Daily Technical Analysis by Kate Curtis from Trader's Way

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464

EURJPY has been moving sideways since the start of the month, as price found support at the 139.00 major psychological level and resistance near 141.00. The pair is moving up to test the top of the range and may bounce from resistance since stochastic is starting to move down from the overbought area.

RSI, on the other hand, is hinting at a potential move higher since the oscillator is still moving up. This could lead to an actual test of the range resistance or a potential upside break. If that happens, the pair could climb by an additional 200 pips, which is the same height as the rectangle pattern.

The moving averages also support a continuation of the longer-term uptrend, as the short-term 100 SMA is treading above the long-term 200 SMA. Price also seems to be treating the 100 SMA as a dynamic support level.

Event risks for this setup include any updates on the Greek debt talks, as positive developments could continue to keep the shared currency supported. French and Italian industrial production numbers are up for release today and another set of strong readings could also give the euro a boost.

As for the Japanese yen, the economy printed a stronger than expected core machinery orders report earlier today. The actual figure came in at 3.8% versus the projected 2.0% decline and stronger than the previous 2.9% figure, which might also keep the yen supported. In addition, risk sentiment could play a key role in price action of the yen pairs.

By Kate Curtis from Trader’s Way

465

GBPUSD is currently stalling at the 1.5500 area of interest once more, which has held as resistance then support in the past. This lines up with the 50% Fibonacci retracement level on the latest swing high and low on the 4-hour time frame and might keep gains in check.

Stochastic is indicating overbought conditions on the same time frame, suggesting that a move lower might take place. In addition, a bearish divergence can be seen since stochastic made higher highs from May 24 and June 10 while price made lower highs then. RSI is also in the overbought region, suggesting that sellers might take control of price action soon.

If that happens, the pair could move back to its previous lows near the 1.5200 major psychological level. Sustained bearish momentum could even lead to a break of these lows and a selloff until the longer-term support near 1.4600. On the other hand, if buying momentum stays in play, a higher pullback to the 61.8% Fib might take place.

The path of least resistance is to the downside, as the Fed is on track to hike interest rates in September, based on the results of the latest jobs report. The May NFP reading came in much stronger than expected and was enough to assure most dollar bulls that the previous slowdown was just temporary.

Much could still hinge on the upcoming US retail sales release, which is slated to show a 1.1% gain in the headline figure and a 0.7% uptick in the core figure. An upside surprise could renew demand for the dollar and put GBPUSD back in selloff mode. On the other hand, bleak data could cast doubts on the potential rate hike in September and lead to more dollar weakness, possibly taking GBPUSD up to the 1.5800 area once more.

By Kate Curtis from Trader’s Way

466

USDCAD is showing signs of a pullback on its 1-hour time frame, as the pair bounced off the 1.2200 major psychological support area. Price is now testing resistance at the 38.2% Fibonacci retracement level, which lines up with the short-term 100 SMA.

A higher pullback might last until the 50% Fib, which coincides with the broken support at the 1.2400 major psychological level. This also lines up with the longer-term 200 SMA. At the moment, the short-term SMA below the long-term SMA confirms that the downtrend could carry on.

Stochastic is moving up, suggesting that a higher correction is possible. Further gains past 1.2400 could find a ceiling at the 1.2450 minor psychological level, which is near the highest Fib level. RSI is already indicating overbought conditions, which means that sellers are ready to push price back down to the previous lows.

Event risks for this setup include the FOMC statement at the middle of the week, as this should set the tone for longer-term dollar price action. Recent reports from the US have shown a pickup, underscoring the Fed’s view that the slowdown was just temporary. Traders are also bracing for a hawkish statement during which the Fed might give a time line on their tightening moves.

Of course Fed head Yellen might also decide to downplay their hawkishness and say that there are still plenty of challenges facing the US economy. She could remind traders that the US dollar’s strength could wind up negative for inflation and overall growth. In this case, the US dollar could still lose ground against its forex counterparts.

There are no major reports lined up from Canada, except for its CPI figures much later on. Data from Canada has also shown a bit of a pickup, allowing the BOC to say that they’re not looking to cut interest rates again soon.

By Kate Curtis from Trader’s Way

467

EURAUD has been forming higher lows on its 4-hour chart, creating a rising trend line and reflecting an ongoing uptrend. The pair seems to be making a correction from its latest rally and using the Fibonacci retracement tool shows that the 50% level lines up with the 100 SMA while the 61.8% level coincides with the trend line and 200 SMA.

In addition, the 1.4300 major psychological level and area of interest is around the 50% to 61.8% Fibonacci retracement levels, which might act as strong support. The 100 SMA is still above the 200 SMA, which suggests that the uptrend could carry on.

RSI is moving down, indicating that the correction is still underway. However, stochastic is on the way, which means that buying pressure could be present and allow the 38.2% Fib to hold as support. A move higher could lead to a test of the previous highs around 1.4750 and possibly a rally beyond this area.

Event risks for this setup include the Greek debt negotiations, which might spark huge moves among euro pairs once a decisive conclusion has been reached. If Greece is unable to agree to an economic reform plan that will allow them to unlock the next set of funds and avoid a default, the euro could be in for a sharp selloff and lead EURAUD to break below the trend line.

On the other hand, a last-minute deal between the creditors and the Greek government could be bullish for the euro. This will allow the debt-ridden nation to stay in the euro zone and clean up its finances, not putting the stability of the shared currency in question.

Earlier today, the RBA released the minutes of its latest policy meeting and confirmed that they would keep monetary policy accommodative. They also stressed that the Aussie needs to depreciate further and that this would be a likely scenario given the recent declines in commodity prices.

By Kate Curtis from Trader’s Way

468

EURGBP has been moving sideways on its 4-hour time frame, finding support at the .7100 major psychological level and resistance at the .7400 major psychological level. The moving averages are also moving sideways, indicating that price could stay in range for quite some time.

Stochastic is pointing down, confirming that a move towards the range support might take place. If the bottom of the range holds as support, price could bounce back to the top again. RSI is also heading lower, indicating that euro bears are in control of price action for now.

The path of least resistance is to the downside, as the Greek debt talks continue to weigh on the euro. There has been no deal reached yet so far, increasing the odds of a debt default and a potential exit from the euro zone. Greek government officals and their creditors are set to have another meeting this week and the outcome could set the tone for euro trading.

Confirmation that Greece might default on its debt this month would be bearish for the shared currency since it will put the stability of the euro region in question. Apart from that, the euro nations that loaned money to Greece will not get paid and might suffer huge losses themselves.

Meanwhile, data from the UK has been mostly weaker than expected, although the headline and core CPI came in close to consensus. Headline CPI showed a 0.1% uptick as expected while core CPI showed a 0.9% increase, lower than the projected 1.0% rise but higher than the previous 0.8% figure.

For today, UK jobs data and the BOE meeting minutes could determine where the pound might be headed. The jobs report could show a 12.5K increase in hiring while the BOE minutes might still show a unanimous vote to keep interest rates and asset purchases unchanged.

By Kate Curtis from Trader’s Way

469

EURUSD just broke out of its short-term consolidation pattern, signaling that further gains are possible for the pair. Recall that price had traded inside a symmetrical triangle pattern before breaking to the upside past the 1.1300 major psychological resistance.

The chart pattern is approximately 250 pips in height, which means that the resulting breakout could be of the same size. The pair appears to be forming a bullish flag pattern on its 1-hour time frame, suggesting that the rally could resume later on.

In addition, the short-term 100 SMA is starting to cross above the longer-term 200 SMA, suggesting that an uptrend is starting. Stochastic is already indicating overbought conditions, however, which could lead to a pullback to the broken triangle resistance. RSI has just reached the overbought area as well.

Traders have been disappointed over the latest FOMC statement, which didn’t provide any strong hints on when they might hike interest rates. This resulted to a sharp dollar selloff in the US session, even though the Fed upgraded their growth and inflation forecasts for the next two years.

Event risks for this setup include any updates on the Greek debt talks, as another round is set to start today. The lack of progress could keep the euro’s gains in check, although markets seem to have warmed up to the possibility of seeing Greece default on its loans and exit the euro zone.

For now, the path of least resistance still seems to be to the upside, as traders start doubting that the Fed can be able to hike interest rates by September. An eleventh hour deal for Greece might still be positive for the euro anyway, as this could prevent debt contagion and keep the stability of the euro intact.

By Kate Curtis from Trader’s Way

470

EURCHF has been slowly treading lower on its short-term time frames, as the lack of progress in the Greek debt talks is starting to weigh on the shared currency. Price is moving inside a descending trend channel and has just bounced off the resistance at 1.0500.

Price could fall back to the channel support at the 1.0400 major psychological level from here, as RSI is pointing down and indicating a return in bearish pressure. Stochastic is on the move up though, which suggests that another test of resistance might still be possible.

The simple moving averages confirm that the downtrend could carry on since the 100 SMA is treading below the 200 SMA for now.

Event risks for this setup include updates on the Greek debt talks as usual. EU leaders have been unable to come up with a deal in their latest meeting, prompting them to schedule an emergency summit for early next week. The lack of developments by then could result to more euro weakness and even a break below the EURCHF channel support if markets come to terms with the idea of a Grexit.

On the other hand, a compromise between the Greek government and its lenders could lead to euro rallies and a potential upside channel break for this pair. Note that Greece has several debt obligations due over the next few weeks and the release of the bailout funds would help them stay avert a default.

As for Switzerland, the recently held SNB monetary policy statement didn’t have any surprises, as the leaders simply jawboned their currency but refrained from taking actual monetary policy action. With that, the path of least resistance might stay to the downside.

By Kate Curtis from Trader’s Way

471

EURCHF is trending higher on its 4-hour time frame, with price testing support at the bottom of the rising channel around the 1.0400 major psychological level. Stochastic is indicating oversold conditions and is starting to move higher, which suggests that further gains are likely.

RSI is on middle ground but is on the move up, hinting that the uptrend could carry on. If so, price could climb up to the top of the channel near the 1.0550 minor psychological level. The moving averages also made an upward crossover, with the 100 SMA above the 200 SMA, indicating that the climb could resume.

Greek debt negotiations continue to pose an event risk for this setup, as European leaders are set to have an emergency meeting today. If the Greek government finally agrees to implement a set of reforms or the creditors relax their conditions, the euro could be in for a strong rally on news that the debt-ridden nation could avoid a default and stay in the region.

On the other hand, reports that no deal has been made could drive the currency pair lower and possibly lead to a break of the support at 1.0400 and further losses for EURCHF. There are no other reports due from the euro zone or Swiss economy today, with the next set of data namely the euro zone PMI readings due tomorrow.

By Kate Curtis from Trader’s Way

472

EURUSD has been consolidating inside a rising wedge pattern for the past few weeks and is recently showing signs of a breakdown. Price is trading below the 1.1300 handle and may be in for around 200 pips more in losses, which is the same height as the chart pattern.

Stochastic is pointing down but is already in the oversold region, indicating that sellers might need to take a break. RSI is also indicating oversold conditions, which means that the selloff might pause from here and that a pullback to the broken wedge support might also be possible.

The short-term 100 SMA is still above the 200 SMA, suggesting that the path of least resistance is to the upside. This could mean that EURUSD might still pop back up above the wedge and resume its climb.

Event risks for this trade today include the release of the German and French manufacturing and services PMI. Analysts are expecting to see improvements in the manufacturing sectors while services could see a small downturn. Stronger than expected data could still lead to a rally for EURUSD.

In the US, durable goods orders data are up for release, with the headline figure expected to show a 0.6% drop and the core figure likely to print a 0.6% gain. Also lined up today is a speech by FOMC member Powell, who might give more clues on when the Fed might hike interest rates.

Other potential catalysts include any updates on the Greek debt talks, as the recent emergency meeting failed to come up with a deal for the debt-ridden nation. News that an agreement will be reached could boost EURUSD while the lack of progress could keep the pair in a downtrend.

[I]By Kate Curtis from Trader’s Way[/I]

473

USD

The US dollar took advantage of the run in risk aversion earlier on in the day, as traders started to accept the idea that Greece might default on its loans. However, weaker than expected data from the US prevented the dollar from extending its rallies throughout the US session. Core durable goods orders came in slightly weaker than expected with a 0.5% gain versus the projected 0.6% increase while the headline figure missed expectations of a 0.6% decline and posted a larger 1.8% drop. The house price index and the flash manufacturing PMI were also weaker than expected while new home sales and the Richmond manufacturing index showed better than expected results. For today, the final GDP reading for Q1 is due and a small upward revision from the 0.7% contraction is eyed.

EUR

The euro suffered a sharp selloff against its forex rivals at the start of the trading day when the emergency meeting in the EU failed to draw up an agreed upon reform plan for Greece. Euro zone PMI readings came in stronger than expected, with Germany and France reporting improvements in both manufacturing and services sectors. The German Ifo business climate reading is up for release today and a dip from 108.5 to 108.2 is expected, owing mostly to the downbeat sentiment surrounding the Greek debt issue.

GBP

The pound also suffered a selloff against its forex counterparts, as the CB industrial orders expectations reading dipped from -5 to -7 instead of improving to 1. BBA mortgage approvals data is up for release today and traders are expecting to see a climb from 42.1K to 43.1K, which might allow the pound to recover.

CHF

The franc gave up a lot of ground to the dollar, just like its European peers. There have been no reports released from Switzerland then, forcing the currency to take its cue from the euro and overall sentiment. Today, the UBS consumption indicator is up for release and it might show an improvement from the previous 1.25 figure. Later on, the SNB will release its quarterly bulletin.

JPY

The yen retreated to the dollar but advanced to its higher-yielding rivals as risk aversion set in the financial markets. Data from Japan was weaker than expected, as the flash manufacturing PMI indicated industry contraction when it fell from 50.9 to 49.9. Earlier today, the BOJ released their monetary policy meeting minutes which barely contained any changes from their previous ones.

Commodity Currencies (AUD, NZD, CAD)

The comdolls had a mixed performance as these were mostly tossed around by changing risk sentiment. Australia printed a couple of weak figures in the Asian session while China showed a small climb in its HSBC flash manufacturing PMI. There are no major reports lined up from the comdolls today.

By Kate Curtis from Trader’s Way

474

EURAUD formed a double top pattern on its 4-hour chart recently, signaling that price is exhausted from its climb. The pair just broke below the neckline of the chart formation, confirming that a reversal is bound to take place.

However, stochastic and RSI are both indicating oversold conditions, which means that a bounce back to the broken neckline near the 1.4450 minor psychological level might take place. Increased bullish momentum might push price back above the broken support area and lead to the formation of another top at 1.4750.

In addition, the short-term 100 SMA is moving above the longer-term 200 SMA, suggesting that the uptrend might still resume. If so, the pair could break past the previous highs and reestablish the uptrend later on.

The German Ifo business climate report is up for release today and the reading is expected to fall from 108.5 to 108.2, reflecting weaker optimism in the euro zone’s top economy. Ongoing concerns regarding the Greek debt issue probably weighed on sentiment as well, which might lead to a downside surprise and further euro selling.

Note that the double top formation is around 300 pips in height, which means that the resulting breakdown could be of the same size. This could take price to the 1.4100 to 1.4150 area.

There are no reports due from the Australian economy today but it looks like risk appetite favored the commodity currencies in recent trading sessions. China is set to release a leading index today and a strong reading could give the Aussie a boost since Australia is China’s largest trade partner.

Watch out for potential support around the 200 SMA, which has held as an inflection point in the past. At the moment, the 100 SMA also appears to be holding as a near-term floor as well.

By Kate Curtis from Trader’s Way

475

GBPAUD has been forming higher lows, creating an uptrend on its 4-hour time frame. In fact, an ascending trend line can be drawn to connect the latest lows and the pair is moving closer to test the rising support area.

RSI is pointing down, suggesting that there’s enough selling pressure left to trigger a move towards the trend line support near the 2.0200 major psychological level. Stochastic is also moving lower, reflecting that sellers are in control at the moment.

Meanwhile, the 100 SMA is still above the longer-term 200 SMA, which confirms that the uptrend is likely to stay intact. In addition, the 100 SMA has been holding as a dynamic support level and might continue to keep losses at bay.

Event risks for this trade setup include the Chinese central bank’s recent decision to increase liquidity by 35 billion CNY. This could keep commodity currencies such as the Aussie supported since stimulus in China would mean stronger demand for Australia’s commodity exports.

The UK is set to release its CBI realized sales report for June and possibly show a decline in the index from 51 to 32, which would reflect lower volumes. A weaker than expected reading might trigger a sharp selloff for the pound, as it might translate to lower consumer spending data.

There are no reports lined up from Australia so the current bearish fundamental bias might still be renewed later on. Data from the country hasn’t been so impressive and the RBA has been inclined to maintain its accommodative monetary policy stance, which suggests that they could still cut rates if necessary. The BOE, on the other hand, has emphasized that their next policy decision is still likely to be a rate hike. This suggests that the path of least resistance for GBPAUD is to the upside.

By Kate Curtis from Trader’s Way

476

USDJPY is starting to move sideways on its 1-hour time frame, as resistance at the 124.25 level held. Price is now moving back to the bottom of the range near the 122.50 minor psychological support.

Stochastic is starting to climb from the oversold area, hinting that a bounce might take place. If so, price could test the top of the range once more and even push for an upside break if buying pressure is strong enough. RSI is still pointing down though, which suggests that there’s enough selling momentum to lead to a test of support before the climb resumes.

For now the 100 SMA is above the 200 SMA, suggesting that the path of least resistance is to the upside. However, these moving averages have been crossing back and forth, confirming that the range-bound behavior is likely to persist.

Earlier today Japan printed mostly better than expected economic data. The national core CPI showed a 0.1% gain instead of staying flat while the Tokyo core CPI came in at 0.1% as expected. Meanwhile, household spending surged by 4.8% versus the projected 3.5% increase while the unemployment rate held steady at 3.3%.

As for the US, only the revised consumer sentiment index from the University of Michigan is up for release. No changes are expected for the initially reported 94.6 figure but a downgrade might be negative for the dollar and possibly trigger a break of the range support.

Strong selling pressure could lead to around 150 pips in losses for the pair, as this is the height of the rectangle chart pattern. However, profit-taking is expected to take place before the end of the trading week, as markets reduce their exposure to the Eurogroup meetings over the weekend.

By Kate Curtis from Trader’s Way

477

EURUSD finally broke out of its triangle consolidation pattern visible on longer-term time frames, signaling that the pair is ready for more declines. Price gapped down over the weekend and opened below the ascending triangle support.

Stochastic is still moving down, indicating that sellers are still in control of price action. EURUSD could fall by as much as 1,000 pips, which is the same height as the triangle chart pattern. RSI is also moving down, confirming that a long-term downtrend is set to take place.

Also, the 100 SMA is moving below the 200 SMA, indicating that the downtrend will carry on. This could take EURUSD down to the previous lows near the 1.0400 major psychological level or even lower in the months ahead.

Event risks for this trade include any updates on the Greek debt crisis. The ECB declined to expand its emergency fund program to the country, triggering capital controls on banks in the country. The IMF deadline for the next repayment is still set for tomorrow and the odds of the Greek government defaulting on this obligation is high. The Greek parliament is still set to have a bailout referendum on July 15.

Later on in the week, the US will release its NFP report for June before traders take off for the long weekend on the Fourth of July. Strong data could reinforce dollar strength since this could confirm that the Fed will hike rates in September. Note, however, that the shortened trading week could open up profit-taking scenarios on Thursday and lead to volatile moves for this pair.

By Kate Curtis from Trader’s Way

478

EURGBP recently broke below the .7100 key support level, indicating that sellers are ready to push the pair lower. Price is pulling back to the broken support area which lines up with the 38.2% Fibonacci retracement level and might keep further gain in check.

However, stochastic hasn’t quite reached the overbought territory, which means that a higher correction is possible. RSI is also on the move up, which suggests that buyers are still in control of price action. EURGBP could climb up to the 61.8% Fibonacci retracement level near the .7200 to .7250 levels and the falling trend line connecting the recent highs.

Once the selloff resumes at any of the Fib levels, price could head back to its former lows near the .7000 major psychological level or lower. On the other hand, an upside break past the 61.8% Fib or the trend line could show that further gains are in the cards.

The main event risk for this setup is the IMF deadline for Greece, during which the country has to pay 1.6 billion EUR in debt repayments. If they fail to meet this obligation, they could wind up paying in arrears or eventually defaulting on their loan. This could prompt speculations of a Grexit and instability for the shared currency.

As for the UK, the current account balance and final GDP readings are up for release today. Strong data could renew demand for the pound, especially since the BOE is one of the more hawkish central banks out there, next to the Fed.

Data lined up from the euro zone includes the German retail sales and unemployment change data, along with the headline and core CPI estimates from the region. Positive readings could keep the euro afloat, although traders might be more tuned in to developments in Greece rather than economic data.

By Kate Curtis from Trader’s Way

479

AUDUSD recently bounced off its long-term support at the .7600 major psychological level and could be ready to test the top of the range again. Price is moving up towards the resistance at .7800, which might keep gains in check.

The top of the range is close to the 200 SMA, which has acted as a dynamic inflection point. The 100 SMA is moving below the 200 SMA, confirming that the path of least resistance is to the downside and that another selloff is likely.

In addition, stochastic is almost in the overbought area, suggesting that buying pressure is fading and that sellers could take control of price action. In that case, another move towards the .7600 handle is possible. RSI, is also on the move up and is edging close to the overbought region as well.

Earlier today, China released its official manufacturing and non-manufacturing PMI reports. The manufacturing PMI was steady at 50.2 as expected while the non-manufacturing PMI showed an improvement.

Later on, the US is set to print its ADP non-farm employment change report, which is considered a leading indicator of the NFP, which is due tomorrow. Analysts are expecting to see hiring gains of 219K from the ADP report, which would reflect a stronger pace of jobs growth compared to the previous month.

Stronger than expected data from the US could remind traders that the Fed could be able to hike interest rates in September, thereby spurring dollar demand. In addition, risk aversion could favor the US dollar as traders price in the possibility of a Grexit and euro instability now that Greece defaulted on its loan to the IMF.

On the other hand, weak US jobs data could undermine the possibility of Fed tightening, especially with financial market risk from the Greek debt crisis. This could lead to a pop higher for AUDUSD and a potential upside break from the range resistance.

By Kate Curtis from Trader’s Way

480

GBPUSD is currently testing the rising trend line connecting the recent lows of price action on the 4-hour time frame. The pair is also drawing support at the 50% Fibonacci retracement level and the 100 SMA.

Stochastic is indicating oversold conditions, which means that a bounce might take place and lead to a move towards the previous highs at the 1.5900 levels. RSI is also giving the oversold signal, suggesting that sellers are already tired and that buyers might jump in.

In addition, the 100 SMA is moving above the 200 SMA, confirming that the uptrend could stay intact. However, a downward crossover might signal a potential selloff and a longer-term downtrend.

Event risks for this trade today include the release of the UK construction PMI, which is expected to climb from 55.9 to 56.6 and reflect stronger industry expansion. Take note, however, that the previously released manufacturing PMI turned out to be a disappointment, increasing the odds of a downside surprise.

The US economy is also set to print its NFP report for June today and possibly show a 231K increase in hiring, slightly slower compared to the previous month’s 280K gain. The unemployment rate is expected to improve from 5.5% to 5.4% while average hourly earnings could show a 0.2% gain. Stronger than expected data could renew demand for the dollar, as these might confirm that the Fed would hike rates in September.

On the other hand, weaker than expected reports could undermine rate hike expectations and lead to a dollar selloff. Traders are waiting for convincingly strong figures to ensure that tightening might take place sometime this year.

Note that leading labor indicators came in better than expected, increasing the odds of an upside surprise. The ADP non-farm employment change report showed a 237K gain versus the projected 219K increase, also higher than the previous 203K rise.

By Kate Curtis from Trader’s Way

481

USDJPY was rejected at the resistance of the descending channel on its 1-hour time frame, which suggests that the selloff could resume. The pair found resistance at the 123.50 minor psychological level and could head back towards support at 121.50.

Stochastic is still moving up, which means that there is a bit of buying pressure left, but a downward move could show that sellers are taking control. RSI is on the move down but is starting to point up, which also suggests a possible bounce.

The short-term 100 SMA is below the longer-term 200 SMA, confirming that the downtrend is likely to carry on. However, an upside break past the channel resistance and an upward SMA crossover would be an early signal of a potential reversal.

The US printed a weaker than expected jobs report for June, as the economy added only 223K jobs instead of the estimated 231K increase. Aside from that, that May figure was downgraded from 280K to 254K while the April figure was revised down as well.

The good news is that the jobless rate fell from 5.5% to 5.3%, which is its seven-year low. However, this was mostly a result of a drop in the participation rate and a reduction in the labor force. Wage growth was also absent since the average hourly earnings figure showed a flat reading.

Meanwhile, data from Japan has recently shown a lot of improvement, particularly when it comes to spending. The Tankan surveys have also reflected gains in the manufacturing and non-manufacturing sectors, suggesting that the BOJ no longer needs to pump up its stimulus efforts.

With that, the path of least resistance is to the downside, as traders pare their bets for a September interest rate hike from the Fed and price in expectations of a neutral policy stance from the BOJ.

By Kate Curtis from Trader’s Way

482

After the huge weekend gap, USDJPY was able to test support at the bottom of the channel near the 121.50 minor psychological level. Price could make its way back to the top to test the resistance near the 123.00 major psychological level.

Stochastic is on the way up, which means that buyers have enough energy to push for a test of the channel resistance. RSI is also moving higher, confirming that buyers are in control at the moment.

However, the middle of the channel has also been holding as resistance, as price recently filled the weekend gap and may be ready to test the bottom of the range again. The 100 SMA is below the 200 SMA, also confirming that the path of least resistance is to the downside.

Weak US jobs data released last week could lead to more dollar losses, as the economy added fewer than expected positions for June. Wage growth was also non-existent, which might lead the Fed to delay their rate hike to later this year or early next year instead of September.

Meanwhile, risk aversion could continue to favor the Japanese yen, as the Greek referendum resulted in a “No” vote for austerity and the bailout proposal. This could spread more uncertainty in the financial markets, along with the Chinese equity market selloff.

By Kate Curtis from Trader’s Way

483

EURUSD has had trouble breaking past the 1.1400 major psychological barrier and has formed a double top pattern on its 4-hour chart. This reversal signal could indicate that the previous uptrend is over and that selling pressure is building up.

Price has yet to break below the neckline support before confirming the potential selloff, which might last by around 500 pips or the same height as the chart pattern. However, if the 1.0900 area holds as support, another bounce to the previous highs might take place.

The 100 SMA is above the 200 SMA for now, which means that the rally could still resume. RSI is in the middle of its range, which means that price could go either way. Stochastic is pointing down, suggesting a potential drop, but is also in the middle.

Event risks for this setup include the EU Summit, during which Plan B for Greece might be discussed. The lack of any kind of resolution for the debt-ridden nation could keep fears of a Grexit and debt contagion on the table, which would be negative for the euro.

Safe-haven flows are keeping the US dollar supported so far, as China hasn’t seen much of a recovery in its crashing stock market. Further declines could keep dragging risk sentiment down and possibly leading to more demand for the lower-yielding dollar.

Only the trade balance and JOLTS job openings report are up for release from the US economy today and these might not have such a huge impact on dollar price action. The trade deficit is set to widen to 42.5 billion USD while the jobs data could show a drop to 5.33M in job openings, which might be negative for the dollar, especially if the actual readings miss expectations.

By Kate Curtis from Trader’s Way