Daily Technical Analysis by Kate Curtis from Trader's Way

Commercial Content Analysts
525

NZDJPY is moving sideways on its 1-hour forex chart and might draw support from the bottom of the range around the 76.50 minor psychological level. A bounce off this area could lead to a move back to the top around the 78.50 minor psychological resistance.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. With that, a break below the range support might even be possible, pushing NZDJPY lower by an additional 200 pips or the same height as the chart formation.

Stochastic is on the move up while RSI is on middle ground, indicating that there is enough buying pressure present to trigger a bounce. However, once the indicators reach the overbought region and turn lower, sellers could take control of price action.

Event risks for this setup include the release of Chinese PMI today, all of which indicated weaknesses in both services and manufacturing industries. Also lined up are retail sales and trade balance reports from Australia, which might be indicative of how New Zealand’s consumer and trade sectors could fare.

Apart from that, commodity price trends and market risk sentiment could push this pair around. Last week, declines in equity markets spurred sharp selloffs for the higher-yielding currencies, favoring the safe-haven yen in the process. A return of this type of market behavior could spur similar moves this week.

On the other hand, a return in risk appetite could mean gains for the Kiwi. The US is set to print its NFP reading on Friday and it might confirm whether or not the Fed could hike interest rates this year. Any signs that the tightening move might be delayed could keep risk appetite in the financial markets, as the global economy can count on extended stimulus from the US central bank.

By Kate Curtis from Trader’s Way

526

EURGBP is still moving inside its range on the 4-hour time frame, currently testing the resistance at the .7400 major psychological level. An upside break might be possible since stochastic is climbing while the 100 SMA just crossed above the 200 SMA.

In that case, EURGBP could climb by an additional 300 pips, which is the same size as the rectangle formation. However, if the resistance continues to hold, price could fall back to the range support around the .7000 major psychological level. RSI is pointing down, indicating that bearish momentum is present.

Event risks for today include the release of the Spanish unemployment change report, which is expected to show a 35.3K increase in joblessness after printing a 74K drop last time. As for the UK, the construction PMI is up for release and it might indicate a climb from 57.1 to 57.6, reflecting a stronger pace of expansion in the industry.

Data from the UK came in weaker than expected yesterday, as the manufacturing PMI fell from 51.9 to 51.5 instead of holding steady. Euro zone data came in mostly stronger than expected, with Germany showing a 7K increase in employment and Italy reporting upbeat jobs data as well.

Later this week, the UK is set to print its services PMI and might show a climb from 57.4 to 57.6. This report tends to have a stronger impact on pound price action since the services sector takes up a larger share of overall economic activity. Stronger than expected data could mean more gains for the pound and a move lower for EURGBP while weak readings could spur a pound selloff or an upside break for EURGBP.The ECB rate statement might also serve as a strong catalyst for price action, although no actual monetary policy changes are expected.

By Kate Curtis from Trader’s Way

527

AUDCAD recently broke below the support around the .9400-.9425 area and dipped to a low of .9250. From there, price bounced and showed signs of a potential pullback to the broken support zone, which might now hold as resistance.

In addition, the broken support lines up with the 38.2% Fibonacci retracement level, which might be enough to keep gains in check. A higher pullback could last until the 61.8% Fibonacci level, which coincides with the moving averages. Note that these just made a downward crossover, signaling that the path of least resistance is to the downside.

Meanwhile, RSI is on the move up for now, indicating that buyers are in control of price action and that a correction is underway. Stochastic hasn’t quite reached the overbought zone yet but is starting to cross down, hinting that a shallow pullback is in the cards.

Earlier today, Australia printed mixed reports, with a 0.1% drop in retail sales versus the projected 0.4% uptick and a smaller trade deficit of 2.46 billion AUD versus the projected 3.10 billion AUD shortfall. This is also smaller compared to the earlier 3.05 billion AUD deficit, although this was already downgraded.

As for Canada, the main event risk this week is its jobs report due tomorrow. The economy probably added 2K jobs in August, weaker compared to July’s 6.6K gain but likely enough to keep the jobless rate steady at 5.8%. For today, the trade balance is due and it might show a larger deficit of 1.4 billion CAD compared to the previous 0.5 billion CAD shortfall.

Oil prices could also direct Loonie price action in the coming days, as OPEC is reportedly ready to discuss adjustments in prices and production levels. Any reduction in supply could allow prices to recover, which might lift the positively correlated Canadian dollar in the process.

By Kate Curtis from Trader’s Way

528

GBPUSD has been selling off on the short-term charts but is currently approaching the bottom of the range visible on the daily time frame. Price could bounce off the floor around the 1.5100-1.5200 levels, which have held as support since April.

A bounce off the range support could mean a move back to the resistance around the 1.5750-1.5800 levels. Stochastic is already indicating oversold conditions, which confirms that a rally is possible, while RSI is also approaching the oversold zone as well.

Meanwhile, the 100 SMA just crossed above the longer-term 200 SMA, signaling that the selloff is likely to be over soon. However, a break below the support zone could mean more losses for GBPUSD, possibly until this year’s lows around 1.4600.

Event risks for this trade today include the US NFP report, which might show a 215K increase in hiring for August. This could be enough to bring the jobless rate down from 5.3% to 5.2%. Stronger than expected data could mean more demand for the US dollar, potentially triggering a downside break from the range. On the other hand, weak results could lead traders to anticipate a later rate hike from the Fed, spurring a bounce for Cable.

Data from the UK was weaker than expected this week, as the industry PMIs came in short of consensus. The manufacturing PMI fell from 51.9 to 51.5 in August while the construction PMI climbed from 57.1 to 57.3, short of the forecast at 57.6. The services PMI, which has a stronger impact on pound movement, slipped from 57.4 to 55.6.

There are no reports due from the UK today, indicating that traders’ will pay close attention to the US jobs report. Average hourly earnings could show another 0.2% uptick, although a disappointing read could mean dollar weakness.

By Kate Curtis from Trader’s Way

529

GBPJPY has been trending lower on its 1-hour time frame, with the 100 SMA treading below the longer-term 200 SMA and indicating that the selloff could continue. Price bounced off the support at the 180.50 minor psychological mark and may be due for a pullback to the Fibonacci retracement levels.

In particular, the 61.8% Fibonacci retracement level lines up with a broken short-term support zone at the 183.00 major psychological mark. This is also near the 100 SMA, which has held as a dynamic resistance level in the past. A smaller correction could last until the 38.2% Fib near the 182.00 level or the 50% Fib at the 182.50 minor psychological level.

Stochastic is still on the move up, indicating that buyers are in control of price action and that a retracement is still taking place. However, an upside break past the Fib levels might be an early signal that a reversal from the downtrend is in order.

The main event risk for this setup this week is the BOE rate statement, which will be followed by the release of the MPC meeting minutes. Only one member is expected to have voted to hike interest rates this time, although the global equity slump might’ve convinced him to hold off any tightening decisions. If so, the pound could be in for more declines against the Japanese yen.

Data from the Japanese economy hasn’t been so impressive, but the safe-haven currency has drawn support from the surge in risk aversion last week. Apart from that, the pound lost some of its appeal when PMI readings from the manufacturing, construction, and services sectors came in below expectations.

Other event risks include the release of Japan’s current account balance, final GDP reading for Q2, and the preliminary industrial production report for August. Stronger than expected data could continue to support the lower-yielding yen, especially if risk appetite remains weak in the financial markets.

By Kate Curtis from Trader’s Way

530

EURCHF has been gradually trading higher, moving inside a shallow rising channel on its 1-hour time frame. Price is currently testing the top of the range at the 1.0900 major psychological level, which might hold as resistance.

In that case, EURCHF could soon head back to the channel support at the 1.0750 minor psychological level before resuming the climb. Support could also be found at the mid-channel area of interest near the 1.0800 mark.

The 100 SMA is above the longer-term 200 SMA, which means that the uptrend is likely to carry on. However, stochastic and RSI are on the move down so a bit of correction might still be possible before the climb resumes. If buying pressure is strong enough, an upside break past the channel resistance might be seen.

There are no major event risks for this pair today, as the ECB has already announced its monetary policy statement last week while the SNB has nothing lined up in the next few days. The Swiss foreign currency reserves report indicated a small increase in holdings but not big enough to suggest that the central bank is actively intervening in the forex market.

Only medium-tier reports from the euro zone and Switzerland are on the docket. This includes the Swiss unemployment rate, which is expected to hold steady at 3.3%, and the German and French trade balance.

Without any major catalysts, the pair could stay in range and sell off from the dovish bias that the ECB shared last week. Recall that Draghi said that they are open to further easing if inflation falls further, announcing downgrades on their growth and CPI estimates as well.

By Kate Curtis from Trader’s Way

531

USDCAD has been moving sideways on its 1-hour forex chart, finding resistance at the 1.3310 level and support at 1.3160. The pair is on its way to test the range support and might be due for a bounce, as stochastic is already indicating oversold conditions. If so, a bounce back to the range resistance might take place.

Take note, however, that the 100 SMA is below the longer-term 200 SMA, which means that the path of least resistance is to the downside. In that case, a break below the range support could be possible, pushing USDCAD to the next floor around the 1.3000 major psychological level.

The main event risk for this trade is the BOC interest rate decision, during which Governor Carney is expected to keep interest rates on hold at 0.50%. The BOC already cut interest rates twice this year and might sit on its hands this time, especially since oil prices have begun to recover. In that case, a break below the bottom of the range might be seen.

On the other hand, dovish remarks or a rate cut might mean more losses for the Canadian dollar, possibly allowing the range support to hold. Note that the BOC typically acts preemptively in order to prevent worse losses from the oil price slump, reducing the negative effects on Canada’s energy sector.

Other potential catalysts include the Canadian building permits report, which might show a 4.7% decline after rising by 14.8% in the previous month. As for the US, only the JOLTS job openings report is lined up and this might just have a minimal impact on the dollar since the NFP was already released last week.

By Kate Curtis from Trader’s Way

532

USDCAD has been moving sideways for quite some time, but the pair seems to have formed lower highs on the 1-hour time frame. Price is also finding support at the 1.3150 minor psychological level, creating a descending triangle pattern.

The pair is currently testing the top of the triangle, which might continue to hold as resistance. The moving averages are crossing back and forth, suggesting that the range-bound action could continue. In addition, stochastic is already in the overbought zone, which suggests that a selloff might take place.

In this week’s rate statement, the BOC decided to keep interest rates on hold at 0.50%. The central bank acknowledged that the financial risks in China have contributed to falling commodity prices but that the Loonie’s depreciation is helping keep the downside risks in check. In addition, the BOC also noted that their rate cuts earlier this year are helping keep growth supported.

In addition, oil prices have recovered recently after the OPEC showed willingness to adjust production levels. This could provide an additional boost to the positively-correlated Loonie and less demand for the safe-haven dollar. Crude oil inventories data is due today and a buildup in stockpiles might limit oil price gains.

As for the US, the initial jobless claims and import prices data could pose event risks. Jobless claims could fall from 282K to 279K while import prices could show a 1.7% drop.

By Kate Curtis from Trader’s Way

533

The recent downtrend on GBPJPY might soon turn, as the pair formed an inverse head and shoulders reversal pattern on its 1-hour chart. Price is currently testing the neckline around the 186.50 minor psychological level and a break past the resistance might mean that an uptrend is in order.

Stochastic and RSI are on the move up, supporting further bullish momentum. An upside break could lead to a rally of around 600 pips or the same height as the chart pattern.

In addition, the 100 SMA just crossed above the longer-term 200 SMA, confirming that the path of least resistance is the upside. However, if the 186.00-187.00 levels continue to keep gains in check, price could eventually fall back to the previous lows near 180.00 or until the area of interest at 184.00.

The BOE decided to keep interest rates and asset purchases unchanged during their policy statement yesterday, with only one dissenter voting to hike rates. The minutes of their monetary policy meeting indicated that officials aren’t worried about the potential negative impact from the slowdown in China, as the U.K. economy is enjoying strong fundamentals.

Furthermore, policymakers emphasized that the U.K. is still on track to a rate hike possibly early next year. They projected that annual inflation would pick up to 1% by the turn of the year, although the volatility in commodity prices and forex fluctuations could pose uncertainties.

As for the yen, the lower-yielding currency has been weighed down by reports that the Japanese government is looking to hike the corporate tax rate next year. Aside from that, a BOJ official suggested that further easing might be a possibility. There are no major reports due from the UK or Japan today, which suggests that the current fundamental biases might prevail.

By Kate Curtis from Trader’s Way

534

EURGBP is still moving sideways on its 1-hour forex chart, bouncing off support at the .7260 area and finding resistance at .7360. Price is on its way up to test the top of the range once more while stochastic is moving down from the overbought zone, suggesting that the resistance might hold.

If so, a move back to the range support might be in order. RSI is also on the move down, confirming that buyers are already exhausted and might allow sellers to take over. Meanwhile, the 100 SMA is below the longer-term 200 SMA, which suggests that the path of least resistance is to the downside.

There are plenty of event risks lined up from the UK this week, which suggests that volatility might pick up and spur a breakout. The UK CPI readings are due tomorrow, with the headline figure slated to fall back from 0.1% to 0.0% in August. After that, the jobs report is lined up for Wednesday and a 5.1K drop in joblessness is expected. Lastly, the retail sales report is up for release on Thursday and a 0.2% uptick is eyed.

As for the euro, the downbeat ECB rhetoric is currently weighing on the shared currency. Although Governor Draghi didn’t make any actual changes to monetary policy, he admitted that the weakening inflationary pressures could lead them to ease again if necessary.

By Kate Curtis from Trader’s Way

535

NZDUSD’s recent downtrend might soon be over, as the pair is forming a double bottom reversal pattern on its 1-hour chart.

Price is still on its way to test the neckline of the formation at the .6400 resistance, with an upside break likely to push the pair up by an additional 250 pips or the same height as the chart pattern.

Both stochastic and RSI are moving up, hinting that there might be enough bullish momentum to trigger a test of the neckline. However, if this area holds as resistance, another move towards the bottoms at the .6250 minor psychological level might take place.

The 100 SMA is below the 200 SMA for now, also indicating that the path of least resistance is to the downside. If selling pressure is strong enough, a downside break of the .6250 floor might also be a possibility. On the other hand, an upward crossover from the moving averages might be an early signal that an uptrend is about to take place.

Earlier today, New Zealand reported a 16.5% gain in dairy prices during the recent Global Dairy Trade auction, suggesting that the industry is regaining ground. This marks the third consecutive bi-weekly auction that a gain in prices was recorded. The country’s current account balance was also slightly better than expected at a deficit of 1.22 billion NZD versus the estimated 1.40 billion NZD shortfall.

Meanwhile, data from the US was weaker than expected, as the headline retail sales showed a mere 0.2% uptick instead of the projected 0.3% increase while the core retail sales report printed a 0.1% uptick instead of the estimated 0.2% gain. For today, the CPI figures are up for release and another round of disappointing results could mean more losses for the dollar.

Other event risks for this trade include the FOMC statement on Thursday during which Fed officials are expected to keep rates unchanged but provide some guidance on when the liftoff might take place. Downbeat remarks focusing on the uncertainties in the global economy could spur dollar weakness while reassuring comments could keep the currency afloat. Soon after, New Zealand is set to print its GDP reading for Q2 and might show a 0.5% expansion.

By Kate Curtis from Trader’s Way

536

GBPAUD might be done with its long-term uptrend, as a reversal pattern can be seen on its 1-hour and 4-hour charts.

A double top formation has materialized after price failed in its last two attempts to break above the 2.2100 major psychological resistance.

The pair is currently testing the neckline of the formation around the 2.1500 levels, with a breakdown likely to spur a selloff. The chart pattern is around 600 pips tall so the resulting downtrend could last by at least the same number of pips, taking GBPAUD down to the 2.0900 mark.

On the other hand, a bounce off the neckline support could spur another test of the resistance at the previous highs, possibly creating a triple top formation. Stronger buying pressure could lead to a break above the 2.2100 mark, signaling a continuation of the uptrend.

Data from the UK economy came in mixed, as the August jobs report showed that 1.2K jobs were lost during the month versus expectations of a 5.1K increase. Still, the unemployment rate fell from 5.6% back to the record low of 5.5% while the average earnings index indicated a faster pace of wage growth at 2.9% for the three-month period ending in July.

Prior to this, the UK CPI readings came in line with expectations, with the headline figure showing a flat reading and the core version of the report showing a decline from 1.2% to 1.0%. In Australia, the RBA minutes showed that the central bank thought that current monetary policy was appropriate but expressed concerns about the slowdown in China and the downturn in commodities.

The UK retail sales report is up for release today and this could be a catalyst for either a break or a bounce. Consumer spending is expected to tick up by 0.2% but analysts are hoping to see an upside surprise due to the steady pickup in wages for the past months. Nonetheless, a disappointing read could spur more losses for the pair and allow it to complete the double top breakdown.

By Kate Curtis from Trader’s Way

537

USDJPY has been making higher lows and lower highs, creating a symmetrical triangle on its 1-hour time frame.

Price just bounced off the triangle resistance and is currently testing support, still awaiting a bounce or a breakdown.

Both stochastic and RSI have already reached the oversold regions and are turning higher, indicating a likely pickup in bullish momentum and a bounce for USDJPY. If so, a move back to the triangle resistance near the 121.00 major psychological level might take place.

Take note, however, that the 100 SMA is starting to cross below the longer-term 200 SMA, which means that the path of least resistance is to the downside. In that case, a downside break could lead to around 300 pips in losses, which is approximately the same height as the triangle formation.

The FOMC decided to keep interest rates on hold at 0.00-0.25% in their September rate decision, much to the disappointment of dollar bulls who were counting on a liftoff this month. Most Fed officials still favored a rate hike sometime this year, with one policymaker actually voting to tighten this week. Another Fed official called for negative interest rates due to the weak inflationary environment.

The Fed upgraded their growth forecast for this year, even with the economic and financial uncertainty associated with the downturn in China. However, policymakers downgraded their forecasts for growth, inflation, and employment for 2016 and 2017.

Earlier this week, the BOJ statement also sounded cautious, as the Japanese central bank highlighted potential risks stemming from China and emerging economies.One policymaker voted to taper asset purchases but was outvoted by other members who wanted to keep policy unchanged.

Since Japan is at greater risk compared to the US when it comes to repercussions from China, the path of least resistance for USDJPY is to the upside. For now though, the disappointment from the FOMC might continue to keep gains in check and keep the pair weak, possibly offering a larger correction from the recent uptrend. There are no reports due from Japan and the US today.

By Kate Curtis from Trader’s Way

538

GBPUSD seems to be starting a new trend on its 1-hour forex chart, as the recent highs and lows can be connected using an ascending channel. Price just bounced off the channel resistance and may make its way to the support near the moving averages.

The 100 SMA is currently above the longer-term 200 SMA, confirming that the uptrend is likely to carry on. If buying pressure builds up immediately, price could move up from the current area of interest at the middle of the channel and test the top of the range once more. If a larger correction is in order, a test of support at the 1.5500 major psychological level might be seen.

Stochastic is already moving out of the oversold region, which means that bullish momentum is already in play. RSI is also indicating a potential return in buying pressure, which means that an early bounce is likely.

Last week, data from the UK came in mixed, as the economy reported a loss of 1.2K jobs in August and a mere 0.1% uptick in consumer spending. However, wage growth was stronger than expected at 2.9% in the three-month period ending in July while the unemployment rate fell back to 5.5%. Inflationary pressures weakened as expected, with the headline CPI falling flat and the core CPI dropping back to 1.0%.

As for the US, the FOMC declined to hike interest rates, leading to a sharp dollar selloff. However, the US central bank left the door open for a possible rate hike before the end of the year, which explains why dollar bulls were back in the game before the end of the week.

A few Fed officials are set to give testimonies this week, possibly providing more clues on when the Fed liftoff might take place. More arguments in favor of an October rate hike could mean more demand for the dollar, pushing GBPUSD to the bottom of the channel. On the other hand, remarks indicating that the liftoff could be delayed until next year could boost GBPUSD to the channel resistance.

Other event risks include the US existing home sales, durable goods orders data, and final GDP reading. There are no major reports lined up from the UK this week.

By Kate Curtis from Trader’s Way

539

EURGBP made a break below its short-term consolidation, indicating a buildup in bearish pressure and a potential selloff to the bottom of the longer-term range visible on the 4-hour chart. Price seems to have broken below the neckline of a triple top formation, which was more than 100 pips in height, so the resulting selloff could last by at least the same number of pips.

The next support is around the .7000-.7050 psychological levels, which have kept losses in check back in June and July. Stochastic and RSI are still on the move down, indicating that euro bears are in control of price action, but the indicators are already in the oversold region.

A return in buying momentum could lead to another test of the range resistance near the .7400 major psychological mark. The 100 SMA is still above the 200 SMA, which suggests that the path of least resistance is to the upside and that a break past the top of the range might still be possible.

Event risks for this trade setup include the release of euro zone PMI readings tomorrow. France is expected to show small improvements for both manufacturing and services industries while Germany could reflect slight declines in activity, resulting to an overall dip for the region’s PMI figures.

Aside from that, ECB Governor Mario Draghi is set to give a testimony around the start of the US trading session, possibly spurring strong moves across euro pairs. Keep in mind that the ECB has already expressed its willingness to ease further if necessary, before even getting wind of the downgrades in the final CPI readings for August. With that, additional dovish remarks from the ECB head could mean more losses for EURGBP.

As for the pound, there are no major reports up for release this week, although some BOE MPC members are set to give testimonies. The BOE is still on track to hike interest rates possibly by next year, as indicated in the latest monetary policy statement and meeting minutes.

By Kate Curtis from Trader’s Way

540

After breaking below the short-term support and indicating further downside momentum, EURGBP is showing signs of a potential pullback to the broken support. Using the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the 50% Fib level lines up with the area of interest and 100 SMA.

The short-term moving average is also below the longer-term 200 SMA, confirming that the selloff is likely to carry on. Stochastic is already moving down from the overbought zone, reflecting a pickup in bearish momentum. RSI is also heading lower, which means that sellers are taking control of price action.

In that case, a move towards the previous lows at the .7200 major psychological level might be in order. A higher pullback to the 61.8% Fib level and 200 SMA might be possible if the pound also undergoes weakness in today’s trading sessions.

Data from the UK came in below expectations yesterday, as the public sector net borrowing report indicated a wider deficit of 11.3 billion GBP versus the projected 8.7 billion GBP shortfall. To top it off, the previous reading suffered a downgrade from a surplus of 2.1 billion GBP to just 0.1 billion GBP. In addition, the CBI industrial order expectations index slipped from -1 to -7, reflecting weaker order volumes.

For today, the event risks are mainly the euro zone PMI releases and ECB Governor Draghi’s speech. Small improvements in France’s manufacturing and services PMI readings are expected while Germany could post declines, dragging the region’s overall PMI figures down as well. Draghi is expected to reiterate the ECB’s willingness to ease further, possibly highlighting the recent downgrades in inflation readings for August. If that happens, EURGBP might resume its slide to new lows, possibly until the .7000 handle.

There are no other reports lined up from the UK for the rest of the week while Germany still has its IFO business climate index due tomorrow. This figure is slated to fall from 108.3 to 107.8, reflecting weaker optimism and probably leading to more losses for the euro.

By Kate Curtis from Trader’s Way

541

EURJPY previously broke below a double top formation on its short-term time frames, signaling that a downtrend is in order. However, the pair enjoyed a bit of relief rally in recent trading sessions, allowing price to pull back to the broken neckline.

Using the Fib tool on the swing high and low on the 1-hour chart shows that the 50% retracement level lines up with the double top neckline around the 135.00 major psychological mark. This is also close to the moving averages, which might hold as dynamic resistance levels.

The 100 SMA is below the longer-term 200 SMA, which suggests that the downtrend could resume later on. In addition, both stochastic and RSI are moving down from the overbought zone, reflecting a pickup in selling momentum and indicating a potential drop back to the previous lows at 133.25 or lower.

Data from the euro zone turned out surprisingly positive yesterday, with the PMI readings coming in closely in line with expectations. France even printed a stronger than expected manufacturing PMI, which jumped to 50.4 and indicated industry expansion. Overall, the region’s PMI figures showed a bit of weakness, but not weak enough to revive Draghi’s dovish tone.

In his testimony, ECB head Draghi clarified that they need more time and evidence to gauge if further easing is necessary. He even expressed an upbeat view on inflation, citing that price levels could pick up before the end of the year. This was followed by an optimistic speech from German central bank head Jens Weidmann who noted that the expansive monetary policy cannot be sustained.

Event risks for this trade today include the release of Germany’s Ifo business climate index, which is expected to slump from 108.3 to 107.8. The country’s GfK consumer sentiment index is also due today and this might show a drop from 9.9 to 9.8, reflecting weaker optimism. Weaker than expected data could renew selling pressure for the euro while strong figures could spur more gains.

Earlier today, Japan reported a weaker than expected flash manufacturing PMI of 50.9 instead of the projected 51.3 figure. This is also lower than the previous 51.7 reading. Later today, the ECB’s targeted LTRO will be implemented, potentially putting downside pressure on the euro again.

By Kate Curtis from Trader’s Way

542

NZDUSD enjoyed a bit of support in recent trading sessions, as traders squared away their risk-off positions. The pair bounced off the bottom of its range around the .6250 minor psychological mark and might make its way back to the top around the .6400 major psychological level.

For now, price is encountering a bit of resistance at the mid-channel area of interest, which might be strong enough to send the pair back down to the bottom of the range. The 100 SMA is below the 200 SMA, suggesting that the path of least resistance is to the downside and that a breakdown of support might even be possible.

Stochastic and RSI are also on the move down, indicating that selling pressure is building up. A break below support could spur a 150-pip drop, which is roughly the same size as the chart formation.

Data from New Zealand has been positive recently, as Fonterra announced an increase in its milk payout forecasts. This could mean higher revenues for farmers and producers, possibly leading to a boost in production later on. Aside from that, the country’s trade balance also indicated green shoots for both imports and exports even though headline figures missed expectations.

In the US, hawkish remarks from Fed officials have been propping up the dollar this week, as Fed Chairperson Yellen confirmed that a rate hike is likely before the end of the year. Just as the other FOMC members Williams and Lockhart, she pointed out that labor market improvements have been impressive but that inflation has been subdued.

Data from the US came in mixed, with new home sales exceeding expectations and durable goods orders data falling short. Event risks for this trade today include the release of the US final GDP reading for Q2 and the revised UoM consumer sentiment index for August.

NZDUSD enjoyed a bit of support in recent trading sessions, as traders squared away their risk-off positions. The pair bounced off the bottom of its range around the .6250 minor psychological mark and might make its way back to the top around the .6400 major psychological level.

For now, price is encountering a bit of resistance at the mid-channel area of interest, which might be strong enough to send the pair back down to the bottom of the range. The 100 SMA is below the 200 SMA, suggesting that the path of least resistance is to the downside and that a breakdown of support might even be possible.

Stochastic and RSI are also on the move down, indicating that selling pressure is building up. A break below support could spur a 150-pip drop, which is roughly the same size as the chart formation.

Data from New Zealand has been positive recently, as Fonterra announced an increase in its milk payout forecasts. This could mean higher revenues for farmers and producers, possibly leading to a boost in production later on. Aside from that, the country’s trade balance also indicated green shoots for both imports and exports even though headline figures missed expectations.

In the US, hawkish remarks from Fed officials have been propping up the dollar this week, as Fed Chairperson Yellen confirmed that a rate hike is likely before the end of the year. Just as the other FOMC members Williams and Lockhart, she pointed out that labor market improvements have been impressive but that inflation has been subdued.

Data from the US came in mixed, with new home sales exceeding expectations and durable goods orders data falling short. Event risks for this trade today include the release of the US final GDP reading for Q2 and the revised UoM consumer sentiment index for August.

By Kate Curtis from Trader’s Way

543

AUDUSD has been in a strong downtrend lately but it looks like the bearish momentum is fading. Price formed higher lows on the 4-hour chart while stochastic made lower lows, creating a bullish divergence.

Stochastic has yet to climb out of the oversold region before indicating a pickup in buying pressure. Similarly, RSI is starting to move up, suggesting that buyers could take the pair higher. If so, a double bottom formation might be seen, adding confirmation to a potential long-term reversal.

The 100 SMA is still below the longer-term 200 SMA for now, which suggests that the path of least resistance is to the downside and that the selloff might resume at some point. Zooming out to long-run time frames shows that the descending trend line connecting the latest highs is still intact.

Event risks for this trade setup include the speeches by FOMC officials this week, as these events played a role in supporting the dollar last week. Dudley, Evans, Tarullo, and Williams are set to give testimonies early on while Fed head Yellen has another testimony lined up before the weekend.

Other potential catalysts include the potential US government shutdown if Congress isn’t able to come up with a funding bill by September 30. This could delay the release of the US NFP, as some government offices will be temporarily closed as a result. Nonetheless, the jobs report is likely to show a 202K increase in hiring for September, up from the previous 173K gain.

With that, leading jobs indicators such as the ADP non-farm employment change report and ISM PMI readings could also push AUDUSD around. Weak data could undermine the likelihood of a Fed rate hike before the end of the year, possibly resulting to dollar weakness, while strong figures could spur gains.

As for the Australian dollar, building approvals data and retail sales figures are due throughout the week, along with final PMI readings from China. More signs of a slowdown from Australia’s top trade partner could mean more weakness for the currency.

By Kate Curtis from Trader’s Way

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EURUSD could be in for a short-term reversal from its recent selloff, as the pair formed a double bottom pattern on its 1-hour time frame. Price has yet to test and break above the neckline of the formation around the 1.1300 major psychological resistance before conforming the potential climb.

The 100 SMA is still below the 200 SMA for now, which suggests that the downtrend might still resume. If so, another move towards the previous lows at the 1.1100 handle could take place.

An upside break past the neckline, however, could mean as much as 200 pips in gains for EURUSD since the double bottom formation is of that height. Stochastic is already indicating overbought conditions while RSI is also suggesting that the move might be overdone already.

FOMC officials shared mixed views about a potential liftoff later this year, as Fed member Evans cautioned about the risks of hiking too early. He noted that inflation is still far below target and that China poses further uncertainties on the global economy.

Other Fed officials, namely Dudley and Williams, seemed to be more optimistic about an interest rate hike taking place later this year. This view is also shared by Fed head Yellen and FOMC member Lockhart.

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German preliminary CPI and Spanish flash CPI data are up for release today, as the Catalonia polls might also have an impact on euro price action. For now, traders seem to be unwinding their short positions following Draghi’s remarks that further ECB easing isn’t set in stone just yet.

By Kate Curtis from Trader’s Way