NZDJPY popped up from its previous lows around the 88.00 major psychological level and is in the middle of a market correction. Applying the Fibonacci retracement tool on the swing high and low on the pair’s 4-hour time frame shows that the 61.8% level lines up with a broken support area, which might hold as resistance.
For now, price is already testing the 50% Fibonacci retracement level which lines up with the longer-term exponential moving average on the same time frame. This is also in line with the 90.00 major psychological mark, which might keep further gains at bay. In addition, stochastic is indicating overbought conditions, which means that buyers are exhausted and that sellers might take over.
If that happens, NZDJPY could slide back to its previous lows or even create new ones. The shorter-term EMA is below the longer-term EMA anyway, confirming that the downtrend is likely to carry on.
The path of least resistance in terms of fundamentals is also to the downside since the RBNZ is expected to cut interest rates in their next policy statement. The central bank has already put a few measures to curb housing inflation in place, which means that they are gearing up to lower borrowing costs without having to worry about asset price bubbles.
As for Japan, there have been no major reports released lately but the yen could draw support from risk aversion. The BOJ has emphasized that they are not looking to increase stimulus anytime soon and previous inflation readings have shown small improvements in price trends.
However, a surge in risk appetite could still allow the Kiwi to gain traction and push NZDJPY past the Fibonacci retracement levels. In this case, the pair could move up to the previous highs around the 92.50 to 93.00 psychological resistance levels.
By Kate Curtis from Trader’s Way
AUDUSD recently broke past resistance at the .8000 major psychological level and surged up to a high of .8150. From there, the pair showed signs of retreating from the rally and may be due for a pullback to the short-term Fibonacci retracement levels.
In particular, the 50% Fibonacci retracement level lines up with the broken resistance at .8000, which might now hold as support. It also coincides with the longer-term exponential moving average on the 1-hour chart and this has held as dynamic support in the past.
For now, stochastic is moving down, which means that sellers are in control of price action and that the market correction is not over yet. Price could still pull back to the 61.8% Fibonacci retracement level at .7975, which might be the line in the sand for any retracements.
A break below the .7975 area could signal the start of a longer-term drop, possibly until the next floor around the .7900 major psychological level. Further declines past this point could lead to a selloff until the .7800 handle.
On the other hand, a bounce off any of the Fibonacci retracement levels would confirm that the uptrend is still intact and that a climb towards the previous highs at .8150 is likely. Sustained bullish momentum could lead to a rally to new highs, probably until the .8200 mark.
Event risks for this trade include medium-tier releases from the US economy in today’s New York trading session. This comprises the Empire State manufacturing index, the preliminary consumer sentiment index from the University of Michigan, and the industrial production and capacity utilization figures. Strong data could renew demand for the US dollar as it would revive Fed rate hike expectations while weak figures could allow the AUDUSD uptrend to carry on.
By Kate Curtis from Trader’s Way
EURJPY is moving inside an ascending channel on its 1-hour chart, indicating that a short-term uptrend is taking place. However, the pair has already reached the top of the channel and may fall from the resistance near the 137.00 major psychological mark.
Stochastic is indicating overbought conditions, which means that euro bulls are tired and that sellers might take over. If so, the pair could head back to the channel support at the 134.50 minor psychological level.
For now, the short-term exponential moving average is treading above the longer-term EMA on the 1-hour chart, confirming that the uptrend is likely to stay intact. If you’re bullish on this pair, you could wait for an actual test of channel support to go long. For a more aggressive entry though, you could watch out for an upside break past the 137.00 channel resistance.
There are no major reports lined up from both the euro zone and Japan today, indicating potential consolidation at the inflection point. This also suggests that the current trend might carry on, unless there are any market updates that could influence overall risk sentiment.
Event risks for this setup in the coming days include the BOJ interest rate statement, during which BOJ Governor Kuroda could stress that there is no need to expand their stimulus program. As for the euro zone, the PMI reports from Germany and France later on this week could also determine where the shared currency might go.
The upcoming release of the FOMC minutes might also have a significant impact on overall price action, as this usually tends to spur risk-related moves. Hawkish remarks could encourage traders to buy the US dollar in exchange for the Japanese yen, leading to a broad-based yen selloff and a potential upside break from the EURJPY channel.
By Kate Curtis from Trader’s Way
GBPUSD has been on a strong uptrend, as the pair has been trading above a rising trend line forming on its 4-hour forex chart. The pair recently rallied up to the 1.5800 major psychological resistance before showing signs of a pullback.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% Fibonacci level is close to the trend line and coincides with the 1.5400 major psychological support. At the same time, stochastic is already indicating oversold conditions, which means that sellers are about to lose steam and let buyers take control.
In that case, a bounce off the nearer Fibonacci retracement level around the 1.5450 to 1.5500 levels might take place and push GBPUSD back up to the previous highs and beyond. Sustained bullish momentum could lead to a move up to the 1.6000 major psychological resistance.
Event risks for this trade setup today include the release of the UK CPI figures, which might indicate another decline in price levels for April. The headline reading is slated to show a flat reading while the core version of the report might stay unchanged at 1.0%. The BOE has already predicted further weakness in inflation so any downside surprises might just lead to a few losses.
As for the US economy, building permits and housing starts are lined up today, with potential improvements eyed. However, data from the US has been disappointing recently so there could be a chance of the actual figures missing forecasts. In that case, demand for the dollar could weaken and spark a bounce for GBPUSD.
In addition, the short-term EMA is moving above the longer-term EMA on the 4-hour chart, confirming that the uptrend is likely to stay intact. The long-term EMA is in line with the rising trend line, adding to the strength of that support zone.
By Kate Curtis from Trader’s Way
GBPJPY seems to be having trouble extending its climb past the 188.00 major psychological resistance level, opening up the possibility of a large correction to the areas of interest. On its 4-hour chart, it can be seen that the long-term EMA has acted as dynamic support in the previous pullback and may do so again.
Price could retreat to support at the 184.00 major psychological level, which lines up with a broken resistance area and the long-term exponential moving average. Stochastic is nearing the overbought area, which suggests that bearish pressure might push the pair lower from here.
The short-term EMA is still treading above the long-term EMA, indicating that the uptrend is likely to stay intact. If so, another move towards the resistance at 188.00 is possible and a potential breakout could be seen if buying pressure escalates.
Event risks for this trade setup include the release of the BOE meeting minutes later on in the week, as this is expected to shed light on the central bank’s economic assessment and outlook. Earlier in the week, UK CPI came in weaker than expected and put the country in deflation.
Hawkish remarks from BOE policymakers assuring that the next step is still a rate hike could be enough to keep the pound on its uptrend. On the other hand, cautious comments could push for a sharper correction on the longer-term time frames.
By Kate Curtis from Trader’s Way
GBPUSD has been forming higher lows and finding resistance at the 2.1200 to 2.1300 levels, creating an ascending triangle pattern on its 1-hour chart. Price is currently testing the top of the formation at the moment and may be due for an upside break since stochastic is nearing the oversold zone.
A break higher could yield around 600 pips in gains, which is roughly the same height as the chart pattern. On the other hand, if the triangle resistance keeps gains in check, the pair could head back to the triangle support at 2.1500.
The short-term exponential moving average is treading above the long-term exponential moving average on the 1-hour chart, indicating that the rally is likely to carry on. A downward crossover, however, might indicate that a selloff could take place.
The path of least resistance is to the upside, as the BOE is closer to hiking rates compared to the RBNZ. Although the UK economy fell in deflation for April with its negative headline CPI, policymakers are hopeful that this drop in price levels would translate to stronger spending and growth. In contrast, the New Zealand economy is still facing a lot of weaknesses, particularly in the dairy sector, and could see an interest rate cut soon.
Event risks for this trade setup today include the release of the UK retail sales report, which might indicate a 0.4% rebound from the previous 0.5% decline. Stronger than expected data could support the BOE’s upbeat claim and remind traders that the UK economy could see better growth figures later on. There are no reports lined up from New Zealand today.
A couple of speeches from BOE Governor Carney are scheduled tomorrow and these could provide another boost for GBPNZD if the central bank head retains his upbeat assessment and outlook for the UK economy.
By Kate Curtis from Trader’s Way
EURNZD could be in for a huge reversal, as price formed a head and shoulders pattern on its 1-hour time frame. The pair is testing the neckline support at the 1.5100 handle and may be due for a breakdown soon. For now, stochastic is indicating oversold conditions, which means that sellers are taking a break.
A convincing break below support could confirm the potential downtrend, which might last by around 300 pips or the same height as the chart pattern. Downbeat remarks from ECB members Coeure and Noyer sparked a sharp euro selloff earlier this week and may continue to weigh on this pair.
On the other hand, if the 1.5100 handle still continues to hold as support, the pair could bounce back up to the area of interest at the 1.5200 mark or until the very top at 1.5400. Event risks for this setup include a speech by ECB Governor Draghi during the London trading session and the release of the German Ifo business climate index, which is expected to dip from 108.6 to 108.3. A lower than expected reading could lead to more losses for the pair.
The short-term exponential moving average has just crossed below the longer-term EMA on the 1-hour chart, an early signal that a selloff is set to take place. Shorting at the 1.5050 area which is significantly below the neckline support could catch the initial downside break, although waiting for a pullback to the neckline after the breakout could be a more prudent entry.
No other reports are lined up from New Zealand for today, as the Kiwi could continue to stay supported against the euro. Note that PMI readings from both Germany and France came in mostly below expectations for May, hinting at another potential slowdown in the region.
By Kate Curtis from Trader’s Way
I think gbpnzd on w1 still going up. But be careful some retracement on d1 time frame. Its just my pov.
EURJPY could be in for a reversal from its uptrend, as price formed a head and shoulders pattern on its 4-hour time frame. The pair is already testing the neckline support at the 134.00 major psychological mark and might be due for a break lower since stochastic is still pointing down, reflecting that sellers have enough energy to push for a break lower.
The chart pattern is around 300 pips in height, which means that the resulting selloff could be of the same size. Sustained selling momentum could even take price down to the area of interest at 128.00. Price is also breaking below the long-term exponential moving average support, an early signal that a reversal is taking place.
The short-term EMA looks ready to cross below the long-term EMA, which would confirm the downtrend. From there, the moving averages might hold as dynamic resistance levels in market pullbacks.
On the other hand, if the neckline or EMA holds as support, price could still bounce back up to the previous highs around 137.00. The path of least resistance is to the downside though since the Greek debt situation has been weighing on the shared currency.
Although Greece has been able to meet its debt payments this month, it faces another set of loan obligations in June and might not be able to secure enough cash in time. With that, the prospect of a default and a potential euro zone exit has been raised once more, also sparking talks of debt contagion in the region.
Meanwhile, the yen drew some support from a relatively upbeat BOJ statement last week. The central bank refrained from altering monetary policy, with one member even voting to taper asset purchases. BOJ policymakers also upgraded their outlook for household spending and housing investment, suggesting that there might be no need to increase stimulus again.
By Kate Curtis from Trader’s Way
USDJPY has been trading inside a long-term ascending triangle visible on its daily time frame. Price is testing the triangle resistance near the 122.00 major psychological level right now and may be due for a bounce or a break.
An upside break would confirm that further gains are likely for the pair, spurred possibly by diverging monetary policy expectations for the Fed and the BOJ. While the prospect of a June rate hike has been downplayed, the fact remains that the US central bank is likely to tighten monetary policy sometime this year. On the other hand, the BOJ has mentioned that they are not looking to increase stimulus but data from Japan remains mostly weak.
There are no major event risks from the US during this shortened trading week, as most of the catalysts have already played out last week. The FOMC minutes were released and these confirmed that the central bank is being a little more cautious this time around, as the economy has seen signs of a slowdown.
For Japan though, a bunch of major reports are set for release at the end of the week, which should give traders an idea of whether or not spending is really picking up as the BOJ suggests. Take note that the annualized retail sales and household spending figures would be compared to the post-sales tax hike data, which could mean that positive data might be seen.
From a technical standpoint, the short-term EMA is still cruising above the longer-term EMA on the daily chart, confirming that the long-term rally could stay intact. An upside break past 122.00 could spark around 700 pips in gains, which is roughly the same height as the triangle pattern.
Stochastic is already in the overbought zone though, suggesting that a selloff might take place soon. In that case, price could move back to the triangle support near the 120.00 mark.
By Kate Curtis from Trader’s Way
USDCHF is currently testing a potential resistance zone, which is near the broken support at the .9500 major psychological level. If this area holds as a ceiling, price could turn back down and head to its previous lows around the .9100 major psychological mark.
The resistance area lines up with the 50% Fibonacci retracement level on the latest swing high and low as well, along with a falling trend line connecting the highs from April. However, the short-term EMA on the 4-hour time frame has just crossed up the longer-term EMA, suggesting that further gains could be possible.
Stochastic is already indicating overbought conditions though and may be ready to cross down, which might be enough to bring sellers back to the table. The main event risk for this setup might be the US GDP release on Friday, which could show a downward revision to a -0.9% growth figure.
An even larger economic contraction might be enough to dash hopes of seeing a Fed rate hike this year, which could force the dollar to return its recent wins. On the other hand, a better than expected reading could give the rally an additional boost, possibly pushing USDCHF up to the next resistance around .9800.
By Kate Curtis from Trader’s Way
USDCAD has been climbing since the middle of the month but may be due to head south again, as the pair is hitting an area of interest. Price appears to be finding resistance at the 61.8% Fibonacci retracement level, which lines up with the broken support at the 1.2500 major psychological level.
At the same time, stochastic has reached the overbought zone, indicating that buyers are already exhausted. The oscillator could turn lower from the region and draw more sellers in, possibly allowing price to head back to its recent lows around the 1.1900 major psychological mark.
Note that the short-term exponential moving average has crossed above the long-term moving average on its daily time frame, suggesting that further gains are possible. This could allow the pair could climb all the way up to the next resistance area around the 1.2800 handle.
Earlier this week, the BOC expressed a slightly dovish tone in its monetary policy statement, citing that the currency’s appreciation is keeping a lid on growth and inflation prospects. The Canadian current account balance, US initial jobless claims, US pending home sales, and crude oil inventories data are the event risks for today.
By Kate Curtis from Trader’s Way
GBPNZD has been treading higher on its short-term time frames, creating a rising wedge pattern on its 1-hour chart. Price has recently bounced off support at the 2.1200 major psychological level and is making its way to the top around 2.1500.
If the top of the wedge holds as resistance, price could head back to the bottom to test support once more. Stochastic is still pointing up, indicating that price could reach the top of the wedge later on.
In case a breakout in any direction occurs, the resulting move might last by around 900 pips, which is roughly the same height as the chart pattern. This pair tends to be a volatile one though so wide stops are recommended.
The short-term exponential moving average is cruising above the long-term exponential moving average, confirming that further gains are likely. With that, the path of least resistance is to the upside, and this is supported by fundamentals.
Earlier this week, Fonterra announced another downgrade in milk payout forecasts for its dairy farmers, citing that global prices have failed to pick up. Speculations of another RBNZ interest rate cut have also been weighing on the Kiwi recently, as the central bank implemented measures to curb housing inflation ahead of time.
Meanwhile, data from the UK has been mixed, with the inflation report showing a negative core figure and the retail sales report churning out stronger than expected readings. Still, the BOE has maintained that their next policy move is still likely to be a rate hike.
By Kate Curtis from Trader’s Way
GBPUSD has been treading lower on its 1-hour chart, forming a descending trend channel with resistance at the short-term exponential moving average. The short-term EMA has been moving below the long-term EMA on the same time frame, confirming that the downtrend is likely to carry on.
Price looks ready to test the channel resistance at the 1.5300 major psychological level, which might continue to keep further gains in check. If so, the pair could head back to he channel support at the 1.5200 major psychological mark. Stochastic is on its way down but is still pointing up, hinting that a few more gains are likely before the pair heads south.
However, if buyers soon take control of price action, the pair could climb past the channel resistance and eventually test the next potential ceiling at the 1.5350 minor psychological mark, which is at the long-term EMA. This indicator has held as a dynamic resistance level in the past and may do so again.
A break past the EMA might signal that a reversal is underway, putting further upside pressure on GBPUSD. This could push price up to the 1.5500 mark once more, depending on how this week’s market catalysts play out.
Event risks for this trade setup include the BOE interest rate decision on Thursday and the US non-farm payrolls report on Friday. The BOE is expected to maintain its neutral policy stance while still emphasizing that their next move is still likely to be a rate hike. Meanwhile, a strong jobs rebound is expected from the US but another disappointment could lead to a sharp dollar selloff.
By Kate Curtis from Trader’s Way
EURAUD seems to be completing a complex double bottom pattern on its daily chart, with price currently testing the neckline around the 1.4400 major psychological mark. An upside breakout past this resistance would mark the start of a longer-term reversal, possibly lasting by around 700 pips or the same height as the chart pattern.
On the other hand, if the 1.4400 major psychological resistance holds, price could resume its drop to the near-term support at 1.4400. Further losses past this point could lead to a tumble until the previous lows around the 1.3700 handle.
Stochastic is indicating overbought conditions, favoring a move lower for the pair. However, the short-term EMA is showing signs of crossing above the long-term EMA, an early signal that a reversal is underway. Price has also broken past the long-term EMA, which has held as a dynamic resistance level in the past.
The main event risk for this swing trade setup is the debt deadline for Greece on Friday, during which the possibility of a Grexit might be discussed once more. If the odds favor a debt default for the country, talks of debt contagion and euro instability might weigh on the shared currency.
Another event risk for this setup is the RBA interest rate statement, during which the central bank might stand pat. After all, they just cut interest rates in their previous policy statement while giving a relatively optimistic outlook. Dovish remarks this time could be the catalyst for a neckline breakout.
By Kate Curtis from Trader’s Way
EURUSD recently pulled up from its sharp dive below the 1.1150 minor psychological level onto the 1.0800 area, creating a corrective wave on its 4-hour forex chart. The Fibonacci retracement tool shows that the 50% level lines up with the broken support level, which might now hold as resistance.
Stochastic is indicating overbought conditions, confirming that a selloff is bound to take place soon. Once that happens, EURUSD could make its way back to its previous lows near 1.0800 or even create new ones if selling pressure is strong enough.
On the other hand, if buyers stay in control, EURUSD could break past the Fibonacci retracement levels and climb to test the next resistance at the 1.1450 minor psychological handle. Further gains past that point would confirm a longer-term climb for the pair.
For now, the short-term exponential moving average is below the long-term EMA, but it appears that an upward crossover might take place. If so, it would add to confirmation that price is about to head further north.
Event risks for this correction setup include the Greek debt talks, as reports have indicated that EU and IMF officials have come up with a reform plan to be implemented by the debt-ridden nation to secure more aid. Other catalysts include the release of the US jobs report on Friday, which might support or counter expectations of a Fed rate hike for September.
By Kate Curtis from Trader’s Way
EURCAD recently formed an inverse head and shoulders pattern on its daily time frame, indicating that the pair is already exhausted from its dive. Price just broke past the neckline resistance around the 1.3800 major psychological level after the ECB rate statement and Canada’s weaker than expected trade balance release.
According to Draghi, they have no plans of tapering their quantitative easing program yet and they might even extend it past September 2016 if the economy takes longer to achieve their inflation goals. He suggested that they might not front-load their asset purchases though since they’re worried about financial market volatility.
As for Canada, the country indicated a worse than expected trade deficit of 3.0 billion CAD versus the projected 2.8 billion CAD shortfall. To make things worse, the previous month’s report was downgraded to show a wider deficit of 3.9 billion CAD.
The chart pattern is approximately 800 pips tall, which means that the resulting rally could last by the same amount. This could take the pair up to the previous resistance near the 1.4500 major psychological level.
For now, the short-term exponential moving average is still treading below the long-term EMA but signs of an upward crossover are materializing. Once this happens, buyers would get more confirmation that price is headed further north.
Stochastic is almost in the overbought region already, suggesting that a pullback might take place before further gains are seen. The pair could retreat to the neckline to draw more buyers in around the potential support area. However, a break below this area might indicate that the downtrend could still resume.
Event risks for this trade setup include the release of Canada’s jobs report on Friday, which might indicate another downturn in hiring. In that case, the pair could be in for more gains as the Loonie sells off. On the other hand, an upside surprise could lend some support for the Canadian currency.
By Kate Curtis from Trader’s Way
GBPUSD has been trading in a downtrend recently, creating a descending trend line on its 4-hour forex chart. The pair is testing the falling resistance area at the moment, as it lines up with the longer-term exponential moving average and the 1.5400 major psychological level.
If this area continues to hold as resistance, GBPUSD could fall back to the previous lows at the 1.5200 major psychological level and even create new lows closer to the 1.5000 mark. Stochastic is moving down from the overbought area, confirming that a selloff is bound to take place.
However, the short-term moving average is edging close to the longer-term EMA, suggesting the possibility of an upward crossover. If that happens, GBPUSD could have a shot at breaking past the trend line resistance and moving up to test the next highs around 1.5600.
The main event risk for this trade setup is the release of the US NFP report, which is expected to show an improvement from the previous month’s reading. If so, the dollar could regain ground against its forex rivals, as this might confirm the possibility of seeing a Fed rate hike by September.
A weaker than expected jobs figure, on the other hand, might lead to an upside break for GBPUSD since it would suggest that the Fed would sit on their hands until next year. Take note though that the UK has just printed a weaker than expected services PMI reading the other day, suggesting the possibility of weaker growth figures for the current quarter.
Only the consumer inflation expectations report is up for release from the UK today and it might show a decline from the previous 1.9% reading, especially since the actual headline CPI dipped to the negative territory recently.
By Kate Curtis from Trader’s Way
GBPUSD could turn from its recent uptrend, as the pair is forming a reversal pattern on its 4-hour chart. Price is in the middle of completing the right shoulder of the head and shoulders formation and might be gearing up to test the neckline around the 1.5100 major psychological support.
A break below the neckline would confirm the potential long-term downtrend, which might last by around 700 pips or the same height as the chart pattern. This could take price down to the 1.4400 mark or at least until the previous lows at 1.4600.
On the other hand, if the 1.5100 mark holds as strong support and keeps losses in check, GBPUSD could bounce up to the nearby resistance at 1.5500 instead. Stochastic is already moving out of the oversold region, indicating that sellers are exhausted and that buyers might take over. Stronger upside momentum could lead to a test of the previous highs at 1.5800.
The path of least resistance is to the downside since the US just printed an impressive May NFP report and allowed traders to price in expectations of a Fed rate hike for September. Underlying data supported further positive momentum for the US jobs market, as the participation rate improved while average hourly earnings showed higher than expected gains.
Meanwhile, the UK has just printed a negative headline inflation reading for April, suggesting that the drop in price levels might continue to weigh on overall growth. This was followed by a bleak services PMI reading, suggesting that the industry could have a smaller contribution to overall economic activity for the current quarter. The BOE isn’t too hawkish with their policy bias just yet but has emphasized that their next move is still likely to be a rate hike.
By Kate Curtis from Trader’s Way
GBPUSD could be done with its short-term selloff since the pair is creating a double bottom reversal formation on its 1-hour time frame. At the same time, the short-term simple moving average is crossing above the long-term 200 SMA, suggesting that a rally might take place.
Stochastic is indicating overbought conditions, which means that pound bears are still in control of price action. RSI is still moving up, hinting that another move higher could be possible. A break above the neckline around the 1.5400 major psychological level could lead to around 200 pips in gains for the pair, which is the same height as the formation.
On the other hand, if the 1.5400 mark continues to keep gains in check, price could move back south to the previous lows around 1.5200. Stronger selling pressure could even lead to a break of support and further losses, possibly until 1.5000 or lower.
The path of least resistance is to the downside since the US just printed a stronger than expected jobs report for May. This was enough to draw dollar bulls back to the game, as expectations for a Fed rate hike in September strengthened. Event risks for this trade include the US retail sales release on Wednesday, although both headline and core figures are expected to show stronger gains.
If so, GBPUSD could resume its longer-term decline and eventually aim for the major support near 1.4600. On the other hand, bleak data from the US could lead traders to doubt a potential Fed rate hike, which might then force the US dollar to return its recent gains.
Only the UK trade balance is up for release today, but BOE Governor Carney is set to give a testimony tomorrow and possibly spur volatility among pound pairs.
By Kate Curtis from Trader’s Way