GBPJPY formed a double top pattern on its 1-hour forex chart, hinting that a potential sellof is in the cards. The pair is still a hundred pips away from testing the neckline support at the 184.00 levels.
A break below the neckline could send GBPJPY lower by as much as 200 pips, which is the same height as the chart pattern. Stochastic is heading south and indicating a pickup in selling momentum anyway, which suggests that a test of the neckline is possible.
A bounce off 184.00 could lead to the formation of another top at the 186.00 handle, which could either lead to range-bound movement or a triple top pattern, which is still a valid reversal formation. Both the BOE and BOJ are holding dovish biases, as the former shifted to a more cautious stance while the latter actually implemented additional easing recently.
Event risks for this trade setup today include the release of the U.K. second GDP estimate, which could see no change at 0.7%. There are no major reports up for release from Japan, leaving yen pairs sensitive to risk sentiment as well.
By Kate Curtis from Trader’s Way
AUDUSD might be in for another major retracement, as price could make its way up to the falling trend line connecting the latest highs of price action. The pair previously broke through support around the .8700-.8800 major psychological mark and dipped to the .8500 handle.
Since then, the pair has pulled up to the 38.2% Fib, which is in line with the area of interest. A higher retracement might last until the 61.8% Fibonacci retracement level, which is closer to the trend line and the .8650 minor psychological mark.
Stochastic is already moving down from the overbought area, which indicates a pickup in selling pressure. This could lead to a test of the previous lows at .8500 or perhaps the creation of new ones until the .8300 area.
Earlier today, Australia reported a stronger than expected private capital expenditure reading, which showed a 0.2% gain instead of the projected 1.7% decline for the third quarter. There are no reports up from the US economy today as traders are on a Thanksgiving holiday.
By Kate Curtis from Trader’s Way
USDJPY showed more momentum as it broke above the descending triangle resistance in today’s Asian trading session. This could be a sign that the pair is in for at least 150 pips in gains, which is the same height as the chart pattern.
Stochastic is already in the overbought area though, indicating that the rally may turn. If so, price could still pull back to the broken triangle resistance around the 117.50 minor psychological support before heading further north.
If this proves to be a fakeout though, USDJPY could retreat to the bottom of the triangle around 117.40 and perhaps attempt a downside break. Based on fundamentals though, the path of least resistance for this pair is to the upside.
Although data from the US economy turned out disappointing results this week, the Fed might still be on track to tighten monetary policy sometimes next year. In Japan, data has come in stronger than expected but still reflected economic weakness, which could keep the BOJ in an easing bias.
By Kate Curtis from Trader’s Way
The rejection of the Swiss gold initiative led to a bounce off the bottom of the ascending triangle on USD/CHF’s 4-hour forex chart. Price is now on its way to test the resistance of the chart pattern around the .9700 major psychological mark.
An upside break could lead to a rally of as much as 300 pips, which is the same height as the chart pattern. However, if the top of the triangle still holds as resistance, price could make another test of the bottom. A downside break might similarly lead to a selloff of roughly 300 pips.
The path of least resistance is to the upside though, as the “No” vote on the gold initiative means that the SNB can still afford to ease monetary policy or intervene in the currency market if necessary. Remember that the central bank is inclined to keep the franc weak in order to retain competitiveness in international trade and to ward off deflationary pressures in Switzerland.
Meanwhile, the US dollar is still strongly supported by good fundamentals, especially if this week’s set of reports come in strong. Traders might price in expectations ahead of the NFP release as soon as the leading indicators, such as the ISM PMIs and ADP employment figures are released.
By Kate Curtis from Trader’s Way
USDJPY has been on a strong climb in the past month, with the pair currently testing the rising trend line on the 1-hour forex time frame. A bounce off this support zone could lead to a rally to the previous highs past the 119.00 handle.
The rising trend line coincides with the 100 and 200 simple moving averages, which also hold as a dynamic support zone. Stochastic is moving up, which indicates a pickup in buying momentum. MACD is also heading higher, which could draw more dollar buyers in.
However, a break below the trend line could signify that the uptrend is over and that a reversal might take place. Earlier today, Japan’s average cash earnings report came in weaker than expected with a mere 0.5% uptick versus the estimated 0.8% gain. The previous reading was downgraded to show a 0.7% increase from the previous 0.8% gain.
There are no top-tier reports due from the US economy today, although FOMC officials Fischer and Yellen are set to give speeches. They could drop more hints on what the Fed has in mind when it comes to future monetary policy changes, which could have a huge impact on dollar price action. Hawkish remarks could lead to more gains for USDJPY, possibly until the 120.00 major psychological resistance and beyond.
On the other hand, cautious remarks could force the pair to give back more of its recent gains, which might lead to a dip until the 116.50 area of interest or lower. Later on this week, the NFP is up for release and this might trigger more volatile moves for the USDJPY pair.
By Kate Curtis from Trader’s Way
NZDUSD is testing the bottom of the range forming on its 1-hour time frame, as price is finding a floor at the. 7780 area once more. A bounce off this support zone could lead to a test of the top of the range at the .7915 level.
Stochastic is moving out of the oversold area, indicating that a rally is possible and that losses might be kept in check. A weak rally might last only until the mid-channel area of interest around the .7850 minor psychological level.
A downside break is still possible though, as the recent drop has been sharp. This was spurred by a weaker than expected New Zealand dairy auction, which marked another decline in dairy prices and led to speculations of another cut in Fonterra milk payouts. A move lower could lead to as much as 140 pips in losses, which is roughly the same height as the rectangle chart pattern.
There have been no reports released from the US economy recently, with only a few FOMC officials giving testimonies but barely providing strong hints on what the Fed plans to do next. The next major catalyst for this trade might be the NFP release on Friday, which could indicate a strong jobs gain of 231K, higher than the previous 214K increase.
With that, the path of least resistance is to the downside, unless the US reports turn out to be huge disappointments. Leading indicators such as the ISM PMI readings and the ADP non-farm employment change might also spur action for this NZDUSD pair.
By Kate Curtis from Trader’s Way
AUDJPY has been moving sideways as seen on the range on its 1-hour time frame. Price found support at the 100.00 major psychological mark and resistance at the 101.00 major psychological level.
The pair is on its way to test the top of the range for now, as data from Australia in today’s Asian trading session has been strong. The country showed a 0.4% increase in retail sales, higher than the projected 0.1% uptick, while the trade balance came in at a smaller deficit of 1.32 billion AUD compared to the estimated 1.85 billion AUD shortfall.
Stochastic is indicating a pickup in selling pressure though, and this might be enough to take AUDJPY back to the bottom of the range before the resistance is tested. If so, price could make another move back to the 100.00 support zone before rebounding.
A breakout in either direction is still possible, depending on how risk sentiment fares for the day. The path of least resistance is still to the upside, as the BOJ is biased towards further easing and the Japanese economy is much weaker compared to Australia.
If price makes a move past the 101.00 resistance, it could head up by an additional 100 pips, which is the same height as the rectangle chart pattern. Similarly, a downside break below 100.00 support could lead to 100 pips in losses.
By Kate Curtis from Trader’s Way
USDJPY is encountering strong resistance at the 120.00 major psychological mark and may be due for a pullback soon. Price could test the rising trend line on its 1-hour chart, as this has been holding as support for the past month.
The trend line is also close to the 100 simple moving average, which is moving above the longer-term 200 SMA and confirming the current uptrend. This has also held as a dynamic support zone in the previous pullbacks.
Potential support is located around the 118.50-119.00 levels, which span the trend line and simple moving averages. A break below this area could be a sign that a deeper retracement is taking place, with USDJPY moving on to test the area of interest around 117.50.
Stochastic is moving out of the oversold area already, which suggests that buying pressure is already picking up. With that, the retracement might be shallow and price could be gearing up for an upside break of its previous highs.
A break past the 120.00 mark could push USDJPY to 121.00 and perhaps all the way up to 125.00 eventually. This could hinge on the outcome of the event risks for this trade today, which include the US non-farm payrolls release. A faster pace of hiring growth is expected, as the economy probably added 231K jobs in November compared to the previous 214K gain.
A weaker than expected result, on the other hand, could undermine the Fed’s expected rate hike time line sometime next year. This might lead to prolonged profit-taking on USDJPY trades, which would mean a sharper correction for the pair.
Fundamentally speaking, the path of least resistance is still to the upside, as the BOJ is dealing with the prospect of deflation and an ongoing recession in Japan.
By Kate Curtis from Trader’s Way
USDJPY is making another test of the rising trend line support visible on its 1-hour forex time frame. The pair has just traded around the 122.00 levels and pulled back to the 120.50 area, which is around the trend line and 100 simple moving average.
The 100 SMA has acted as dynamic support in the past and might continue to hold in the recent pullback. In addition, the 200 SMA is close to the rising trend line and might also hold as support.
Stochastic is moving up for now but is hinting at a potential return in selling pressure. MACD is also heading lower, indicating that dollar bears are in control of price action for now. The retracement might even last until the 119.50 minor psychological support, with a downside break indicating a potential reversal.
If the rally resumes, USDJPY could make its way back to the previous highs around 122.00 and perhaps go for new ones. Further gains could take the price up to the 125.00 major psychological mark, depending on this week’s set of catalysts.
For today, there are no major event risks lined up for this USDJPY trade, as both the US and Japan don’t have top-tier data due. This pair could encounter additional volatility during the release of Japan’s PPI and consumer confidence data in tomorrow’s Asian trading session or Wednesday’s U.S. retail sales release.
Producer prices are still expected to weaken in Japan, with a corresponding decline in consumer confidence. Meanwhile, the strong gains in U.S. hiring for the month of November are likely to have spurred positive spending figures, especially as the Thanksgiving holidays and early holiday shopping might’ve contributed to stronger retail sales.
By Kate Curtis from Trader’s Way
USDCHF is in a steady climb, as the pair has been moving inside a rising trend channel on its 1-hour time frame. Price just came off a test of the channel bottom around the .9700 major psychological level, which seems to have held as support.
Further gains could take the pair up to the top of the channel around the .9800 major psychological level or higher. Stochastic is already in the overbought area though, hinting that buying pressure may weaken soon. If the rally is slow, USDCHF might reach only until the middle of the channel around the .9775 area.
Increased selling pressure might even lead to a downside break of support and further losses for USD/CHF. Event risks for this trade today include the US retail sales release, which could show strong spending gains. After all, shopping during the Thanksgiving holidays must’ve picked up in the past month and employment came in strong then.
Going long at market with a stop below .9700 and a target of .9850 could yield a high return-on-risk for a day trade. Adjusting the stop to breakeven once price hits the top of the range could be a good way to protect profits.
As for Switzerland, there are no major reports lined up for today. Just recently, its CPI and retail sales showed bleak readings, as the inflation figure came in flat while spending was weaker than expected. With that, the fundamental bias for this pair is to the upside.
Bear in mind that the SNB’s foreign currency reserves also indicated that the central bank has room to ease or intervene in the forex market in order to keep its currency weak and ward off deflation.
By Kate Curtis from Trader’s Way
AUDUSD is moving up to test the channel resistance on its 4-hour time frame, as the top of the falling range lines up with the 200 simple moving average. This has acted as a dynamic inflection point in the recent downtrend and is close to the .8300 major psychological level.
Stochastic is hinting at a move lower, as the oscillator is moving down from the overbought area and reflecting a pickup in selling momentum. In fact, a shallow bearish divergence can be seen as price made higher highs while the indicator made lower highs.
MACD is also suggesting a potential move down, which might take AUDUSD back to the bottom near the .8150 minor psychological support. Bear in mind though that Australia just reported a stronger than expected jobs figure, indicating that employment picked up by 42.7K in November versus the estimated 15.2K rise. However, the previous reading was downgraded significantly from an initially reported 24.1K gain to just 13.7K.
This could still keep Aussie gains in check, pushing the pair to resume its selloff soon. A stronger return in bearish pressure might even lead to a break below the channel support, as traders predict that the US central bank might be ready to hike interest rates next year.
Meanwhile, analysts are speculating that the RBA could be gearing up to cut interest rates next year, as falling commodity prices and weak employment trends might warrant monetary policy support. The ongoing slowdown in China, Australia’s largest trade partner, is also adding reason for the Australian central bank to ease.
Shorting at .8300 with a 50-pip stop and a target of .8150 could yield a 3:1 trade for a short-term setup. Bear in mind that the US is set to release its retail sales figures in the New York trading session and add support for the Greenback.
By Kate Curtis from Trader’s Way
USDJPY may be due for a downtrend as the pair recently broke below the rising trend line on the 1-hour time frame and SMAs are crossing down. Price pulled up from the 118.00 support zone to the area of interest at the 119.00 mark, which might hold as resistance.
Stochastic is indicating a pickup in selling pressure, as the indicator is moving down from the overbought area. At the same time, the short-term 100 SMA seems to be crossing below the 200 SMA, which could be a sign of a reversal. MACD is also moving down and reflecting a return in bearish dollar momentum.
With that, USDJPY could test its recent lows at 118.00 or perhaps create new lows if sellers are strong enough. Shorting at market with a stop above the 120.00 handle or broken trend line and aiming for the 117.00 area of interest could yield a 2:1 return on risk for a short-term trade.
Bear in mind though that data from Japan has mostly been lower than expected this week while data from the US has continued to impress. The BOJ is more likely to ease monetary policy again while the Fed is already on track to hike interest rates sometime next year. However, these biases have long been priced in and traders might be keen to book profits on their long USDJPY positions until the end of this year.
Event risks for this USDJPY trade today include the release of US PPI figures and the University of Michigan consumer sentiment index. Headline producer prices could dip 0.1% due to the recent drop in oil prices while core producer prices might see a 0.1% uptick. Consumer sentiment is likely to have improved in November, with the index slated to climb from 88.8 to 89.6.
By Kate Curtis from Trader’s Way
EURGBP has been moving inside a rising channel since the start of the month, as the uptrend might carry on. The pair is gearing up to test the top of the range around the .7950 minor psychological level, which might hold as resistance.
Stochastic is moving down, indicating a pickup in selling pressure and a potential move towards support at the .7900 major psychological mark. The pair might resume its selloff before even testing the top of the range if it breaks below the current consolidation at the .7925 area.
This pair’s movement could hinge on the outcome of euro zone and UK data this week, which include the release of euro zone PMI, BOE minutes, and UK jobs and inflation figures. From a fundamental standpoint, the UK is on a much better footing compared to the euro zone, although the BOE has recently pushed back rate hike expectations for next year due to weakening inflation pressures.
With that, the UK CPI release might be the biggest event risk for this trade this week, as another downturn in headline and core inflation figures could lead to pound weakness and a possible upside break from the channel. If that happens, buying pressure could strengthen and lead to more gains for EURGBP.
On the other hand, a recover in inflationary pressures and a move closer to the central bank’s 2% target could renew demand for the pound. This could even lead to a break below the rising trend channel support and may spark a reversal for EURGBP.
If the actual readings come in line with expectations, EURGBP could stay in range and bounce back and forth between support and resistance of the rising trend channel on the 1-hour time frame. Most of the event risks are centered mid-week, which might mean more volatility for the pair around that time.
By Kate Curtis from Trader’s Way
EURUSD is consolidating inside a symmetrical triangle pattern ahead of the top-tier events from both the euro zone and the US this week. For today, German and French manufacturing and services PMIs are lined up and these might provide volatility for the pair.
Price is on its way to test the top of the formation around the 1.2450 minor psychological resistance, and an upside break might lead to as much as 150 pips in gains, which is the same height as the chart pattern. Similarly, a downside break from the 1.2400 handle or the bottom of the triangle could lead to as much as 150 pips in losses.
Stochastic is on middle ground and is on its way up, hinting that euro bulls have enough energy to push for a test of the triangle resistance and a potential breakout, depending on the results of the PMI reports. Small improvements are expected from both countries, which might be enough to lift the region’s manufacturing and services PMI readings as well.
However, disappointing data could lead to another test of support and a potential breakdown. US building permits and housing starts data are due today and strong figures could lead to more demand for the dollar, setting the tone for a potentially upbeat FOMC statement tomorrow.
Continued consolidation is also possible, paving the way for quick scalp trades from the triangle top and bottom until the FOMC statement takes place. Hawkish remarks from the Fed could lead to more dollar gains while cautious comments could force the Greenback to retreat.
Other event risks today include the release of the German ZEW sentiment index, which could show an improvement from 11.5 to 19.8. Euro zone trade balance is also due today, along with the US current account balance.
By Kate Curtis from Trader’s Way
GBPUSD has been stuck in a range on its 1-hour time frame, as the pair found support at the 1.5600 major psychological level and resistance at the 1.5750 minor psychological mark. Price recently bounced off the bottom of the range and is currently testing the top.
Weaker than expected UK CPI wasn’t enough to trigger a downside break from support yesterday, as pound traders are still probably waiting to see the BOE meeting minutes due today. Also up for release are the UK jobs figures, which could reflect another pickup in employment.
Take note that a bullish flag appears to have formed right on the top of the range, hinting that a continuation of the rally might be in order. Stochastic is moving lower though, which suggests that bears are in control of price action for now.
If the top of the range holds as resistance, GBPUSD could move back to its previous lows around the 1.5600 mark. Depending on how the events turn out, a downside break might be possible. This could lead to a 150-pip selloff, which is the same size as the rectangle range pattern.
A bounce could lead to a move back to the top of the range, with a potential upside break likely to last by another 150 pips as well. This scenario might take place if the BOE minutes remain hawkish, despite the recent downturn in inflation and the onse of risk aversion in the financial markets.
As for the US dollar, the FOMC statement is also a huge event risk for this trade, as the Fed is expected to drop the “considerable time” phrase in discussing how long rates might stay low even after easing has already ended. A relatively upbeat statement could mean extended gains for the dollar, which is already benefitting from the flight to safety in the past few days.
By Kate Curtis from Trader’s Way
EURGBP has been moving inside a symmetrical triangle chart pattern since mid-August, as price made higher lows and lower highs. This suggests indecision between buyers and sellers, with a potential breakout in either direction looming.
Price has just tested the top of the triangle around the .8000 major psychological resistance and is head for the bottom near the .7850 minor psychological support. A bounce off this level could lead to another move to the top while a breakdown could lead to as much as 300 pips in losses, which is the same height as the chart formation. Similarly, an upside breakout could result to a 300-pip rally.
Stochastic is moving down for now, indicating that sellers are in control. However, the oscillator is about to reach the oversold area and crossing up from this level would mean that buying pressure is taking hold.
Event risks for this trade include the release of the German Ifo business climate index and the U.K. retail sales report today. The business index is expected to improve from 104.7 to 105.6, which would reflect stronger optimism. Meanwhile, U.K. retail sales might see a 0.3% increase, following the previous month’s 0.8% gain.
An upside surprise could be likely for U.K. retail sales, given how the latest jobs report has surprised to the upside. Improving hiring conditions could lend support to consumer spending, as individuals feel more confident in their financial situation. A stronger than expected reading could lead to a move back to .7850 or perhaps a break below the triangle support.
Better than expected German business sentiment data could keep the consolidation intact though, as traders hesitate to commit to a strong longer-term bias for this pair. Bear in mind though that the ECB has cut interest rates in a couple of instances so far this year while the BOE’s next move is likely to be a rate hike, although the time frame has been pushed back.
By Kate Curtis from Trader’s Way
USDCAD has been on a short-term uptrend, as shown by the ascending trend line connecting the pair’s recent lows. Price looks ready to make a test of the trend line for now and may bounce off support, as this lines up with the 38.2% Fibonacci retracement level.
Stochastic is moving out of the oversold area, indicating that buyers are about to take control of price action. If the pair resumes its climb, it could move up to the resistance around the previous highs at 1.1670. Stronger buying pressure could even lead to a break past those levels and a move towards the 1.1700 major psychological mark.
A deeper retracement could still be possible, as there are support zones located at the 50% to 61.8% Fib levels. These line up with the 1.1550 minor psychological mark and 1.1500 major psychological level respectively, both of which could have a lot of buy orders located.
Event risks for this trade today include the release of Canadian retail sales and CPI. Headline CPI is expected to show a 0.2% decline, mostly due to falling oil prices, while core CPI might print at 0.1% uptick. Headline retail sales could see a 0.4% drop while core retail sales could indicate a 0.2% rise.
Stronger than expected data could lead to more Loonie rallies, which might be enough to trigger a downside break of the rising trend line support. Bear in mind though that there are no economic reports from the US, suggesting that the safe-haven dollar might react mostly to risk sentiment.
For now, demand for the Greenback is strong as the Fed showed a bit of inclination for considering tightening monetary policy next year. While their recent FOMC statement indicated that they’re still keeping rates low for a considerable time, they also mentioned that they’re being patient in looking into rate hikes.
By Kate Curtis from Trader’s Way
GBPJPY has formed a double top pattern on its 4-hour forex chart, indicating that a potential selloff is in the cards. The previous uptrend could soon be reversed if price breaks below the neckline of the pattern around the 180.50 minor psychological support zone.
In that case, GBPJPY could drop by close to 1000 pips, which is around the same height of the chart pattern. For now, stochastic is suggesting that bulls are in control and that a pullback might happen before GBPJPY resumes its drop.
If the 180.00 area holds as long-term support though, GBJPY could recover back to the previous highs near the 190.00 major psychological resistance and form a triple top chart pattern. This is still a valid reversal signal but it might also be indicative of ranging market movement.
If risk aversion persists, the path of least resistance could be to the downside. Weak economic figures from Japan appear to be supporting its currency while the central bank and government refrain from taking action so far. However, announcing further easing could lead to yen weakness and potential gains past the previous highs.
As for the UK, data has been mixed recently, although traders are still focused on speculations that the BOE isn’t likely to tighten monetary policy this year. The monetary policy committee meeting minutes are up for release this week and might provide more directional clues for pound pairs.
A short order around 180.00 or lower could be enough to catch the potential drop and avoid a fake out. If you’re bullish on the pair, you could wait for a test of the support area and aim for the previous highs while trailing the stop to protect profits along the way.
By Kate Curtis from Trader’s Way
AUDUSD has been trading in a steady downtrend in the past few months, with a falling trend line connecting the latest highs on the 1-hour time frame. The pair previously bounced off its lows and is showing signs of a pullback to the trend line.
Using the Fibonacci retracement tool on the latest swing high on low on the same chart shows that the 61.8% Fibonacci level lines up with the .8150 minor psychological resistance and the trend line. This could keep gains in check and push price back to its previous lows or to new ones around the .8000 major psychological support.
Shorting at .8150 with a stop above the .8200 major psychological resistance and a target of .8000 could offer close to a 3:1 return on risk. Stochastic is almost in the overbought area, indicating that buying pressure is weakening and that sellers could start shorting the pair once more.
Event risks for this AUDUSD setup include the release of the FOMC minutes mid-week, as this might shed more light on whether or not the US central bank is ready to start tightening monetary policy this year. Hawkish remarks could add support for this bias and allow the pair’s downtrend to resume and strengthen. On the other hand, cautious comments could downplay rate hike forecasts and lead to a reversal for AUDUSD.
As for Australia, the country is set to print its building approvals and retail sales reports later in the week. Earlier today, the trade balance posted better than expected results. China will release its CPI figures on Friday and possibly show another downturn in producer price inflation.
With that, the path of least resistance for this pair is to the downside, as falling commodity prices and risk aversion are also weighing on the Australian dollar. Continued expectations of Fed tightening could keep the US dollar supported.
By Kate Curtis from Trader’s Way
EURGBP recently bounced off the support of the range on its 4-hour time frame, suggesting that the sideways price action might carry on. Price could head back to the top of the range near the .8050 minor psychological resistance.
Stochastic just turned down from the overbought area though, reflecting a possible pickup in selling pressure. This might lead to a downside break of support and further losses for EURGBP.
Event risks for this trade include the release of the euro zone retail sales report and the BOE interest rate statement. Consumer spending could climb by 0.3% in the euro zone, slower compared to the previous 0.4% gain, while the UK central bank is expected to keep monetary policy unchanged.
Other factors that could impact this trade are updates on the Greek political situation. A snap election is scheduled to take place later on in the month and an increasing chance of seeing a new government could mean that Greece might not secure its next set of bailout funds.
A downside break from support could mean as much as 250 pips in losses for EURGBP, as this is the same height as the rectangle chart pattern. Less chances of a Greek euro zone exit and debt contagion could keep the pair in range and possibly push for an upside break of .8050.
Bear in mind that the UK just printed a weaker than expected construction and services PMI, the latter of which suggests that growth could slow down. The services index fell from 58.6 to 55.8, reflecting a slower expansion in the industry.
Going long at market with a tight stop below the .7800 mark and a target of .8000 could yield a good return on risk for a day trade. Waiting for a break below support might be a little riskier, as this pair is volatile and can be prone to false breaks.
By Kate Curtis from Trader’s Way