report turned out much weaker than expected, as the US economy added only 160K positions versus the estimated 203K gain. In addition, the previous NFP readings were revised to show smaller gains.

There are no major reports due from the US or Australian economies today, which suggests that risk sentiment could play a key role in price action. Sentiment for the Aussie has been bearish since the RBA recently cut interest rates and their monetary policy statement, which showed a downgraded inflation outlook, suggested scope for additional easing.

Later on in the week, US retail sales and PPI figures are up for release, with downbeat readings likely to underscore the view that the Fed won’t be able to hike interest rates in June.

By Kate Curtis from Trader’s Way

NZDUSD has formed a double top pattern on its 4-hour chart, signaling that a reversal from the previous uptrend might take place. Price just broke below the neckline around the .6800 major psychological level, which confirms that the downtrend is starting.

However, technical indicators are hinting at a possible bounce. Stochastic is already indicating oversold conditions and is starting to turn higher, suggesting that profit-taking could happen and allow a pullback to the broken neckline. Similarly, RSi is in the oversold area so sellers might need to take a break.

In addition, the 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. The gap between the moving averages is narrowing, though, so a downward crossover might be possible.

Remarks from New Zealand Finance Minister Bill English suggested that the RBNZ might pursue a rate cut in their June statement. He acknowledged the rise in Auckland house prices, hinting that the central bank might make some adjustments in their loan-to-value ratio controls or other macro-prudential measures to curb housing inflation.

This mirrors a similar scenario last year during which the central bank put housing market measures in place first before announcing a rate cut soon after. With that, traders are awaiting the Financial Stability Report from the RBNZ to see if actual tools will be employed.

Another event risk for this setup is the quarterly retail sales report due on Thursday. Headline retail sales could post a 1.0% gain, slower than the earlier 1.2% increase, while core retail sales could post a 1.1% increase. As for the dollar, retail sales and PPI releases on Friday could add to volatility.

By Kate Curtis from Trader’s Way

NZDUSD recently broke below a long-term rising trend line, indicating that the previous uptrend might already be over. Price also formed a double top reversal pattern and broke below the neckline, adding confirmation that a downtrend could take place.

However, price found support at the .6700 handle and appears to be making a correction from the selloff. Applying the Fib tool on the latest swing high and low shows that the 50% Fib lines up with the broken support and the .6900 major psychological mark, which might hold as resistance from here.

In addition, the moving averages are close to the Fib levels and could serve as dynamic inflection points. For now, the 100 SMA is above the 200 SMA so there’s still a chance that the uptrend could resume, but a downward crossover seems imminent. Stochastic and RSI are both on the move up, showing that buying pressure is present.

The RBNZ Financial Stability Report noted that the housing sector poses challenge but policymakers refrained from making any actual adjustments to financial instruments such as the loan-to-value ratio. They did mention that they are looking into other macro-prudential tools for now. RBNZ Wheeler also noted that growth in their trading partners has slowed, possibly referring to the downbeat imports data from China.

Other event risks for this trade include the quarterly retail sales report from New Zealand on Thursday. Headline retail sales could show 1.0% growth compared to the earlier 1.2% increase while core retail sales could rise 1.1% versus the previous 1.4% gain.

As for the US, retail sales reports are also up for release later in the week. Headline retail sales are projected to fall 0.3% while core retail sales could rise 0.6%. PPI data is also due on Friday and the headline figure might show a 0.3% uptick.

By Kate Curtis from Trader’s Way

AUDUSD recently broke above a double bottom neckline, signaling that a long-term uptrend might take place. Price reached a high of .7830 before showing signs of a correction. Applying the Fibonacci retracement tool on the latest swing high and low on the daily time frame shows that the 50% level coincides with the broken neckline and the .7350 minor psychological level.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. In addition, the 100 SMA lines up with the area of interest, adding to its strength as a support area. The 200 SMA is closer to the 61.8% Fib, which could be the line in the sand for a larger retracement.

Stochastic is indicating oversold conditions and is turning higher, suggesting a return in bullish momentum. Similarly RSI made it out of the oversold region so buyers could regain control and push the pair up to the swing high at .7830 or higher.

Earlier in the week, the Aussie lost ground on downbeat Chinese imports data, which suggested weaker demand for raw material and commodity products. Prior to this, the RBA cut interest rates by 0.25% in a surprise decision, citing a weaker inflation outlook as their main reason for easing.

However, data from Australia has managed to show some signs of resilience, as retail sales and trade balance beat expectations. The Westpac consumer confidence index also printed a climb of 8.5% from the previous 4.0% drop. In the next weekend, Chinese industrial production and retail sales figures are up for release, likely providing more clues on local demand.

Gold prices have been rallying lately, adding to potential support for the Aussie. Meanwhile, US retail sales and PPI are up for release from the US on Friday and downbeat results could spur more losses for the Greenback.

By Kate Curtis from Trader’s Way

EURJPY has formed lower highs and found support at 122.25, creating a descending triangle pattern on its 4-hour time frame. Price is currently testing the triangle resistance, still deciding whether to make a bounce or a break.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. In addition, the 200 SMA lines up with the top of the triangle and appears to be holding as a dynamic resistance level.

Stochastic is on the move down, which means that euro bears are taking control of price action. RSI is also heading south so price could follow suit, taking the pair down to the triangle support once more.

A number of reports are up for release from the euro zone today, providing several catalysts for price action. Preliminary GDP readings from its largest economies are up for release ahead of the region’s growth figure, which is expected to show a 0.6% expansion for Q1. Germany is also set to print its final CPI reading while France will report its non-farm payrolls figure.

As for Japan, the tertiary industry activity index is up for release and a 0.2% decline is eyed, worse than the previous 0.1% dip. No other reports are up for release from Japan, which suggests that risk appetite could also play a big role in determining direction.

Top-tier US economic reports due later on in the day could have a material impact on sentiment. Traders might also book profits before the weekend, as Chinese industrial production and retail sales reports are due on Saturday.

By Kate Curtis from Trader’s Way

USDJPY has been trending lower on its 4-hour chart, moving below a descending trend line connecting the latest highs of price action. The pair is currently stalling between the 50% and 61.8% Fibonacci retracement levels, which keep further gains in check.

In addition, price is also finding resistance around the moving averages, which typically hold as dynamic inflection points. The 100 SMA is below the 200 SMA so the path of least resistance is to the downside and the downtrend could carry on, taking USDJPY to the previous lows around 105.65.

Stochastic is on the move down, indicating that sellers are in control of price action. RSI is also heading south so price could follow suit. A higher pullback, however, could last until the 109.75-110.00 level, which is closer to the falling trend line.

Data from the US economy came in mostly stronger than expected on Friday, particularly the retail sales report. Headline consumer spending rose 1.3% instead of posting the projected 0.3% drop while core retail sales gained 0.8%. Preliminary UoM consumer sentiment advanced to 95.8 to indicate stronger optimism.

Earlier today Japan reported a 26.4% year-over-year drop in preliminary machine tool orders and a sharper than expected 4.2% drop in producer prices. The Empire State manufacturing index is up for release from the US economy today and a drop from 9.6 to 7.2 is expected to show a slowdown in activity.

Risk sentiment has been favoring the lower-yielding currencies lately, although the dollar appears to have drawn support from stronger than expected consumer spending data. Meanwhile, yen rallies have been subdued because of intervention threats from the BOJ and Japanese government.

By Kate Curtis from Trader’s Way

EURGBP could be in for a longer-term selloff, as a head and shoulders pattern is being completed on the pair’s daily time frame. Price is on its way to test the neckline around the .7750 minor psychological support and a break lower could confirm the downtrend.

The 100 SMA is still above the 200 SMA and is close to the neckline, which might still prove to be a challenge for sellers to break. The gap between the moving averages has been widening so bullish pressure is still building up.

Meanwhile, stochastic is turning lower once more, indicating that bears are trying to regain control. RSI is also heading down so EURGBP could follow suit. The head and shoulders pattern is approximately 500 pips tall so the resulting breakdown could last by the same amount.

There are plenty of top-tier releases from the UK this week, likely spurring additional volatility for this pair. The UK CPI is up for release today and a 0.5% headline figure is eyed. The core version of the report could also hold steady at 1.5%.

Tomorrow the UK jobs report is due and a 4.0K increase in claimants is expected. Meanwhile, the average earnings index or indicator of wage growth could slow from 1.8% to 1.7% for the three-month period ending in March. UK retail sales data is due on Friday and a 0.6% rebound is expected.

As for the euro, the event risks include the release of the ECB meeting minutes and the final CPI readings. Downgrades and dovish remarks could put more weight on the euro, pushing EURGBP to test the neckline support or break lower.

By Kate Curtis from Trader’s Way

GBPJPY has formed higher lows and lower highs, creating a symmetrical triangle pattern on its 4-hour time frame. Price just bounced off the triangle support around the 155.50 minor psychological level and might be due for a test of resistance at 159.00-160.00.

The 100 SMA is above the 200 SMA for now so the path of least resistance is to the upside. However stochastic is on the move down so sellers are in control of price action for now. RSI is also heading south so price could follow suit, possibly even leading to a break below support and a continuation of the longer-term selloff for GBPJPY.

The triangle pattern is approximately a thousand pips tall so the resulting breakout could be of the same size. A break below the 155.00-155.50 area could lead to a drop until the triangle lows at 152.00 then onto new lows. Similarly, an upside breakout from the resistance could lead to approximately a thousand pips in gains.

Data from the UK came in weaker than expected yesterday, as the headline CPI fell from 0.5% to 0.3% and the core CPI dropped from 1.5% to 1.2%. UK jobs data is due today and a 4K rise in claimants is eyed, possibly enough to keep the unemployment rate steady at 5.1%. The average earnings index is expected to fall from 1.8% to 1.7% to indicate much weaker wage growth.

Later on, the UK retail sales report is up for release and a 0.6% rebound in consumer spending is eyed. Updates on Brexit opinion polls have also been influencing pound price action in the past few days, with a larger lead in favor of staying in the EU yielding gains for the currency.

As for the yen, the Japanese GDP report printed a stronger than expected 0.4% growth figure versus the projected 0.1% uptick. Core machinery orders are lined up next.

By Kate Curtis from Trader’s Way

GBPJPY has formed higher lows and found resistance at the 162.00 major psychological level, creating an ascending triangle pattern on its 4-hour time frame. Price made a bounce off support around 155.50 earlier on and appears poised to test the triangle resistance.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. However, stochastic is already indicating overbought conditions so buyers might need to take a break soon. Similarly RSI is in the overbought area and is turning lower, suggesting that sellers might be ready to take control.

If so, GBPJPY could head back to the triangle support around the 156.00 major psychological level this time. This is also near the moving averages, which might hold as dynamic support levels.

Earlier in the week the UK printed mixed economic data, as the CPI readings fell short of expectations while the jobs report surprised to the upside. Headline CPI fell from 0.5% to 0.3% while the core CPI dropped from 1.5% to 1.2%. Meanwhile, the April claimant count showed a 2.4K drop in joblessness instead of the estimated 4K gain. The average earnings index climbed back to 2.0% instead of falling from 1.8% to 1.7%.

In addition, opinion polls showing a slightly larger lead in favor of staying in the EU are keeping the pound supported, especially after central bankers have highlighted the risks that might stem from a Brexit.

Data from Japan has been mostly stronger than expected so far, as the GDP reading beat expectations with 0.4% growth and the industrial production report revised to show a stronger 3.8% increase. Core machinery orders also beat expectations with a 5.5% gain instead of the estimated 1.9% drop.

By Kate Curtis from Trader’s Way