EURAUD has been selling off recently but could be due for a bounce as price is nearing the bottom of the range on its 1-hour time frame. If the bottom of the range at the 1.4550 minor psychological support keeps losses in check, the pair could head back up to the top of the range at 1.4750 or at least until the middle around 1.4650.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing so a downward crossover might be due, drawing more sellers to the mix and possibly triggering a downside break of support. If that happens, the pair could fall by an additional 200 pips or the same height as the rectangle formation.
Stochastic is already indicating oversold conditions so a bounce could be in order. The oscillator has yet to move out of the oversold region before indicating a return in buying momentum.
Economic data from the euro zone was stronger than expected in recent sessions. The region’s ZEW economic sentiment index rose from 5.4 to 12.3 this month while the German ZEW index was up from 0.5 to 6.2, outpacing the consensus at 4.2.
As for Australia, its Westpac consumer sentiment index posted a strong 1.1% increase, a stronger pace of improvement compared to the earlier 0.3% uptick. An upbeat report from Moody’s on the strength of the Australian economy is keeping the Aussie supported during the Asian session.
There are no other reports due from Australia for the rest of the day while the euro zone has its industrial production report and the French final CPI reading lined up.*
By Kate Curtis from Trader’s Way
EURJPY is trending lower on its 4-hour time frame, moving inside a descending channel formation. Price is currently testing the resistance around 116.00 and might be due for a selloff back to support at the 111.00 major psychological level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, price is already trading above both moving averages so an upward crossover could be possible. Price also seems to be finding support at these dynamic inflection points.
Stochastic is on the move up from the oversold region, also suggesting a return in buying pressure. In that case, price could attempt to break past the channel resistance and start a reversal.
European markets closed in the red yesterday even though medium-tier reports from the region came in line with expectations. This was likely due to resurfacing Greek debt concerns raised by ECB member Coeure. Apart from that, widening yield spreads between Germany and the US also spurred euro weakness.
Economic data from Japan has been mixed, with core machinery orders posting a smaller than expected 2.2% drop and preliminary machine tool orders showing a 6.3% slide, following the earlier 8.4% drop. The tertiary industry activity index is up for release today and a 0.2% decline is eyed.
There are no major reports due from the euro zone today, with only the German final CPI reading on the docket. Any headlines on the Brexit, yield spreads, or Greek debt could influence euro price action on a data-light day.
By Kate Curtis from Trader’s Way
EURUSD recently broke below its descending triangle support at 1.1130 and has dipped to a low of 1.0988 before showing signs of a pullback. Applying the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level lines up with the broken support, which might now hold as resistance.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic is heading up, which means that buyers are in control of price action for now. In that case, a higher pullback could be possible and the line in the sand might be the top of the triangle around 1.1175-1.1200.
If any of these resistance levels hold, EURUSD could make its way back to the previous lows or lower. On the other hand, a move past the 1.1200 resistance could put the pair back on an uptrend.
Medium-tier economic reports from the US came in stronger than expected yesterday. Initial jobless claims stood at 254K, same as in the earlier week, and lower than the estimated 252K figure. Meanwhile, import prices posted the estimated 0.1% increase as expected, chalking up a rebound from the previous 0.2% dip.
Euro zone data has also been mostly in line with expectations for the week, with the ZEW economic sentiment readings released earlier on indicating a notable pickup in optimism. However, widening bond yield spreads between Germany and the US has highlighted the surge in demand for US assets, leading to a sharp drop for the shared currency midweek.
Up ahead, US retail sales and PPI numbers are due. Analysts are expecting to see a 0.6% gain in headline retail sales and a 0.4% uptick in core retail sales, representing rebounds over their previous readings. Producer prices are expected to post a 0.2% uptick for the headline figure and a 0.1% rise for the core figure. The preliminary UoM consumer sentiment for October is also lined up and a rise from 91.2 to 92.1 is expected.
By Kate Curtis from Trader’s Way
EURAUD broke below support at the 1.4550 minor psychological level then dipped to the 1.4400 area before pulling up. Using the Fib tool on the latest swing high and lows shows that the 61.8% retracement level coincides with the broken range support, which might now hold as resistance.
The 100 SMA is below the longer-term 200 SMA on the 4-hour time frame, signaling that the path of least resistance is to the downside. The gap between the moving averages is widening, which means that bearish pressure is getting stronger.
Stochastic is on the move up for now, which means that buyers might be in control of price action, but the oscillator is nearing the overbought region. Once it turns lower from that area, selling momentum could return and allow any of the nearby Fib levels to keep gains in check.
There were no major reports out of the euro zone and Australia last Friday but China’s inflation reports came in stronger than expected, providing support for the Australian dollar. Earlier in the week, though, trade data from China showed a sharp decline in both exports and imports so demand for Australia’s raw material commodities could weaken.
Euro zone final CPI readings are up for release today, along with a speech from ECB Governor Draghi. This might set the tone for the ECB interest rate statement on Thursday, although no actual changes to monetary policy are expected. Still, policymakers are expected to address rumors that the central bank is considering winding down its asset purchases ahead of the program’s end date.
As for Australia, the RBA minutes are up for release and this should provide more insight on whether or not the central bank would still adjust interest rates this year. Later in the week, Australia’s job figures are up for release and a 15.2K increase in hiring is eyed.
By Kate Curtis from Trader’s Way
NZDUSD has been trending higher on its daily time frame, moving inside an ascending channel and currently testing support. Price seems to have bounced off the bottom of the channel and is headed back to the top at the .7650 minor psychological level.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA is holding as dynamic support for the time being but a larger pullback could find its way to the 200 SMA dynamic support just below the bottom of the channel at .7100.
Stochastic is moving higher, which confirms that buyers are taking control of price action. If sellers take over, however, price could break below the channel support and start a reversal.
Earlier today, the quarterly CPI report from New Zealand printed a stronger than expected 0.2% gain versus the estimated flat reading. This undermined RBNZ official McDermott’s remarks on weak inflation for Q3, signaling that the central bank might be in no rush to cut interest rates. Still, the latest reading was lower than the previous 0.4% gain.
Economic data from the US was weaker than expected on Monday, indicating a slowdown in the manufacturing sector. Industrial production was weaker than expected with a meager 0.1% uptick while the Empire State manufacturing index showed a surprise pickup in contraction instead of a return to industry growth.
US CPI reports are up for release today, with the headline figure likely to show a 0.3% increase and the core figure expected to post a 0.2% gain. Keep in mind that PPI readings beat expectations so there’s a good chance that the CPI reports could be stronger than expected.
As for the Kiwi, New Zealand has another Global Dairy Trade auction lined up today and it might show a rebound in dairy prices after posting a 3% decline in the previous instance. China has a number of top-tier reports namely its GDP, retail sales, and industrial production figures due in the next Asian session and might also influence demand for the commodity-related NZD.
By Kate Curtis from Trader’s Way
GBPJPY has been trending lower on its 1-hour time frame, moving below a descending trend line. Price bounced off the 124.75 area and is pulling up to test the trend line once more. Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the falling resistance.
A higher correction could last until the 61.8% Fib or the dynamic resistance at the 100 SMA. This is also close to a broken short-term support zone around the 130.00 major psychological level, which might keep gains in check moving forward.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is widening so bearish pressure is getting stronger. However, stochastic is still on the move up to show that buyers are in control of price action for now until the oscillator reaches the overbought zone and turns lower.
UK economic data came in better than expected, with the headline CPI up from 0.6% to 1.0% and the core CPI up from 1.3% to 1.5%. This was higher than the consensus at 0.9% and 1.4% respectively, as price gains were buoyed by a weaker pound in September.
For today, UK jobs data is due, with the claimant count change expected to show a 3.4K increase in joblessness, higher than the earlier 2.4K rise. The average earnings index is expected to hold steady at 2.3% while the unemployment rate is projected to stay unchanged at 4.9% as well. UK retail sales data is due on Thursday.
As for the yen, only Japan’s all industries activity index is due, and it might show a 0.2% gain compared to the earlier 0.3% uptick. Earlier in the week, Japan’s industrial production was downgraded from 1.5% to 1.3% to show a weaker pace of growth.
By Kate Curtis from Trader’s Way
USDCAD is trending higher on its long-term and short-term charts, moving inside an ascending channel on its 1-hour time frame. Price dipped below the channel support but spiked right back up, indicating that buyers are putting up a fight.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In that case, USDCAD could move back up to the channel resistance at the 1.3300 major psychological level or higher. However, the gap between the moving averages is narrowing so a downward crossover might take place.
If that happens, selling pressure could pick up and trigger a break of the support at the 1.3100 major psychological level. Stochastic is on the move up to show that buyers are in control of price action but the oscillator is nearing the overbought region to reflect buyer exhaustion.
The Bank of Canada kept interest rates on hold at 0.50% as expected but Governor Poloz admitted that policymakers have “actively discussed” the idea of additional stimulus. The central bank also lowered its 2016 GDP forecast from 1.3% to 1.1% on weaker export activity.
In crude oil news, the EIA report showed a surprise draw of 5.2 million barrels from stockpiles, easing fears of an oversupply and driving crude oil back up again. Later on in the week, Canada is set to print its retail sales and CPI figures, which might underscore the BOC’s dovish tone.
As for the dollar, US reports were mixed, as building permits beat expectations with a gain from 1.15M to 1.23M while housing starts fell from 1.15M to 1.05M instead of rising to 1.18M. US existing home sales are lined up, along with the Philly Fed index and the initial jobless claims.
By Kate Curtis from Trader’s Way
USDCAD bounced off the ascending channel support around the 1.3100 area recently and is on its way to test resistance at 1.3300-1.3350. If this area holds as a ceiling, price could head back down for another test of support.
The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. If so, price could make an attempt to break past the channel resistance and go for a sharper climb. However, stochastic is already indicating overbought conditions so sellers could take over once the oscillator heads south.
Economic data from the US has been mixed yesterday, with initial jobless claims missing expectations and the existing home sales report printing upbeat results. There are no major reports up for release from the US today.
The BOC refrained from cutting interest rates in their latest monetary policy statement but Governor Poloz hinted that officials actively discussed the idea of more stimulus. The central bank also downgraded growth and inflation forecasts for the year, citing a weaker outlook for export activity as well.
In contrast, Fed rate hike expectations for November or December are still in play, supporting the US dollar. With that, this counter trend setup could prove to be risky as an upside breakout seems possible, unless any other catalysts materialize. Canada has its retail sales and CPI figures lined up so strong readings could allow the Loonie to recover.
Crude oil price gains have been supporting the positively correlated Canadian dollar, as inventories data have shown surprise declines in stockpiles, further easing fears of an oversupply. Speculations about an oil output deal for the November OPEC meeting could continue to support the oil-related Loonie.
By Kate Curtis from Trader’s Way
EURJPY has been trending lower, moving inside a descending channel visible on its 1-hour time frame. Price is bouncing off the channel support and might be due for a test of resistance around the 113.50 minor psychological level.
Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the channel resistance and is also near the dynamic inflection point at the 100 SMA. This short-term moving average is below the longer-term moving average so the path of least resistance is to the downside.*
Stochastic is on its way up but seems to be crossing down, which suggests the presence of weakening bullish pressure. If sellers take over, price could resume its drop to the previous lows near the 112.00 handle or lower until the channel support.
Euro zone flash PMI readings are due today from the manufacturing and services sectors of France and Germany. Small improvements are eyed, with all indices expected to show a slightly faster pace of industry expansion. Weaker than expected results, however, could spur stronger losses for the shared currency.
The ECB refrained from making any monetary policy adjustments last week but this turned out to be a disappointment for bulls who were expecting some confirmation that QE tapering had been discussed. Instead, Draghi suggested that their bond purchase program could even go past the March 2017 end-date.
Earlier today, Japan reported a rise in its flash manufacturing PMI from 50.4 to 51.7, outpacing the consensus at 50.6. Later on in the week, CPI and spending data are lined up from Japan, with another batch of strong readings likely to keep the Japanese currency supported.
By Kate Curtis from Trader’s Way
EURGBP is still trending higher on its daily time frame, just slightly above the rising trend line connecting the recent lows of price action. Price is making a pullback to this support area, which lines up with the 38.2% to 50% Fibonacci retracement levels around .8800-.8900.
A bounce off this support zone could lead to a climb back to the previous highs at .9200 while a break lower could spark a larger correction. The 61.8% Fibonacci retracement level lines up with a broken resistance area, which might hold as support moving forward.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. However, stochastic is pointing down to show that sellers are in control for the time being and that further losses are possible until the oscillator reaches the oversold area.
Economic data from the euro zone was mostly stronger than expected yesterday. Only the French flash services PMI fell short of estimates as it fell from a downgraded 53.3 figure to 52.1 instead of improving to 54.1. The rest of the manufacturing and services PMIs from Germany, France, and the rest of the region showed stronger improvements.
Germany’s IFO business climate index is due today and a rise from 109.5 to 109.6 is eyed. Also on today’s schedule is a speech by ECB Governor Draghi who could reiterate that they’re not looking to taper asset purchases just yet.
As for the pound, the UK CBI industrial order expectations showed a fall from -5 to -17 versus the projected rise to -2, reflecting weakening demand. BOE Governor Carney has a testimony lined up today and any hints on monetary policy could bring volatility to EURGBP.
By Kate Curtis from Trader’s Way
EURAUD recently broke below the short-term triangle consolidation pattern. Price dipped to a low of 1.4125 before showing signs of pulling up and using the Fib tool on the breakout move shows that the 61.8% level is close to the broken triangle support.
The 100 SMA is below the longer-term 200 SMA, which confirms that the path of least resistance is to the downside. Also, the 100 SMA coincides with the broken symmetrical triangle support, adding to its strength as a potential ceiling.*
Stochastic is still pulling up, which means that sellers are exhausted and letting buyers take over at this point. A bit of bullish divergence can be seen as price made lower lows while stochastic had higher lows. Once the oscillator makes it to the overbought level, sellers could get back in the game and push for a drop to the previous lows.*
Earlier in the day, Australia printed a much stronger than expected quarterly CPI for Q3. Price levels were up 0.7%, stronger than the earlier 0.4% gain and the estimated 0.5% increase. The trimmed mean CPI came in line with estimates of a 0.4% gain, possibly enough to ensure that the RBA won’t need to cut interest rates in the near future.
Data has been strong for the euro as well, with the German Ifo business climate index beating expectations at 110.5 versus 109.6 and the earlier 109.5 figure. On Monday, flash manufacturing and services PMI readings from Germany and France have been mostly stronger than expected.
ECB head Draghi confirmed that stimulus will stay in place until the region hits its inflation targets, mentioning that their easing program has done a fine job of warding off deflation. Up ahead, Australia still has data on import prices and PPI due while the euro zone will have its flash CPI readings from its top economies on Friday.
By Kate Curtis from Trader’s Way
EURJPY could be in for a reversal from its selloff, as the pair formed an inverse head and shoulders pattern on its 1-hour time frame. Price already broke past the neckline at the 114.00 major psychological mark and might climb by around 150 pips, which is the same height as the chart formation.
The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance is to the downside. An upward crossover, however, could draw more buyers to the mix and allow the climb to gain traction. Note that price is already trading above these moving averages, which might hold as dynamic support levels moving forward.
Stochastic is pointing down to show that sellers are in control of price action for now. Once the oscillator reaches the oversold region and turns higher, buying pressure could return.*
Sources have shared that the ECB is mulling some adjustments to their QE program, which is likely to extend past the March 2017 end-date. This could include lightening restrictions on the availability and size of purchases, making it easier to boost liquidity in the region.
Data from the euro zone hasn’t been so bad so far this week, as most of the manufacturing and services PMI from Germany and France came in better than expected. German IFO business climate was also better than expected but the GfK consumer climate index fell short of estimates.
There are no reports due from the euro zone and Japan today, as the top-tier reports are all lined up on Friday. From Japan, we’ve got consumer spending and CPI readings which could set the tone for the BOJ statement next week. Euro zone has its preliminary GDP and CPI reports from Germany, France, and Spain.*
By Kate Curtis from Trader’s Way
AUDUSD could be in for a quick reversal from its uptrend, as the pair formed a double top on its 1-hour time frame. Price failed in its last two attempts to break past the .7700 major psychological level and is currently testing the neckline support at .7600.
A break below this level could send the pair down by around 100 pips, which is roughly the same height as the chart formation. On the other hand, if support holds, another bounce towards the .7700 resistance could be seen. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.
Stochastic is pulling up, which means that buyers are taking control of price action. Near-term resistance is located around the middle of the formation and the dynamic inflection points or moving averages, which could draw sellers back in the game if the oscillator indicates overbought conditions then.
Australia printed a stronger than expected headline CPI for Q3, indicating a 0.7% increase in price levels versus the projected 0.5% uptick and the previous 0.4% gain. However, other inflation-related reports have missed expectations, which suggests that there’s still some downside pressure on price levels. PPI posted a bleak 0.3% gain, half as much as the estimated 0.6% increase, while import prices fell 1.0% versus the estimated 0.7% drop.
As for the US, medium-tier reports have mostly been coming in better than expected, reflecting enough momentum for the US economy. Flash manufacturing and services PMI have printed upbeat readings for October, which suggests that the economy is off to a good start for the quarter.*
US advanced GDP data is due today and a 2.5% growth figure is expected for Q3, much faster than the earlier 1.4% expansion. Stronger than expected results could further reinforce rate hike expectations and dollar demand while weak data could lead to a decline for the currency.
By Kate Curtis from Trader’s Way
EURJPY has been moving sideways on its 4-hour time frame and is making its way closer to the range resistance at the 116.00 major psychological level. If it holds as a ceiling, price could head back south to the range support at 112.50-113.00.
The 100 SMA is above the longer-term 200 SMA on this chart for now so the path of least resistance is to the upside. However, the gap between the moving averages is narrow so a downward crossover could be possible, indicating a return in selling pressure.
Stochastic is indicating overbought conditions and is turning lower, also indicating that buyers are exhausted and could let sellers take over sooner or later.
Data from Japan was mostly stronger than expected on Friday, as inflation and consumer spending showed some improvements for October. On the other hand, euro zone data was mixed, with France reporting weaker than expected CPI and GDP. Spain and Germany printed stronger than expected CPI.
Earlier this week, Japan reported weaker than expected preliminary industrial production and retail sales data. The former showed a flat reading instead of the estimated 0.9% gain while the latter printed a 1.9% year-over-year decline versus the estimated 1.7% drop.
Euro zone flash CPI estimates are up for release today and strong data could be enough to assure market watchers that the ECB won’t adjust its easing program yet. Analysts are expecting to see a rise from 0.4% to 0.5% for the headline figure and no change in the core figure at 0.8%. German retail sales and Italian CPI figures are also due today.
By Kate Curtis from Trader’s Way
EURCAD has been trending higher on its 4-hour time frame and moving inside an ascending channel. Price has moved past the mid-channel area of interest and is making its way to the resistance around the 1.4900 major psychological level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the resistance could keep gains in check. If so, EURCAD could eventually make its way back towards support at 1.4500 or at least until the middle of the channel at 1.4700.
Stochastic is on the move up, which means that buyers still have enough energy to push higher. Once the oscillator reaches the overbought zone and turns lower, sellers could return and force the pair to give back its recent gains.
Economic data from the euro zone came in line with expectations yesterday, signaling that the ECB might not need to ramp up stimulus just yet. Headline CPI flash estimates came in at 0.5% as expected while the core CPI flash reading stood at 0.8%. The region’s GDP estimate came in at 0.3% as expected.
Canada’s inflation reports came in mixed, with the RMPI posting a surprise 0.1% decline versus the estimated 0.5% gain and the IPPI coming in line with the projected 0.4% uptick. However, crude oil price action turned out to be a bigger driver of Loonie movement, as record high OPEC output pushed the commodity down.
Doubts that the OPEC can implement an output deal by the November 30 meeting have been weighing on crude oil and the oil-related Canadian dollar, although inventory data has shown some reductions in stockpiles. Canada’s monthly GDP is due today and a 0.2% growth figure is eyed, slower than the earlier 0.5% expansion.
By Kate Curtis from Trader’s Way
AUDUSD is starting to trend lower on its 1-hour time frame, moving inside a descending channel and just bouncing off the resistance at .7650. Price seems to have its sights set back on the bottom of the channel at the .7550 minor psychological support.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff could carry on. However, the pair is encountering an area of interest around the middle of the channel and the dynamic inflection points at the moving averages.
Stochastic is pointing down to show that sellers are in control of price action, but the oscillator is already dipping into the oversold region to show that bearish momentum might be exhausted. If buyers take over at this point, AUDUSD could make another test of the channel resistance or perhaps break higher.
Earlier in the week, the RBA decided to keep interest rates unchanged as expected while giving some upbeat remarks on commodity prices and their jobs outlook. Prior to this, China printed stronger than expected PMI readings for both manufacturing and non-manufacturing sectors, hinting at stronger demand for Australia’s raw material commodities down the line.
In today’s Asian session, the Australian economy reported a sharp 8.7% tumble in building approvals, worse than the projected 2.8% drop and the earlier 1.8% slide. As for the US, the ISM manufacturing PMI came in line with expectations but election-related uncertainties are currently dampening the currency’s gains.
For today, the FOMC will have its monetary policy statement but they are expected to stop short of actually hiking interest rates. Later on in the week, the NFP report for October will be released and this could confirm whether or not the Fed will hike in December. Also, any headlines concerning the US elections could also drive dollar action, as odds favoring Trump could weigh on US assets.
By Kate Curtis from Trader’s Way
EURAUD recently broke below support around the 1.4600 major psychological level then dropped to a low of 1.4125. From there, price showed signs of a pullback and is currently testing the 61.8% Fibonacci retracement level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also the gap between the moving averages is widening, indicating stronger selling pressure. The 200 SMA lines up with the 61.8% Fib, adding to its strength as resistance, but a higher pullback could last until the 1.4600 area.
Stochastic is indicating overbought conditions and is starting to turn lower, reflecting a return in bearish momentum. If any of the resistance levels hold, EURAUD could make its way back to the previous lows or lower.
Australia printed a stronger than expected trade balance, as the deficit narrowed from a positively revised 1.82 billion AUD shortfall to 1.23 billion AUD. This was caused by a 2% gain in exports, indicating stronger external demand, and a 1% drop in imports.
Prior to this China printed upbeat PMI readings from the manufacturing and non-manufacturing sectors. The official manufacturing PMI rose from 50.4 to 51.2 while the Caixin version showed a rise from 50.1 to 51.2. The official non-manufacturing PMI climbed from 53.7 to 54.0 while the Caixin version rose from 52.0 to 52.4.
The RBA also gave a relatively optimistic statement this week, citing improvements in commodity prices and trade activity while giving an upbeat outlook for the jobs market. More details are due on Friday, along with Australia’s retail sales report. Data from the euro zone has been mostly upbeat as well, but the region faces uncertainties from the Brexit and its troubled banking sector.
By Kate Curtis from Trader’s Way
GBPUSD is showing signs of a pullback from its selloff, possibly gearing up for a much-needed correction to the broken support around 1.2850-1.2900. Applying the Fib tool on the latest swing high and low on the daily time frame shows that this area lines up with the 61.8% Fibonacci retracement level.
The area of interest is also near the 100 SMA dynamic resistance, which might be enough to keep gains in check. The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to resume at some point.
Stochastic is still on the move up but is nearing the overbought levels, which suggests that buying pressure could be exhausted soon. Once the oscillator turns down from this region, sellers could take over and push price back to the swing low.
The British High Court ruled that the UK government would need to get the approval of parliament first before invoking Article 50. This could mean significant delays in starting the negotiation process with the EU, although this could provide lawmakers more time to iron out the details before splitting with the region. Keep in mind, though, that the government plans to appeal this decision to the supreme court next month.
Meanwhile, the BOE kept interest rates and bond purchases unchanged as expected. The statement also seemed less dovish than usual as policymakers were pleased by the recent progress in inflation, signaling that they might not need to ease again soon.
As for the US dollar, election-related uncertainties are still weighing heavily on stock markets and the currency. Data was mostly weaker than expected, with the ISM non-manufacturing PMI posting a sharper than expected drop led by a fall in its jobs index. Initial jobless claims, unit labor costs, and non-farm productivity also missed expectations.
By Kate Curtis from Trader’s Way
USDCAD has been trending higher and moving inside an ascending channel on its 4-hour time frame. Price is currently testing the resistance and seems to be indicating that a test of support is in order.
Stochastic is indicating overbought conditions and is turning lower, which means that buyers are exhausted and allowing sellers to take over. In that case, the resistance at the 1.3400-1.3450 could keep further gains in check, possibly leading to a drop to the channel support at the 1.3100-1.3150 area.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is narrowing so an upward crossover might be due, possibly drawing more buyers to the mix. If buyers are eager to jump in, the mid-channel area of interest at the 1.3250 level could hold as support.
Economic data from the US came in slightly weaker than expected on Friday, as the NFP report printed a 161K gain versus the estimated 174K increase. The unemployment rate fell from 5.0% to 4.9% as expected while average hourly earnings rose 0.4% versus the 0.3% forecast.
As for Canada, jobs data came in above consensus, as the economy added 43.9K positions in October versus the estimated 10K drop. The Ivey PMI also beat expectations with a rise from 58.4 to 59.7, reflecting stronger industry growth. However, the trade balance showed a weaker than expected 4.1 billion CAD deficit versus the projected 1.7 billion CAD shortfall and the previous 2 billion CAD deficit.*
Only medium-tier reports are due from the US today and none are due from Canada. The upcoming US elections could carry more weight in terms of dictating dollar price action, as higher odds of a Clinton victory could be positive for the dollar. Over the weekend, FBI director Comey announced that the agency found no evidence of wrongdoing in their investigation on Clinton’s private email server.
By Kate Curtis from Trader’s Way
USDJPY is trending higher, moving inside an ascending channel on its 4-hour time frame. Price just bounced off the resistance late last week and is pulling back towards support at the 102.00 major psychological level.
The pair closed at the 50% Fibonacci retracement level on Friday then gapped higher over the weekend to move closer to the resistance at 105.00-105.50. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which suggests that a break higher could be possible.
Until price closes past the swing high, though, the correction could still be in play and USDJPY could fill the gap until it tests the 61.8% Fib closer to the bottom of the channel. Stochastic is already indicating overbought conditions so buyers are already feeling tired and could allow sellers to take it from here.
The US elections will likely be the biggest movers of price action for the week, as the conclusion of the FBI probe on Clinton’s private email server over the weekend allowed risk appetite to return and the dollar to start the week stronger. Still, traders might book positions before the results start coming in, possibly leading to some dollar weakness.
Based on previous market movements, a Clinton victory could be positive for US markets and the dollar while a Trump victory could spur a flight to safety, which would favor the Japanese yen. Either way, volatility is likely to spike once the voting centers start sending in results so wide stops are warranted.
There are no major reports lined up from Japan for the day, leaving traders focused purely on the US elections. After this, the attention will turn to the next FOMC meeting in December, as US data hasn’t been all that impressive and post-election risks could still keep central bank officials in a cautious mood.
By Kate Curtis from Trader’s Way
