Daily Technical Analysis by Kate Curtis from Trader's Way

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484

USDCHF is currently testing the resistance of the symmetrical triangle visible on its daily forex chart. Price is also encountering a ceiling around the moving averages, indicating that a selloff might take place.

Stochastic is still moving up, which means that there may be some buying pressure left for a bit of consolidation around the resistance. Similarly, RSI is climbing, which means that buyers are still in control for now. Once these indicators reach the overbought zone, sellers could hop in and start pushing prices down to the triangle support.

The moving averages are treading close together, suggesting the possibility of range-bound movement. However, a downward or upward crossover might offer more clues on which direction a breakout could occur. Note that the chart pattern is around 1,500 pips in height which means that the resulting breakout could be of the same size.

Event risks for this setup include the FOMC minutes release today, which could give more hints on when the Fed might hike interest rates. Keep in mind that this meeting was held prior to the release of the latest NFP report so policymakers might still be feeling a bit more optimistic.

In addition, the risks from the Greek default and China’s stock market tumble haven’t weighed into their discussions then. With that, cautious remarks could underscore views that the Fed can’t afford to tighten in September, possibly leading to a dollar selloff.

Data from Switzerland came in mostly unchanged from previous months, as the jobless rate held steady at 3.3% while foreign currency reserves data didn’t show any signs of intervention.

Other event risks for this setup could be the looming Grexit, as EU leaders and Greek government officials still can’t see eye to eye. Greece has been given a five-day deadline to agree to the bailout proposal or exit the euro zone, leading to more downside pressure on the European currencies.

By Kate Curtis from Trader’s Way

485

NZDUSD has been on a strong downtrend in the past few weeks but price is pulling up to test a resistance level on its 1-hour time frame. Price is trading around the descending trend line connecting the recent highs and this resistance area lines up with the 200 SMA, which has held as a dynamic inflection point in the past.

RSI is on the way down, suggesting that sellers are taking control of price action and could push the pair to the previous lows at .6620. Stronger selling pressure could lead to a break of these lows and a move towards the next support around .6500.

Meanwhile, stochastic is pointing up, indicating that the correction is still taking place. A break above the rising trend line could lead to a much larger pullback, possibly until the area of interest around .6800, before the pair resumes its longer-term selloff. For now, the 100 SMA is below the 200 SMA, which means that the path of least resistance is to the downside.

Earlier today, Australia reported a stronger than expected employment figure for June, allowing risk appetite to return to the markets. This was followed by a slight pickup in Chinese stock indices, possibly due to the halt in trading activities in some major exchanges and the injection of a 260 billion CNY loan from a government-owned entity.

The latest FOMC minutes indicated that most policymakers weren’t inclined to hike interest rates just yet, due to the ongoing concerns about Greece and challenges to domestic growth. Future policy decisions could continue to carry more cautious remarks, as the June meeting hasn’t included the disappointing June NFP figure and the increased financial risks from Greece and China.

Updates from Greece could continue to drive risk flows, with weaker risk appetite likely to allow NZDUSD to resume its selloff.

By Kate Curtis from Trader’s Way

486

AUDUSD bounced off its recent lows as risk appetite returned to the markets in the past few trading sessions. The pair looks ready to retrace to the broken support at the .7600 major psychological level, which lines up with the 50% Fibonacci retracement level and the 100 SMA.

At the same time, the 100 SMA is below the 200 SMA, confirming that the downtrend is likely to carry on. Stochastic is moving up, which means that there’s a bit of buying pressure left to trigger a correction to the .7600 area. RSI is also climbing, adding confirmation that a correction is taking place.

If the .7600 area holds as resistance, AUDUSD could resume its drop to the recent lows around .7400 and even create new ones, depending on how strong selling pressure gets. A break above the 61.8% Fib, on the other hand, could mean that a reversal from the downtrend is taking place.

Chinese equities chalked up another day in gains, suggesting that the government’s stimulus measures are starting to take effect. This allowed risk appetite to boost the higher-yielding Australian dollar against the safe-haven U.S. dollar. Aside from that, news that the Greek government is ready to give in to some of its creditors’ requirements is also lowering the odds of a Grexit and keeping risk-off moves at bay.

However, the path of least resistance for AUDUSD might still remain to the downside, as the selloff in Chinese equities probably resulted to a slump in consumer spending and confidence. This also probably weighed on business investment and production, which could mean a downturn in demand for Australia’s raw material commodity exports.

Note, however, that Australia recently printed a stronger-than-expected jobs figure and that the FOMC statement turned out to be a disappointment when it comes to confirming that the Fed can hike rates in September.

By Kate Curtis from Trader’s Way

487

EURGBP is still on a downtrend but the pair is currently testing the top of the descending channel visible on its 4-hour time frame. If resistance around the top of the channel or .7200 holds, the pair could move back to the bottom at .7000 or lower.

Stochastic is pointing down, which means that sellers are in control of forex price action. At the same time, RSI is also heading lower, adding confirmation that a selloff is possible.

The moving averages are mostly moving sideways and have been crossing back and forth, but the 100 SMA is currently below the longer-term 200 SMA so the path of least resistance is still to the downside. However, an upside break past the .7200 mark and onto .7300 could signal that a reversal is going on.

Eurogroup leaders are set to have more meetings today to discuss the details of Greece’s economic proposals. Over the weekend, the negotiations weren’t able to come up with a resolution for the debt crisis, even though the five-day ultimatum from the IMF has passed.

As for the UK, the BOE is set to print their credit conditions report today and an increase in lending activity could be positive for the pound. This could reassure traders that the BOE won’t need to increase their stimulus efforts in order to keep borrowing and spending activity supported.

The Greek parliament is set to have a meeting mid-week to come up with the necessary legislation to put the bailout reforms in action. However, the lack of agreement over the next few days could still undermine the idea of seeing a solution to the Greek debt crisis and remind traders that a default and euro zone exit are still possibilities.

By Kate Curtis from Trader’s Way

488

GBPUSD had been trading below a descending trend line since mid-June but the pair recently broke to the upside. This signals that a reversal is in order, especially since price made a pullback to the broken trend line which now seems to be holding as support.

The 100 SMA is still below the longer-term 200 SMA, which suggests that the downtrend might be able to resume. An upward crossover, however, might confirm that an uptrend is taking place.

Stochastic is moving up, reflecting a pickup in bullish pressure and a potential climb back to the previous highs or higher. RSI is on the way down, which suggests that a larger correction might still be possible.

Event risks for this trade include the release of UK CPI, with the headline figure expected to show another flat reading after printing a 0.1% uptick in May. The core version of the report could hold steady at 0.9%. Other underlying inflation figures such as the producer price index might also have an impact on GBPUSD movement.

BOE Inflation Report hearings are also scheduled today. Governor Carney could share more details on their assessment and outlook for inflation and growth, which might prompt speculations about policy changes.

Later on, the US is set to print its retail sales figures and possibly show weaker gains for both headline and core readings compared to the previous month’s results. If so, the US dollar could give back its recent gains on weaker expectations of a September Fed rate hike.

A bounce for GBPUSD could take the pair up to its recent highs near 1.5600 while a selloff could lead to a move until the 1.5400 support area or lower. Updates on the Greek debt situation could continue to push European currencies around as it still affects overall market sentiment.

By Kate Curtis from Trader’s Way

489

AUDUSD could be in for a reversal from its recent selloff, as the pair is creating a double bottom pattern on its 1-hour chart. Price has been unable to break below the .7400 floor earlier this month and seems ready to test the neckline around the .7500 level.

An upside break from the neckline resistance could mean around 100 pips in additional gains, which is the same height as the double bottom formation. Stochastic is pointing up, suggesting that further upside is possible, while RSI is already indicating overbought conditions.

For now, the 100 SMA is moving below the 200 SMA, suggesting that the downtrend could carry on, but an upward crossover seems to be looming. If that materializes, AUDUSD could eventually break past the neckline and go for an uptrend.

Yesterday, the US printed weaker than expected retail sales data, with the headline figure showing a 0.3% decline instead of the projected 0.2% uptick and the core figure indicating a 0.1% dip instead of the estimated 0.7% increase. This is also significantly weaker compared to the previous month’s readings, which were downgraded to show a 0.8% increase in core retail sales and a 1.0% gain in the headline figure.

Earlier today, Australia reported a 3.2% drop in Westpac consumer sentiment, a slower pace of decline compared to the previous 6.9% slide. Data from China came in mostly better than expected, with industrial production and retail sales both printing stronger than expected figures. GDP and fixed asset investment came in line with expectations of 7.0% growth and an 11.4% gain respectively.

Later on, industrial production and PPI figures are lined up from the US, along with the Empire State manufacturing index. Fed Chairperson Yellen also has a speech lined up and this could push dollar pairs around, depending on her assessment and outlook for the economy.

By Kate Curtis from Trader’s Way

490

After surging past the key resistance around 1.2800 during the BOC rate statement, USDCAD is forming a bullish flag pattern that suggests potential continuation. After all, the BOC decided to cut interest rates from 0.75% to 0.50% and lowered their growth forecasts.

A break above the flag pattern around 1.2950 could mean a move beyond the 1.3000 major psychological level. The mast of the flag is around 200 pips in height so the resulting breakout could be of the same size.

Take note, however, that stochastic is starting to move down from the overbought zone, which means that selling pressure could pick up. RSI is also on the way down, suggesting a potential move lower. If that happens, USDCAD could make a retracement to the broken resistance around 1.2800 before resuming its climb.

The 100 SMA is also above the longer-term 200 SMA, which suggests that the ongoing rally could carry on.

As mentioned, the BOC decided to ease monetary policy in their latest statement, citing the downturn in the U.S. and China as some of the factors supporting their downbeat outlook. Governor Poloz added that weaker than expected investment in oil-related sectors could mean weaker growth prospects.

Meanwhile, Fed Chairperson Yellen sounded confident about the U.S. economy in her latest testimony. While data from the US economy hasn’t been so impressive and most market watchers already adjusted their rate hike expectations to December, Yellen’s reassuring remarks were enough to draw more dollar bulls to the game.

Event risks for this setup include the US CPI and Canadian CPI releases towards the end of the week, with weak readings from Canada and improvements in the US likely to spur further gains for this pair.

By Kate Curtis from Trader’s Way

491

EURAUD formed a head and shoulders pattern on its 1-hour time frame, indicating that a reversal from the previous uptrend might be seen. Price is already breaking below the neckline support at the 1.4700 major psychological level and could be in for more declines.

The chart pattern is around 400 pips high so the resulting selloff could last by the same amount. This could take EURAUD down to the 1.4300 major psychological level or lower. However, if the breakdown proves to be a false one, price could still move back up to the previous highs around 1.5100.

Stochastic is moving up but is almost in the overbought zone, suggesting that selling pressure could pick up and push the pair lower soon. RSI is climbing from the oversold region though so buyers could still push for a pullback to the broken support around 1.4700 to 1.4750.

Event risks for this setup include the German parliamentary vote on the Greek bailout proposal, although this is expected to go by without a hitch. After this, Greece has a payment deadline to the ECB on July 20 then the parliament will discuss the details of their economic reforms by July 22. From there, discussions regarding Greece’s third bailout package will begin.

As for Australia, data has shown a few improvements lately, particularly when it comes to inflation expectations. However, the ongoing slowdown in China might affect export volumes in the country and overall commodity prices.

Earlier today, Australia reported a 0.2% rebound in its CB leading index, suggesting that economic improvements could be seen sooner or later. Next week, the RBA minutes are up for release, along with Australia’s CPI figure for June. Upbeat remarks from the central bank and an improved inflation reading could mean more gains for the Aussie.

By Kate Curtis from Trader’s Way

492

NZDUSD could be in for a correction early this week, as the pair bounced off its recent lows around the .6500 major psychological level. Applying the Fibonacci retracement tool on the latest swing high and low shows that the 50% level lines up with the broken support around .6650.

Stochastic is pointing up and moving out of the oversold region, indicating that a correction is bound to take place. RSI is also climbing, which means that buyers are in control of price action.

A shallow retracement could last only until the .6600 major psychological level, which lines up with the 100 SMA. Meanwhile, a larger correction could last until the 61.8% Fib near the 200 SMA. The short-term SMA is still below the longer-term 200 SMA, confirming that the path of least resistance is to the downside.

The main event risk for this setup is the RBNZ interest rate statement on Thursday’s early Asian trading session. The central bank just cut interest rates in their previous statement so they might sit on their hands for the time being, although recent data suggests that the economic slowdown is worsening.

Dairy prices have continued to tumble, according to the latest data from the country’s global dairy trade auctions. This has prompted several institutions to downgrade their milk payout forecasts, which would mean lower revenues and spending for farmers. The country’s quarterly CPI also fell short of expectations, underscoring the central bank’s weak inflation outlook.

Meanwhile, Fed Chairperson Yellen has expressed confidence in the US economic recovery, reminding traders that a rate hike could still take place before the end of the year. US headline and core CPI figures came in line with expectations of 0.3% and 0.2% gains respectively, signaling that inflation has been picking up in the economy.

By Kate Curtis from Trader’s Way

493

NZDJPY has formed a double bottom pattern on its 1-hour chart, signaling that a short-term reversal could be possible. Price found support at the 81.00 major psychological mark and resistance at the 83.00 major psychological level, which is the neckline of the chart formation.

A break above the 83.00 mark would confirm that an uptrend is underway and that a rally could take NZDJPY up to the 85.00 major psychological resistance. For now, stochastic is indicating overbought conditions and so is RSI, suggesting that a selloff might be more likely.

In addition, the 100 SMA has just crossed below the 200 SMA once more, suggesting that the downtrend is set to carry on. If so, the pair could test the former lows once more or even go all the way down to the next support at 80.00.

The main event risk for this setup is the RBNZ interest rate decision in Thursday’s early Asian trading session. The pair could sell off once more if the central bank decides to lower interest rates again, just as they did in their previous rate statement.

Dairy prices have been on the decline in New Zealand, leading to lower milk payout forecasts for farmers. This could mean lower investment and spending activity down the line, which might weigh on overall economic growth.

Risk appetite could also play a major role in this pair’s price action, as there have been no major reports out of Japan. Falling commodity prices have been the main market theme in the past few days, leading to a downturn in risk-taking and a rally for the lower-yielding Japanese yen.

Earlier today, Japan released the minutes of its latest monetary policy meeting, which didn’t really contain any surprises. Policymakers noted that exports have been picking up and that business activity is seeing improvements.

By Kate Curtis from Trader’s Way

494

After selling off in the past few days, EURUSD is making a correction to the 38.2% Fibonacci retracement level. This coincides with a broken support level around the 1.0950 minor psychological level and the 200 SMA resistance, which could allow the downtrend to resume.

Stochastic is pointing down, confirming that selling pressure is present. RSI is also turning from the overbought zone, signaling a potential pickup in bearish momentum. These could take EURUSD down to the previous lows at the 1.0800 mark or lower.

Note that the 100 SMA is moving farther away from the 200 SMA, indicating that the downtrend is about to get stronger. This could lead to the creation of new lows, possibly around 1.0700 or lower if euro bears jump into action.

There are no major reports lined up from the euro zone or the US economy today, which suggests that risk sentiment could be the main driver of price action. This could mean that the ongoing downtrend for EURUSD might resume sooner or later.

Keep in mind that the pair has previously formed a double top on its longer-term time frames, signaling the possibility of a selloff as soon as price breaks below the neckline around the 1.0800 mark. This could then take EURUSD to the lows around 1.0500 earlier this year.

Fed rate hike expectations for the end of the year could keep the US dollar supported against its peers in the long run, as strong figures from the US economy might continue to keep this view valid. For today, US existing home sales data is up for release and an increase from 5.35M to 5.40M is expected.

Tomorrow has the Spanish unemployment change report on tap, along with the euro zone consumer confidence index. On Friday, PMI readings from Germany and France are lined up, along with the US flash manufacturing PMI and new home sales figures.

By Kate Curtis from Trader’s Way

495

AUDJPY has been moving sideways on the 1-hour time frame, finding support around the 91.00 major psychological level and resistance just above 92.00. The pair seems to be on its way to test the bottom of the range for another potential bounce.

However, the 100 SMA just crossed below the 200 SMA, suggesting that further decliens might be possible. If so, price could break below support at 91.00 and fall by an additional 100 pips, which is roughly the same height as the range.

Stochastic is moving up though, which means that there could be enough buying pressure left for a move back to the top of the range. RSI is on the way down but is on middle ground, barely offering directional clues at the moment.

Earlier today, Australia reported a climb in its NAB business confidence from 0 to 4 for the second quarter of the year, reflecting an increase in optimism. Meanwhile, Japan indicated a wider trade deficit of 0.25 trillion JPY from its previous 0.18 trillion JPY shortfall.

The path of least resistance in terms of fundamentals is still to the downside since gold prices have been tumbling recently, which is not good for the positively-correlated Australian dollar. At the same time, equities have also been on the decline due mostly to weak US earnings reports and this is weighing on risk appetite and higher-yielding currencies like the Aussie.

There are no major reports lined up from both Japan and Australia for the rest of the day, leaving risk sentiment in the driver’s seat of price action. Further declines in gold and other commodities for the rest of the day could have an impact on market sentiment and Aussie trading.

By Kate Curtis from Trader’s Way

496

EURGBP has been trending lower on its 4-hour forex chart, with price moving below a descending trend line connecting the highs since May. Price looks ready to pull back to the trend line, which is in line with the 200 SMA. For now, the 100 SMA is below this longer-term moving average, confirming that the downtrend is likely to continue.

In addition, the trend line lines up with the 61.8% Fibonacci retracement level and the .7100 major psychological mark. If this holds as resistance, EURGBP could make its way back down to the previous lows around the .6930 level.

Stochastic has already reached the overbought area, indicating that buying pressure is fading and that sellers are ready to take over. RSI is still moving up, suggesting that there is still a bit of buying momentum left before the correction is completed.

Event risks for this trade include the release of PMI readings from Germany and France today. Germany is expected to show a stronger expansion in its manufacturing sector since the index is set to climb from 51.9 to 52.9 while its services PMI could climb from 53.8 to 54.1. In France, the manufacturing PMI is expected to rise from 50.7 to 51.1 while the services PMI could fall from 54.1 to 53.9.

Later on, the UK will release its BBA mortgage approvals report and possibly show an increase from 42.5K to 43.5K, reflecting a pickup in housing demand and potentially stronger spending later on. However, the UK retail sales report released yesterday showed a weaker than expected 0.2% uptick versus the projected 0.4% increase.

Next week, the UK is set to print a bunch of medium-tier reports earlier on, along with the much-anticipated preliminary GDP reading for the second quarter of the year. Strong data could remind traders that the BOE is shifting to a more hawkish stance these days.

By Kate Curtis from Trader’s Way

497

USDCAD recently made a strong rally past a key resistance area around 1.3000 and is currently retreating to that level at the start of the week. Price surged to the 1.3100 mark after the breakout and could be in for new highs after this correction.

At the moment, price is finding support around the 50% Fibonacci retracement level but might be due for a larger pullback to the 100 SMA. This moving average is above the longer-term 200 SMA, indicating that the long-term uptrend is likely to carry on.

At the same time, stochastic is showing a bullish divergence, with price making higher lows and the oscillator drawing lower lows. Once stochastic moves out of the oversold area, the pair could regain ground. RSI, meanwhile, is still moving down and suggesting that the correction isn’t over yet.

Event risks for this trade setup include the FOMC statement, which could show whether or not the Fed is ready to hike interest rates before the end of the year. The liftoff has been pushed back from June to September and even possibly until December.

As for the Canadian dollar, falling commodity prices have been weighing on the Loonie these days, as Brent crude oil has fallen below $55/barrel once more. This could mean another leg lower for oil prices and the Loonie, which might spur a risk-off environment in favor of the safe-haven US dollar as well.

Event risks from Canada include the release of the Canadian monthly GDP reading on Friday. Other potential movers are the US durable goods order report today and the advanced GDP reading from the US on Thursday. Strong data from the US could remind traders that the Fed is moving closer to tightening monetary policy, which might drive USDCAD up to new highs. On the other hand, weak figures could cast more doubts on the rate hike and spur a break below 1.3000 for USDCAD.

By Kate Curtis from Trader’s Way

498

GBPAUD has been on a strong uptrend on its longer-term time frames, but a pullback seems to be materializing on the 1-hour chart. The pair has recently found resistance at the 2.1400 major psychological mark and might retreat to the 2.1200 levels.

This potential correction area lines up with the 50% Fibonacci retracement level and the rising long-term trend line. This also coincides with the 100 SMA and 200 SMA, which are indicating that the uptrend is likely to continue.

Stochastic is on the move down, confirming that a correction from the recent rally is underway. RSI is also moving lower, suggesting that sellers are in control of price action at the moment. Once these indicators start showing oversold conditions, buyers could get back to action and allow the climb to resume.

Event risks for this setup include the release of the UK preliminary GDP reading today. This could show a growth of 0.7% for the second quarter, stronger than the previous 0.4% expansion. A higher than expected GDP reading could mean more gains for the pound, as this would confirm that the BOE might be able to hike rates early next year.

Recall that the BOE Inflation Report hearings were bullish for the pound, as Governor Carney said that they are moving closer to tightening monetary policy. However, the recent jobs report and retail sales figures turned out weaker than expected, leading some traders to doubt that a rate hike could be possible.

As for the Australian dollar, gold prices have been falling recently, which could mean lower revenues for the mining industry and a downturn in export activity. This could also set off another tumble in commodity prices, which would be bearish for the Aussie and negative for risk appetite.

By Kate Curtis from Trader’s Way

499

EURAUD has been trending higher on the 4-hour time frame and price looks ready to make another test of the uptrend line connecting the recent lows. Price could draw support around the 1.5000 to 1.5100 area, which lines up with the trend line and former resistance level.

In addition, the trend line coincides with the moving averages, which have held as dynamic support areas in the past. The 100 SMA is above the 200 SMA, confirming that the uptrend could carry on.

Stochastic has just reached the oversold area, suggesting that a bounce might take place soon, but the oscillator has yet to turn higher. Meanwhile, RSI is still on the move down, which means that there may be enough selling pressure left to trigger an actual test of the uptrend line.

The euro has been climbing ever since the Greek debt drama reached a resolution and bailout talks are moving forward. Data from the euro zone hasn’t been so impressive but traders are still banking on the improved sentiment in the region.

On the other hand, the Aussie has been under heavily selling pressure when gold prices have been falling last week and early this week. The Australian economy could be faced with weaker mining revenue and investment if gold continues to drop, as this would also weigh on iron ore prices and other commodities.

Apart from that, the recent selloff in Chinese equities earlier this week shows that Australia’s major trade partner isn’t out of the woods yet. It seems that the government and central bank intervention has only stemmed the decline for a few weeks but the overall outlook is looking grim. Further declines could mean weak demand for Australia’s raw material exports, which might then weigh on the country’s growth.

By Kate Curtis from Trader’s Way

500

EURCHF is pulling back from its strong upside break past the symmetrical triangle resistance on the 4-hour chart and may be due for a retest of the 1.0500 major psychological support. This lines up with the 61.8% Fibonacci retracement level and the broken triangle resistance.

The 100 SMA crossed up from the 200 SMA, confirming that the uptrend is likely to stay intact and that the breakout has found momentum. Stochastic is already indicating oversold conditions and is moving higher, suggesting that buying pressure could return sooner or later. However, RSI is still on the move down, which means that there may be enough selling pressure left for a larger correction.

A bounce off the 61.8% Fib or any of the retracement levels could lead to a move up to the recent highs near the 1.0700 major psychological mark. However, a break below the 1.0500 handle could mean that a longer-term selloff is setting in.

Event risks from the Greek debt issue have faded, as the government is taking steps to implement austerity and repay its existing obligations. Economic data from the euro zone has shown a few improvements, although the recent batch of PMI readings from Germany and France have fallen short.

Germany is set to print its preliminary CPI and its unemployment change report today and strong data could mean more gains for the euro. Also lined up is Spain’s preliminary GDP reading and flash CPI.

As for the franc, the KOF economic barometer could provide a bit of volatility, as the reading is slated to climb from 89.7 to 90.3, reflecting significant improvements. Stronger than expected data could allow the EURCHF correction to carry on while weak results could lead to an earlier bounce.

Euro zone flash CPI estimates are up for release tomorrow and increases could mean more gains for the shared currency. Meanwhile, traders are still careful to pile on long franc positions due to the threat of SNB intervention.

By Kate Curtis from Trader’s Way

501

EURCHF is pulling back from its strong upside break past the symmetrical triangle resistance on the 4-hour chart and may be due for a retest of the 1.0500 major psychological support. This lines up with the 61.8% Fibonacci retracement level and the broken triangle resistance.

The 100 SMA crossed up from the 200 SMA, confirming that the uptrend is likely to stay intact and that the breakout has found momentum. Stochastic is already indicating oversold conditions and is moving higher, suggesting that buying pressure could return sooner or later. However, RSI is still on the move down, which means that there may be enough selling pressure left for a larger correction.

A bounce off the 61.8% Fib or any of the retracement levels could lead to a move up to the recent highs near the 1.0700 major psychological mark. However, a break below the 1.0500 handle could mean that a longer-term selloff is setting in.

Event risks from the Greek debt issue have faded, as the government is taking steps to implement austerity and repay its existing obligations. Economic data from the euro zone has shown a few improvements, although the recent batch of PMI readings from Germany and France have fallen short.

Germany is set to print its preliminary CPI and its unemployment change report today and strong data could mean more gains for the euro. Also lined up is Spain’s preliminary GDP reading and flash CPI.

As for the franc, the KOF economic barometer could provide a bit of volatility, as the reading is slated to climb from 89.7 to 90.3, reflecting significant improvements. Stronger than expected data could allow the EURCHF correction to carry on while weak results could lead to an earlier bounce.

Euro zone flash CPI estimates are up for release tomorrow and increases could mean more gains for the shared currency. Meanwhile, traders are still careful to pile on long franc positions due to the threat of SNB intervention.

By Kate Curtis from Trader’s Way

502

AUDUSD is forming a double bottom pattern on its 1-hour chart, signaling a potential reversal from the selloff. Price has failed in its last two attempts to break below the .7250 minor psychological support level and is on its way to test resistance at the .7350 neckline.

A break above the neckline could set off as much as 100 pips in gains, which is the same height as the chart formation. However, if the resistance holds, another move towards the .7250 mark or lower could take place.

Stochastic is in the overbought region, signaling that the rally might already be over. RSI is still on the move up, indicating that there’s a bit of buying momentum left for a test of the neckline. Meanwhile, the 100 SMA is below the 200 SMA, confirming that the longer-term downtrend could carry on.

Weaker than expected advanced GDP data from the US triggered a bit of a dollar selloff, following the FOMC statement earlier in the week. Fed officials declined to commit to tightening in September, citing that they’d pay wait for more labor market improvements before hiking interest rates. With that, the upcoming NFP release could have a strong say in dollar trends.

As for Australia, the quarterly PPI report released earlier today showed better than expected results. Producer prices were up 0.3%, higher than the estimated 0.2% uptick but weaker than the previous 0.5% gain. Private sector credit was also slightly weaker than expected with a 0.4% increase instead of the estimated 0.5% rise.

Only medium-tier reports are lined up from the US for the rest of the day, as profit-taking activity at the end of the month could push AUDUSD around as well. Over the weekend, China will be releasing its official manufacturing and non-manufacturing PMI readings which might also lead to AUDUSD gaps in Monday’s open.

By Kate Curtis from Trader’s Way

503

EURUSD is currently testing the descending triangle resistance and might be due for a move back to the support at the 1.0850 minor psychological level. Stochastic is pointing down, indicating that sellers are in control, while RSI is on middle ground.

Price is also drawing resistance from the long-term 20 SMA, which has acted as a dynamic inflection point in the past. The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside.

Further selling pressure could trigger a break of the triangle support, potentially leading to more losses for EURUSD. The chart pattern is around 500 pips in height, which means that the resulting breakout could be of the same size.

Event risks for this trade setup include the US NFP release later on in the week, as this could confirm whether or not the Fed can hike interest rates by September. Strong data could favor tightening by then, which would mean strong demand for the US dollar. On the other hand, weak data could spur a selloff for the dollar and a possible upside break from the descending triangle.

By Kate Curtis from Trader’s Way