USDJPY recently broke above its descending channel visible on the 1-hour time frame, indicating that it’s done with its downtrend. Price climbed up to a high of 115.00 before pulling back and applying the Fib tool on its latest swing high and low shows that the 61.8% retracement level lines up with the broken channel resistance.
The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. Price also seems to have bounced off the 200 SMA dynamic support, which is also near the channel resistance, and might be on its way back to the swing high.
Stochastic is pulling up from the oversold territory, which means that bullish pressure is building up once more. Stronger buying momentum could take USDJPY past the swing high onto the next ceiling around 115.50 and beyond.
US banks are closed for the holiday today so liquidity could be low and range-bound conditions could be in play. Over the weekend, Japan printed a weaker than expected trade surplus of 0.16T JPY compared to the estimated 0.28T JPY figure and the earlier 0.33T JPY surplus.
Japan’s flash manufacturing PMI is up for release tomorrow and a drop from 52.7 to 52.1 to reflect a slower expansion in the industry. A weaker than expected read could reflect a sharper slowdown, which could be bearish for the Japanese yen.
As for the US, the flash manufacturing PMI is due and a rise from 55.6 to 55.8 is eyed, which would be indicative of a faster pace of growth. Traders are also on the lookout for Trump’s tax reform plan as a truly “phenomenal” announcement could lead to more gains for US equities and the dollar.
By Kate Curtis from Trader’s Way
GBPUSD formed lower highs and found support at the 1.2400 major psychological level recently, creating a descending triangle chart pattern. Price just bounced off the resistance and is moving closer to testing support.
The pair is also approaching the peak of the pattern, which means that a breakout could happen sooner or later. The chart pattern is approximately 300 pips tall so the resulting breakout could be roughly the same size. The 100 SMA is currently below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the moving averages are close to the triangle resistance, adding to its strength as a ceiling.
Stochastic is on the move down, indicating a pickup in selling pressure. However, the oscillator is already dipping into the oversold region, which means that buyers could get back in the game soon and push for a bounce off support or a break higher.
The main event risk for the pound could be the Brexit debtes going on in the House of Lords, as any indication that leaders might cause additional delays would extend the period of uncertainty for the UK economy. On the other hand, clearing this hurdle fairly smoothly could spur a relief rally for the pound.
Data from the UK has been mostly weaker than expected last week, as the consumer sector showed signs of lagging on slow wages combined with rising price levels. Prior to this, industry PMI readings also showed some weakness. This week, the second GDP estimate is due and a downgrade could also increase downside pressure on GBPUSD.
As for the dollar, futures are pointing to a higher open for stocks and sustained gains for the week as top retailers are scheduled to report earnings. Traders are also looking out for Trump’s tax announcement, which might also be positive for equities and the dollar.
By Kate Curtis from Trader’s Way
EURGBP formed a long-term reversal pattern visible on its daily time frame, signaling that price is done with its climb and that a selloff could be due. The pair is still testing the neckline support at .8400-.8450 at the moment but a break lower could send it down by 700 pips or the same height as the chart formation.
The 100 SMA is still above the longer-term 200 SMA for now so the path of least resistance might still be to the upside. However, the gap between the two is narrowing, indicating that buying pressure is weakening and that a downward crossover could take place soon. Price is already moving below the 200 SMA dynamic support to show that bears are taking control.
Stochastic is close to the oversold region, which means that sellers are taking a break for now. A move higher could take the pair up for a quick bounce to the .8500 area or the 100 SMA dynamic inflection point before selling pressure picks up.
The euro has been selling off recently due to political issues in Italy and France, along with debt troubles in Greece and Italy. Even though flash manufacturing and services PMIs came in better than expected yesterday, the shared currency failed to gain any traction as it was dragged down by headlines.
On the other hand, the pound is staying resilient in hopes that the government’s Brexit plans can push through without a glitch through the House of Lords. The debates are still ongoing and traders are on edge for the outcome, but sources are saying that the timeline of triggering Article 50 by the end of next month is still a go.
UK public sector net borrowing was weaker than expected at a 9.8 billion GBP deficit while the BOE inflation report hearings confirmed that Carney isn’t sold on hiking just yet. The UK second estimate GDP is due today and any revisions to the preliminary 0.6% growth figure could push the pound in a strong direction.
By Kate Curtis from Trader’s Way
EURJPY is trending lower on its 4-hour chart, moving inside a descending channel connecting the latest highs and lows of price action. The pair is bouncing off support at the moment and may be due for a test of resistance.
The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. In addition, the gap between the moving averages is getting wider, which means that bearish pressure is getting stronger. The 100 SMA is around the mid-channel area of interest, adding to its strength as a ceiling in the event of a shallow pullback, while the 200 SMA dynamic resistance is closer to the channel top at 121.00.
Stochastic is on the move up to indicate that buyers are regaining control of price action from here, but it could be indicative of a return in bearish pressure once it reaches the overbought area and turns down.
Uncertainties all over Europe could keep gains in check for the shared currency, although the latest updates in the French political scene have led to a strong bounce. Headlines revealed that a poll gave the lead to Le Pen’s rival Macron who also gained the backing of influential French politician Bayrou. This could increase their odds of winning the run-off against Le Pen and possibly move the spotlight away from Frexit concerns.
Economic reports from the region haven’t all been bad as the latest batch of flash manufacturing and services PMIs from Germany and France printed stronger than expected results. The German IFO business climate index also beat expectations by rising from 109.9 to 111.0 instead of dipping to 109.6.
Meanwhile, data from Japan has been mixed as the all industries activity index printed a sharper than expected 0.3% decline versus the estimated 0.2% dip while the flash manufacturing PMI printer a higher than expected read of 53.5. Aside from that, the yen seems to be taking advantage of safe-haven flows while traders remain uneasy about buying the dollar.
By Kate Curtis from Trader’s Way
NZDUSD failed in its last two attempts to break below the .7150 minor psychological level, creating a double bottom formation visible on its 1-hour chart. Price has yet to break above the neckline around the .7250 level to confirm the reversal.
If that breakout materializes, NZDUSD could climb by at least 100 pips or the same height as the chart formation. The 100 SMA is below the longer-term 200 SMA, though, so the path of least resistance is to the downside. If the resistance holds, another bottom could form at .7150.
Stochastic is on the move down to reflect the presence of selling pressure, which might also bring more sellers to the mix, but buying pressure could return once the oscillator makes it out of the oversold region and turns higher.
The dollar is looking weaker against most of its peers as traders are running out of excitement for the Trump administration’s fiscal policy reform plans. According to Treasury Secretary Mnuchin, it will take until 2018 or so before the impact of the policy changes kick in and GDP growth could reach 3% at best, not the 4% expansion promised during the election campaign.
US data has been mostly in line with expectations but traders are playing it cautiously as the FOMC minutes specified that their March decision hinges mostly on the outcome of jobs and inflation reports before meeting. As such, any major disappointments could dose hopes for a hike while strong readings could revive dollar demand.
As for the Kiwi, the currency was barely hit by the 3.2% drop in dairy prices during the latest Global Dairy Trade auction. Over the weekend, New Zealand printed stronger than expected PPI input and output prices, indicating positive pressures on overall inflation down the line and lesser need for the RBNZ to cut.
By Kate Curtis from Trader’s Way
GBPUSD sold off sharply last Friday but appears to be finding support at the bottom of its short-term range at the 1.2400 major psychological level. Stochastic is already indicating oversold conditions, which means that sellers are exhausted and that buyers are likely to take over price action.
In that case, the pair could make it all the way back up to the range resistance at the 1.2570 area. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, these moving averages are also oscillating to show that range-bound conditions could stay in play.
A break below support could push price down by around 170 pips or the same height as the chart formation. Similarly, a break higher could bring the pair up by 170 pips or so. The moving averages are also around the middle of the range, potentially acting as near-term areas of interest.
Over the weekend, headlines indicated that UK Prime Minister May could move to end the free movement of migrants in March, reminding market watchers that Brexit negotiations are likely to kick off around that time as well. May is also expected to announce that EU migrants who have moved to the UK before the cutoff date will have their rights protected as long as British citizens living in other parts of Europe are given the same.
In the US, anticipation for Trump’s tax plan is building up once more this week as the US President has a speech scheduled mid-week. If his announcement turns out positive for corporate America, the dollar could continue to advance against its peers since this could also be a point in favor of a March Fed rate hike.
Other event risks for the week include UK construction and services PMI, as well as the US preliminary GDP reading. FOMC policymakers Yellen, Fischer, Evans, and Powell have speeches lined up on Friday.
By Kate Curtis from Trader’s Way
EURGBP has been trending lower, moving inside a descending channel connecting the latest highs and lows on the 4-hour time frame. Price is currently testing the resistance near the .8500 major psychological level and might be due for a move back towards the channel support at .8400 or lower.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 100 SMA lines up with the channel resistance and is holding as a dynamic inflection point at the moment.
Stochastic is already turning lower from the overbought zone so selling pressure is kicking in, also confirming that a move towards the channel support is likely. However, if price still pops higher, the 200 SMA dynamic resistance at .8550 could keep gains in check.
The main event risk for the UK is the outcome of the Brexit debates in the House of Lords. UK PMI readings from the construction and services industries are also lined up and downbeat results or signs of a slowdown could mean more losses for the pound.
Scottish referendum talks are also weighing on sterling at the moment since this could add fresh issues to the already complicated Brexit negotiations. Scottish FM Sturgeon mentioned that they might call for a vote in reaction to the UK’s triggering of Article 50 by March.
Meanwhile, the euro is also under some selling pressure due to the happenings in French politics. Polls are suggesting that Macron could widen his lead against Le Pen and diminish odds of a Frexit, which could spark increased uncertainty in the region. French consumer spending, preliminary CPI and GDP readings are due today.
By Kate Curtis from Trader’s Way
AUDUSD recently broke below its ascending channel visible on the 1-hour and 4-hour time frames. Price has dipped to a low of .7635 before showing signs of a pullback. Applying the Fib tool on the swing high and low shows that the 50% retracement level lines up with the broken support.
This area appears to have held as resistance so far, and a continuation of the selloff could lead to a test of the swing low or a move down to the next key level at .7600. Stochastic is still heading higher, though, so there may be some buying pressure left for a higher correction.
The 100 SMA is above the 200 SMA but the gap between the moving averages is narrowing to hint at a potential downward crossover. Also, these dynamic inflection points are close to the 50% Fib, adding to its strength as near-term resistance.
Earlier today, Australia printed a stronger than expected 1.1% Q4 GDP reading versus the estimated 0.7% expansion. This also chalks up a strong rebound over the earlier period’s 0.5% contraction. Components of the report confirmed that the pickup was mostly spurred by stronger trade activity.
As for the US, the lack of upward revision on the Q4 preliminary GDP reading at 1.9% led to a few losses but it looks like traders are banking on a March Fed rate hike from all the FOMC members’ comments and expectations of fiscal stimulus from the Trump administration.
US President Trump is scheduled to announce his plans for increased infrastructure and security spending, but traders are still holding out for his tax reform announcement. Chinese PMI readings came in mostly stronger than expected so this should be a point in favor of the Australian dollar as well.
By Kate Curtis from Trader’s Way
GBPUSD bounced off the resistance at the 1.2650 minor psychological level and broke below the near-term consolidation support at 1.2400, confirming that sellers are taking over. Price is now making its way towards the long-term support at the 1.2100 major psychological level.
The 100 SMA is above the longer-term 200 SMA on the 4-hour time frame but a downward crossover seems to be looming, indicating that bearish momentum could pick up. In that case, a break below the range support could be possible, taking GBPUSD lower by 550 pips or the same height as the chart formation.
Stochastic is already indicating oversold conditions so the odds could turn in the bulls’ favor at some point, although the oscillator has yet to move higher to reflect a return in buying momentum. If that happens, a pullback to the nearby area of interest at 1.2400 could take place or a bounce back to the resistance at 1.2650 could be seen.
The pound is under heavy selling pressure as the Brexit Bill is encountering a lot of friction in the House of Lords. Amendments might need to be made, particularly when it comes to the status of UK citizens in EU nations, so this could mean a delay in PM May’s Article 50 timeline and more uncertainty for the economy.
As for economic data, UK manufacturing PMI turned out weaker than expected by falling from 55.7 to 54.6 versus the estimated rebound. The construction PMI is due today and no change to the earlier 52.2 reading is eyed, although another downbeat result could confirm that Brexit jitters are affecting business conditions. Services PMI is due on Friday and this might carry more weight.
Dollar demand seems to have returned even after Trump’s speech was a bit of disappointment without any tax reform details. Still, investors took comfort in the fact that he sounded more presidential and less divisive. Also, more FOMC speeches highlighting the need to hike in their upcoming meeting this month is keeping the dollar supported. Data has been mostly stronger than expected, with the ISM manufacturing PMI up from 56.0 to 57.7.
By Kate Curtis from Trader’s Way
EURAUD has been trending lower on its daily time frame, moving below a descending trend line connecting the latest highs of price action. Price bounced off a low of 1.3625 and looks ready for a pullback to the falling resistance level.
Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with an area of interest or former support around 1.4100, which might hold as resistance. This is also close to the descending trend line, with the 61.8% Fib acting as the line in the sand around 1.4300 for this correction.
The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. This is also near the 50% Fib, adding to its strength as resistance. Stochastic is moving up for now, which suggests that sellers are taking a break and allowing buyers to stay in the lead for the time being.
Economic data from Australia turned out mixed yesterday, with the trade balance printing a smaller 1.30 billion AUD surplus versus the estimated 3.82 billion AUD surplus. The previous reading was also downgraded from 3.51 billion AUD to 3.33 billion AUD to reflect weaker trade activity.
On the flip side, building approvals came in stronger than expected with a 1.8% gain instead of the estimated 0.1% downtick. Prior to this, Australia reported a stronger than expected GDP growth of 1.1% versus the projected 0.7% expansion while China’s manufacturing PMI readings beat expectations, signaling stronger demand for Australia’s raw materials.
For now, the euro is recovering as French election jitters and Frexit concerns are abating. Le Pen seems to be falling behind on the polls so investors seem less worried about instability in the region. However, news reports revealed that Greece is seeking financial assistance from the World Bank so it may be running out of options and still at risk of default.
By Kate Curtis from Trader’s Way
USDCAD bounced off long-term support around the 1.3100 major psychological level recently and seems to be setting its sights on the top of the range at the 1.3550 minor psychological mark. Price has already moved past the middle of the range, indicating that buying momentum is strong.
Also, the 100 SMA is above the longer-term 200 SMA on the daily time frame so the path of least resistance is to the upside. In addition, the 100 SMA dynamic support is right around the middle of the range, adding to its strength as a potential near-term support area.
Stochastic is in the overbought zone, which means that buying pressure could fade soon and that the range resistance could keep gains in check. In that case, a selloff back to the support near the 200 SMA dynamic inflection point could happen later on.
Last Friday, several FOMC members gave testimonies, most of which confirmed that an interest rate hike could be on the table this month. If so, the dollar could extend its rally across the board as the US central bank stays on track towards tightening three times this year.*
However, this could all depend on the NFP report due on Friday as policymakers are still going to base their decision on whether or not the momentum in hiring and inflation is sustained. Analysts are expecting to see a 185K increase in hiring for February, slower than the earlier 227K gain.
As for the Canadian dollar, the BOC statement was slightly more dovish than expected as Poloz reiterated that they are open to the idea of further cuts and that the pickup in price levels and employment could be temporary. Canada is also set to print its jobs report on Friday.
By Kate Curtis from Trader’s Way
AUDUSD recently broke below its ascending channel support around the .7650 minor psychological mark and dipped to .7550. Price seems to be showing signs of pulling back and applying the Fib tool on the latest swing high and low shows that the 61.8% level is close to the broken channel.
The 100 SMA also coincides with the 61.8% Fib to add to its strength as a potential ceiling. If this holds, another move towards the swing low could take place. The 100 SMA is above the longer-term 200 SMA for now to show that the path of least resistance is to the upside, but the gap is narrowing so a downward crossover may be imminent.
Stochastic is also heading up to indicate that buyers are in control of price action at the moment. Once the oscillator hits the overbought area and turns lower, selling pressure could return.
The RBA is set to announce its monetary policy decision today and is likely to keep interest rates unchanged at 1.50%. In their previous statement, the central bank sounded upbeat about growth and inflation, leading market watchers to believe that no further rate cuts are in the cards. This time around, the RBA might acknowledge that Aussie strength has dampened export demand and overall trade activity.
The US dollar continues to stay supported by expectations of a March rate hike but additional volatility is still expected around the NFP release. Analysts are expecting to see 185K in hiring gains, slower than the earlier 227K increase. Weaker than expected data could cast doubts about a hike and send the dollar lower.
On the other hand, upbeat results could spur more dollar gains as this would keep the Fed on track towards hiking rates thrice this year. Fed speeches last week were mostly in line with this bias, with Fed head Yellen herself acknowledging that waiting too long to hike could do more harm than good.
By Kate Curtis from Trader’s Way
USDJPY seems to be tired from its selloff as it formed a double bottom pattern on its 4-hour chart. Price failed in its last two attempts to break below the 111.50 area and might be due for a break of the neckline at 114.50. If that happens, price could move up by an additional 300 pips or the same height as the chart formation.
The 100 SMA seems to be crossing above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is also making its way out of the oversold zone to indicate a potential pickup in buying pressure. However, if the current resistance at the 114.50 minor psychological level holds, price could head back to the bottoms at 111.50, possibly creating a range for USDJPY.
Demand for the dollar has been sustained recently as traders continue to look forward to a Fed rate hike this month. Economic data has been more or less on track towards achieving their inflation and employment goals so odds of tightening keep increasing while FOMC officials have reiterated the need to hike sooner rather than later.
The main event risk for this is the NFP report due on Friday, as a weaker than expected read could cast doubts on a hike the following week. Analysts are hoping to see a 188K increase, slower than the earlier 227K gain, but a higher figure could seal the deal for tightening and lead to more dollar gains.
As for the Japanese yen, the BOJ statement is also coming up next week and no additional easing measures are expected since recent economic reports from Japan have shown some improvements. Earlier today the final GDP reading was upgraded from 0.2% to 0.3%, just a notch short of the 0.4% consensus, while the current account balance turned out weaker than expected.
By Kate Curtis from Trader’s Way
EURUSD is making its way to the bottom of its longer-term range at the 1.0500 major psychological level and might be due for a bounce. If so, price could make its way back up to the range resistance at the 1.0600 area or at least halfway until the 1.0550 minor psychological mark.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the moving averages are oscillating to reflect range-bound conditions. Stochastic is heading south to show that sellers are in control of price action, but the oscillator is already in the oversold area so buyers could regain the upper hand soon.
Economic data from the euro zone has been mixed recently, although Germany has been showing a lot of weak spots. Earlier in the week, German factory orders showed a 7.4% slide versus the projected 2.5% dip while the French trade balance showed a larger than expected deficit.
But what’s driving this pair’s price action more predominantly these days is dollar strength, as traders are pricing in strong expectations of a Fed rate hike this month. The ADP non-farm employment change for February came in at 298K versus the projected 185K figure while the January reading was upgraded. This signals a potential upside surprise for the NFP due on Friday and this would confirm that a rate hike is underway for the Fed meeting next week.
The ECB is set to announce its monetary policy decision today and no changes are expected. However, the accompanying press conference could mean a lot of volatility for the euro, especially if Governor Draghi shares more insight on their next policy steps. If he continues to downplay developments in the region or highlights the risks, the euro could break below its range against the dollar.
By Kate Curtis from Trader’s Way
GBPJPY has formed lower highs and lower lows, moving inside a descending channel on the 1-hour chart. Price is currently approaching the resistance at the 140.00 major psychological level and if this keeps gains in check, the pair could head back to the channel support at the 138.00-138.50 area.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the two is widening, which means that bearish pressure is getting stronger. Stochastic is already in the overbought zone, which indicates that buyers are exhausted, but the oscillator has yet to cross down to reflect a return in selling pressure.
The Japanese yen could benefit from a return in risk aversion, although it is currently being weighed down by the pickup in dollar demand. However, European currencies are currently enjoying some support after the ECB statement presser as the central bank upgraded growth and inflation forecasts while Draghi admitted that there’s no more urgency to ease.
In the UK, the RICS house price balance showed a 24% increase versus the projected 23% gain. UK manufacturing production is due today and it could show a 0.6% decline, erasing part of the earlier 2.1% increase. Industrial production could dip by 0.4% after rising by 1.1% in the previous period.
The US NFP report could provide some volatility for this pair today as the results would likely have a strong impact on USDJPY. If it sparks profit-taking ahead of the weekend and the Fed meeting next week, JPY could benefit and this pair could head back down.
By Kate Curtis from Trader’s Way
AUDUSD has been trending lower on its 1-hour time frame, moving below a descending trend line connecting the latest highs of price action. Price is currently pulling back to this trend line, which lines up with the 61.8% Fibonacci retracement level on the latest swing high and low.
If this area keeps gains in check, price could head back south to the swing low at the .7500 major psychological level or create new lows. On the other hand, an upside breakout could trigger a reversal from the ongoing selloff.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, the gap between the moving averages is getting wider so bearish pressure could get stronger. Stochastic is pointing up but is already testing the overbought region, which reflects weakening buying pressure and a potential return by sellers.
US data came in stronger than expected on Friday, as the economy added 235K jobs versus the projected 188K increase and the previous month’s gain, which was upgraded from 227K to 238K. The unemployment rate dropped from 4.8% to 4.7% as expected but average hourly earnings fell short of estimates and posted a meager 0.2% uptick instead of the projected 0.3% increase.
Still, the upbeat jobs report boosted Fed rate hike expectations for the month, and the actual FOMC meeting is scheduled for this week. Fed officials are strongly expected to hike rates by 0.25% and signal scope for further tightening down the line, keeping them on track towards hiking rates three times this year.
Meanwhile, China has its industrial production figures due and this could have a strong impact on AUD price action. Later on in the week, Australia will release its jobs figures and downbeat results could push the currency back on its downtrend.
By Kate Curtis from Trader’s Way
EURAUD is starting to trend higher these days, moving inside a rising channel connecting the latest highs and lows of price action. Price is moving closer to support and a bounce could take it back up to the channel resistance at the 1.4250 minor psychological level.
Applying the Fib tool on the latest swing high and low shows that the 50% retracement level is holding as near-term support. A larger correction could last until the 61.8% Fib at 1.4000, which is closer to the channel support and the 200 SMA dynamic inflection point.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is on the move up, which means that buyers are in control of price action. However, once the oscillator reaches the overbought zone and turns lower, sellers could get back in the game.
The euro is still enjoying its post-ECB rally after Governor Draghi mentioned in the presser that there is no more urgency to ramp up easing as deflationary risks are subsiding. This reflects a notable shift in the central bank’s bias to a less dovish one, leading bulls to hop in and bears to book profits off their earlier short positions.
On the other hand, the Australian dollar is being weighed down by risk aversion and the prospect of a Fed rate hike. Higher borrowing costs in the US could dampen spending and investing activity all over the globe, which then hurts demand for commodities.*
Apart from that, China just reported weaker than expected retail sales data at 9.5% year-over-year in February versus the projected 10.5% figure and the earlier 10.9% gain. Fixed asset investment came in at 8.9% year-to-date versus the projected 8.2% figure while industrial production advanced from 6.0% to 6.3%.
By Kate Curtis from Trader’s Way
EURJPY recently broke out of its descending channel pattern, signaling a reversal from the selloff. Price reached a high of 122.83 before showing signs of a pullback, and applying the Fib tool on the latest swing high and low shows that the 38.2% retracement level is closest to the broken resistance.
If this holds as support, the pair could head back up to the swing high or higher. A larger pullback could last until the 50% Fib at the 120.50 minor psychological level or at the 120.00 major psychological mark. A break below these levels could put the pair back on a downtrend.
The 100 SMA is still below the 200 SMA so the path of least resistance might still be to the downside. However, the gap between the moving averages is narrowing to show a pending upward crossover, which could draw more buyers to the game. Stochastic is already indicating oversold conditions, which means that selling pressure is exhausted and that buyers could regain control.
The euro seems to be correcting from its post-ECB run, during which Governor Draghi’s remarks during the presser indicated that the central bank is no longer considering further easing. He said that there is no more urgency to increase stimulus as deflationary risks are lower.*
However, the shared currency is also reeling from political uncertainty as French election updates revived “Frexit” concerns. Le Pen has led in the polls against Macron and presidential favorite Fillon is currently under formal investigation for allegedly diverting public funds.*
Meanwhile, the Japanese yen is awaiting the BOJ interest rate decision this week and any dovish remarks could push the currency back down. On the other hand, a shift to a less dovish tone could also mean gains for the lower-yielding currency. Changes in bond yields after today’s FOMC statement could also push yen pairs around.
By Kate Curtis from Trader’s Way
Cable recently bounced off its long-term support at the 1.2100 major psychological mark and seems to be pulling up from its recent selloff. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the descending trend line, 100 SMA dynamic inflection point, and the 1.2350 minor psychological mark.
Meanwhile, the 61.8% Fib could also hold as resistance since it lines up with a broken support level and the 200 SMA. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.*
Stochastic is on the move up but is dipping into overbought territory, which suggests that bullish pressure might be weakening. Once it crosses down and turns lower, selling momentum could return and take GBPUSD for another test of 1.2100.
UK economic data turned out stronger than expected as the claimant count showed an 11.3K reduction in joblessness versus the expected 3.2K rise. Also, the unemployment rate fell from 4.8% to 4.7% for January but the average earnings index slid from 2.6% to 2.2% versus the 2.4% forecast.
In the US, the Fed hiked interest rates as expected and their dot plot confirmed that three rate hikes are still possible for the year. Their official statement contained a few upgrades in assessment for inflation and sentiment, but dollar bulls didn’t seem so impressed by the lack of hawkishness.
It will be the BOE’s turn to announce their monetary policy decision today and no changes to interest rates or asset purchases are expected. In the US, building permits and housing starts are due, along with the Philly Fed index and initial jobless claims.
By Kate Curtis from Trader’s Way
EURAUD recently broke below its ascending channel on the 1-hour time frame and might be due for a pullback before heading further south. Applying the Fib tool on the latest swing high and low shows that the 61.8% level is closest to the broken support but that the 50% Fib already appears to be keeping gains in check.
This retracement level lines up with the moving averages, which usually hold as dynamic inflection points. The 100 SMA is gearing up for a downward crossover, possibly drawing more sellers to the mix and pushing for a move to the swing low at the 1.3900 mark.
Stochastic is turning lower to show that sellers are regaining control of price action. In that case, EURAUD could break below the previous lows and head further south to the next areas of interest closer to 1.3800.
After giving up some ground on election-related uncertainty, the euro regained its footing on upbeat remarks from a couple of ECB policymakers. For Nowotny, the central bank might consider increasing the deposit rate before making adjustments to the benchmark rate and asset purchases. Meanwhile, Praet acknowledged the recent improvements in the economy but clarified that the ECB might not be ready to reduce easing yet.
As for the Australian dollar, jobs data from the Land Down Under fell short of estimates. The employment change figure showed a 6.4K drop in hiring for February while the unemployment rate rose from 5.7% to 5.9%. There are no major reports from both Australia and the euro zone today so market sentiment and political headlines could push this pair around.
By Kate Curtis from Trader’s Way
