USDCAD has been trending higher on its long-term time frames, moving inside an ascending channel that has held for the most part of 2016. Price is currently testing the channel support and could be due for a bounce as a spinning top candle has formed.
The next daily candle should serve as confirmation for this potential reversal, and the moving averages are hinting that the uptrend could carry on. The 100 SMA is above the longer-term 200 SMA and is in line with the channel support, adding to its strength as a floor.
Stochastic is heading south to suggest that there’s a bit of selling pressure left but the oscillator is dipping into the oversold area to show that bearish momentum is exhausted. Once it crosses higher, bulls could get back in the game and allow the next candle to close past the previous candle high around 1.3270.
US NFP data came in below expectations last Friday, with the economy adding only 156K positions versus the projected 175K increase. On a less downbeat note, the previous reading was upgraded to show a 205K gain in hiring for November while average hourly earnings rose by 0.4% versus the 0.3% consensus. The unemployment rate rose to 4.7% as expected on higher labor force participation.
Canada printed a stronger than expected increase in hiring of 53.7K instead of the estimated 5.1K decline while its jobless rate rose to 6.9% as expected. The country’s trade balance beat expectations with a surplus of 0.5B CAD versus the estimated deficit of 1.6B CAD.
Only the labor market conditions index is lined up from the US economy today and an improvement could remind traders that the Fed is looking to hike rates thrice this year. Meanwhile, Canada has the BOC Business Outlook Survey due. The Loonie could take its cue from oil price movements as well.
By Kate Curtis from Trader’s Way
EURAUD recently broke past resistance at the 1.4400 major psychological level and zoomed up to the 1.4700 area. Price has since pulled back and is currently testing the broken resistance at the 50% Fibonacci retracement level.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Price seems to be finding support at the 200 SMA dynamic inflection point as well. Also, a small double bottom formation can be seen with the neckline at 1.4450.
Stochastic is heading up from the oversold region to hint at a return in buying pressure. A break past 1.4450 could be enough to confirm the potential climb, likely taking price back up to the 1.4700 area and beyond. On the other hand, a break below the moving averages and lowest Fib at 1.4350 could lead to a drop back to the swing low at 1.4100.
Economic data from Australia turned out weaker than expected earlier today, with retail sales up by 0.2% versus the estimated 0.4% gain and the earlier 0.5% increase. Chinese CPI missed expectations and printed a 2.1% increase compared to the 2.2% consensus and the earlier 2.3% figure. PPI beat expectations at 5.5% versus 4.6%.
Data from the euro zone has been mostly better than expected so far, with yesterday’s German trade balance and Sentix investor confidence figure coming in the green. Prior to this, euro zone flash headline and core CPI have also surpassed expectations. French industrial production data is due today.
There are no other major reports lined up from both Australia and the euro zone for the latter half of the week, although Italy is still set to release its industrial production data. Headlines from China highlighting how monetary authorities are trying to rein in offshore investments could dampen confidence in the world’s second largest economy and demand for Australia’s commodities.
By Kate Curtis from Trader’s Way
GBPJPY recently broke below a head and shoulders reversal formation, signaling that a long-term downtrend is in the cards. Price seems to be pulling up from its slide, though, and applying the Fib tool on the latest swing high and low shows that the 50% retracement level coincides with the broken neckline.
A descending trend line can be drawn to connect the latest highs of price action on the 1-hour time frame. The 100 SMA has crossed below the longer-term 200 SMA to suggest that the path of least resistance is to the downside, with the short-term moving average lining up with the 50% Fib as dynamic resistance.
Stochastic is still on the move up for now so buyers might be in control of price action and allow the pullback to materialize. Once the oscillator hits the overbought region and turns lower, sellers could get back in the game and push for a drop to the swing low at 140.00 or lower.
UK economic data has been mostly stronger than expected so far this week and last week. However, traders are paying closer attention to Brexit related headlines lately, especially since PM May mentioned that they might forego access to the single market in exchange for closing the UK’s borders.
As for the yen, the Japanese currency is taking advantage of the slide in dollar demand that followed after the release of downbeat December NFP data. The weaker than expected jobs report led traders to doubt that the FOMC can be able to hike rates thrice this year, especially since the incoming Trump administration could come up with a lot of fiscal policy changes.
The BOJ has also upgraded its GDP outlook, convincing traders that they’re not likely to ramp up their stimulus efforts anytime soon. Data from Japan has been mixed, though, and the next BOJ decision is set to take place by the end of the month.
By Kate Curtis from Trader’s Way
EURJPY had been trading between support at the 121.70 area and resistance at 123.75. Price seems to be breaking below support at the moment and could be gearing up for a longer-term selloff. Note that the range is approximately 200 pips in height so the resulting selloff could be of the same size.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the gap between the moving averages seems to be narrowing so a downward crossover may be imminent. If that happens, bearish pressure could pick up and spur stronger downside momentum.
Stochastic is heading up from the oversold region to suggest a return in buying pressure. This could still allow EURJPY to bounce back to the top of the range or just make a quick pullback to the broken range support.
Economic data from the euro zone has been mostly stronger than expected in the past few days, particularly when it comes to inflation estimates. However, risk aversion is weighing on the shared currency as Brexit headlines are dampening the outlook for the region.
As for the yen, the Japanese currency is taking advantage of the weakness in the dollar, spurred by downbeat December NFP data and the sharp selloff during Trump’s press conference. Japan’s leading indicators showed some signs of improvement and investors are mindful of the BOJ’s upgraded GDP forecasts.
French final CPI and euro zone industrial production numbers are up for release today and upbeat results could allow the shared currency to recover. ECB minutes are also due. On the other hand, downbeat data and more risk-off factors could allow the breakdown to materialize.
By Kate Curtis from Trader’s Way
EURAUD continues to trade sideways, moving between support at the 1.4150 minor psychological level and resistance at the 1.4500 mark. Price is currently testing the bottom of the range and could be due for a bounce back to the top soon.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Also, stochastic is indicating oversold conditions, which means that sellers are exhausted and might let buyers take over. However, if selling pressure persists, price could break below the rectangle and go for at least 350 pips in losses, which is the same height as the chart formation.
Commodity currencies have been on strong footing in the past few days, supported by improved sentiment for China. This could shore up demand for commodities, as well as their prices, which is positive for the Australian dollar.
In contrast, European currencies are being weighed down by Brexit concerns, as the idea of a “hard Brexit” or having the UK give up access to the single market could also have negative repercussions on the euro zone. Prime Minister Theresa May has a speech lined up today so this should clear up some of the issues on investors’ minds.
Earlier today, though, China reported a smaller than expected trade surplus for January. The reading came in at 275B CNY versus the estimated 345B CNY figure and the earlier 298B surplus. Components of the report indicated a sharper than expected fall in exports, suggesting a slowdown in production and demand for raw materials.
By Kate Curtis from Trader’s Way
EURUSD continues to tread higher, moving inside an ascending channel visible on its 1-hour time frame. Price is just testing the resistance and could be due for a pullback to support before heading further north.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. These moving averages are in line with the mid-channel area of interest, also acting as a potential floor in the event of a pullback.
Stochastic is on the move down to suggest that sellers are trying to take control of price action. This could allow EURUSD to retreat until the 1.0550 minor psychological level or at least until 1.0600 before making another test of the resistance around 1.0700.
Economic data from the euro zone came in better than expected last Friday, as the German WPI printed a 1.2% gain versus the projected 0.3% uptick. This was also stronger than the earlier 0.1% gain, indicating upside pressure on overall inflation.
Meanwhile, US data was mixed as core retail sales and PPI fell short of estimates while the headline figures surpassed expectations. Headline retail sales rose by 0.6% versus the estimated 0.5% gain while headline PPI was up 0.3% versus the projected 0.1% uptick. Preliminary UoM consumer sentiment dipped from 98.2 to 98.1 instead of improving to 98.6.
Euro zone trade balance is due today but traders might hold out for the ECB statement later on this week or UK PM May’s Brexit speech. Any indication that a “hard Brexit” might be underway could also dampen demand for the shared currency. US banks are closed for Martin Luther King Day today.
By Kate Curtis from Trader’s Way
EURJPY has been trending lower on its daily time frame, moving inside a descending channel formation and currently testing the resistance. Applying the Fib tool on the latest swing high and low also shows that the channel resistance lines up with the 61.8% Fibonacci retracement level.
The channel resistance seems to be keeping gains in check for now and might send the pair back down to the channel support at 105.00 or to the previous lows at 109.00. However, the 100 SMA is closing in on the 200 SMA and is attempting to make an upward crossover, possibly drawing more buyers to the mix.
Stochastic is on the move down to indicate that sellers are in control of price action, but the oscillator is approaching the oversold zone so bears might need to take a break and let buyers take over. If so, an upside channel breakout and downtrend reversal could be possible.
The main event risk for the day is UK Prime Minister Theresa May’s speech in which she is expected to detail the government’s Brexit negotiation plan. In her previous testimonies, she mentioned that they are willing to give up access to the single market in exchange for autonomy when it comes to immigration and European Court of Justice rulings, something that could weigh heavily on UK trade and investment.
Still, May is expected to reassure the public that they will seek trade arrangements with other nations in order to keep the economy afloat. If her words manage to keep confidence supported, EURJPY might be able to push for more gains. On the other hand, fears about a slowdown in the entire region could mean more losses for the pair.
Euro zone data has been mostly stronger than expected lately while Japan’s figures have been mixed. Its tertiary industry index came in line with expectations of a 0.2% uptick while its preliminary machine tool orders indicated a 4.4% rebound over the earlier 5.6% decline.
By Kate Curtis from Trader’s Way
GBPUSD made a strong bounce after PM May’s Brexit speech in the latest London trading session, allowing price to recover off the 1.2000 lows and create a reversal formation. A double bottom can be seen on the 4-hour chart with the neckline at 1.2700.
Price still has a long way to go before clearing the neckline and confirming the potential uptrend but if it is able to do so, the pair could head north by as much as 700 pips or the same height as the chart pattern. If the resistance holds, the pair could make another attempt at breaking below the 1.2000 mark.
The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. In addition, the gap between the moving averages is widening, which means that bearish pressure is getting stronger. Stochastic is indicating overbought conditions, which also support the idea of further losses for GBPUSD.
In her speech, UK Prime Minister May confirmed the possibility of a “hard Brexit” in which they could give up access to the single market in exchange for immigration controls and autonomy from the European Court of Justice. She did try to reassure market watchers that the government would pursue trade deals with other nations and stay in good terms with the EU. May also noted that Parliament will be allowed to vote on the Brexit deal before anything is made official.
As for the US, mixed Fed rhetoric and uncertainty ahead of Trump’s inauguration dampened the dollar’s gains. According to FOMC member Dudley, the Fed is in no rush to tighten since the economy isn’t growing at a much faster pace than its sustainable long-term growth. He added that inflation isn’t a problem and that dollar appreciation would keep a lid on price levels. The Empire State manufacturing index posted a sharper than expected drop from 9.0 to 6.5.
UK CPI readings came in better than expected and jobs figures are up for release today. Another stronger than expected read could allow the pound to extend its climb while weak results could force it to turn back down. FOMC member Kashkari has a speech lined up today, along with Fed head Yellen.
By Kate Curtis from Trader’s Way
GBPJPY has been trending lower since breaking below the head and shoulders neckline recently. Price has reached a low of 136.40 before pulling up and showing signs of a correction. Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the descending trend line connecting the latest highs of price action.
The 100 SMA has crossed below the longer-term 200 SMA to indicate that the selloff is likely to carry on. The 100 SMA lines up with the 61.8% Fibonacci retracement level, which might be the line in the sand for this downtrend.
Stochastic is pointing up but is already in the overbought region, which means that buyers are already exhausted and may let sellers take over. Once the oscillator turns lower, selling pressure could increase and push GBPJPY back down to the previous lows or lower.
Earlier in the week, UK Prime Minister Theresa May outlined her Brexit plans in her latest testimony, explaining that the UK could forego access to the single European market in exchange for immigration controls. She assured that the government would seek trade deals with other nations to ensure that trade activity remains supported.
However, these uncertainties seem to have been outweighed by stronger than expected data from the UK. Headline and core CPI posted strong gains and outpaced estimates while the claimant count change showed a surprise 10.1K reduction in joblessness. UK retail sales are still up for release on Friday.
In Japan, there have been no major reports recently so the yen may be reacting to country-specific events. Keep in mind, though, that the BOJ statement is coming up soon and that the central bank just upgraded their GDP forecasts. Apart from that, Trump’s upcoming inauguration could impact US bond yields and yen demand.
By Kate Curtis from Trader’s Way
USDJPY continues to trend lower on its 1-hour time frame, moving inside a descending channel connecting the latest highs and lows. Price is currently bouncing off the channel resistance at the 115.50 minor psychological level and could be due for a selloff to the support at 112.00 or at least until the swing low at 112.50.
The 61.8% Fib was in line with the channel resistance, which explains why it’s currently holding as a ceiling. Also, the 200 SMA lined up with the Fib levels, adding to their strength as resistance. The 100 SMA is safely below this longer-term moving average and is increasing the gap so the path of least resistance is to the downside and bearish pressure is picking up.
Stochastic is heading south to indicate that sellers are in control of price action. However, once the oscillator reaches the oversold region and turns higher, bears could book profits and allow buyers to take over.
US economic data has been mostly stronger than expected, as initial jobless claims, Philly Fed index, and housing starts surpassed estimates. However, dollar traders remain wary of event risks stemming from Trump’s inauguration so there might be some profit-taking off long dollar positions before the end of the week.
There have been no major reports out of Japan recently but the currency seems to be taking advantage of the risk-off flows these days. Aside from that, bullish sentiment has been restored after the BOJ recently upgraded their GDP forecasts.
By Kate Curtis from Trader’s Way
The 1.0400 handle seems to be holding as a long-term floor for EURUSD once more, as price bounced off this area and might now be headed back to the top of its range around 1.1500. This range has held since February last year and might continue to do so.
However, the 100 SMA is below the longer-term 200 SMA on the daily chart, signaling that the long-term path of least resistance is to the downside. In that case, a range breakdown is still possible and this could potentially send EURUSD lower by the same height as the rectangle formation of over a thousand pips.
Stochastic is still pointing up on the daily chart to show that buyers are in control of price action. However, the oscillator is already dipping into the overbought zone so profit-taking could happen and allow sellers to regain control.
US President Donald Trump’s inauguration speech seems to have kept a lid on dollar gains as investors continue to be nervous about his fiscal policy plans and a potential trade war. After all, Trump’s remarks could have repercussions on its trade ties with China, Mexico, Canada, and other big economies.
For the euro zone, the region’s consumer confidence index is due today and no change in the -5 reading is eyed. ECB Governor Draghi has a speech lined up but he is expected to simply repeat his remarks during their monetary policy statement’s presser, reiterating that the pickup in inflation was just mostly energy-based.
There are no major reports due from the US economy today as traders also brace themselves for the advanced GDP release later on in the week. Another potential catalyst for this pair is the UK High Court ruling, which could have an impact on how Brexit negotiations play out, both for the UK and the euro zone.
By Kate Curtis from Trader’s Way
USDJPY is trending lower on its 1-hour time frame, moving inside a descending channel and approaching support at the 111.50-111.75 area. A bounce off this area could take price back up to the channel resistance around the 114.00 major psychological level.
The 100 SMA is below the 200 SMA for now so the path of least resistance is to the downside, but the short-term moving average appears to be getting ready for an upward crossover so a bounce could be likely. If buying pressure is strong enough, traders could even push for a break past the channel resistance.
Meanwhile, stochastic is in the oversold area, also suggesting that a bounce from the selloff is due. A break above the channel resistance could take USDJPY up to the next area of interest at 115.50.
The dollar has been in a lot of selling pressure before Trump officially took office, as investors have been speculating about a lot of uncertainty during his administration. His “America First” theme seems to have backfired on the dollar as a potential trade war would also have dire consequences on US economic growth.
On the other hand, the Japanese yen has been the beneficiary of risk-off moves, especially during the Asian session. Trump’s Treasury Secretary pick Mnuchin shared his plans to investigate China’s currency manipulation tactics while Trump signed an executive order quitting the TPP during his first day in the White House.
Medium-tier data from Japan came in stronger than expected today, as the flash manufacturing PMI climbed from an upgraded 52.4 figure to 52.8 instead of dipping to 52.3. Prior to this, the all industries activity index posted a 0.3% uptick. US flash manufacturing PMI, existing home sales, and Richmond manufacturing index are due next.
By Kate Curtis from Trader’s Way
EURGBP recently broke to the upside from an ascending triangle formation and zoomed up to a high of .8850. From there, price showed signs of a correction to the broken triangle resistance at the .8520 area.
Applying the Fib tool on the latest swing low and high shows that the 61.8% Fib is close to the broken resistance, which might now hold as support. If so, EURGBP could make its way back up to the highs and beyond.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 200 SMA lines up with the broken triangle resistance and might keep losses in check. Stochastic is indicating oversold conditions so buyers could take over soon.
Euro zone reports turned out mixed, as German flash manufacturing PMI and French flash services PMI came in better than expected but the German flash services PMI missed expectations. German Ifo business climate is due today and a rise from 111.0 to 111.3 is expected.
In the UK, the High Court ruling seems to have boosted the pound as requiring parliamentary approval before invoking Article 50 and starting the negotiation process sparked hopes that the actual Brexit could be postponed. UK public sector net borrowing fell from 10.8 billion GBP to 6.4 billion GBP, reflecting improving finances.
Moving forward, Brexit headlines could continue to push this pair around as these have been crucial in setting the outlook for the UK economy. Still, Prime Minister May has been reassuring in terms of making the best of Brexit and securing the best possible deal for the nation.
By Kate Curtis from Trader’s Way
EURUSD has been trending higher but slowly consolidating inside a rising wedge formation visible on the 1-hour and 4-hour charts. This signals that a breakout in either direction could take place soon as price is approaching the peak of its formation. The wedge is approximately 400 pips tall so the resulting breakout could be of the same size, possibly taking EURUSD either to the 1.0350 lows or to highs at 1.1150.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic seems to be on the move up but is nearing the overbought zone so buyers might be getting exhausted and ready to let sellers take control of price action.
Economic data form the euro zone has been weaker than expected recently, as the German Ifo business climate index printed a surprise drop from 111.0 to 109.8 versus the projected rise to 111.3. As it turns out, German manufacturers are less optimistic about current and future business conditions in the country, possibly due to Brexit concerns.
However, demand for the dollar has also been weak even as US equities have been advancing. Reports that Trump’s team has a list of 50 infrastructure projects that could rein in a lot of investment and employment have boosted stock indices to record highs but the US currency has failed to follow suit.
Today has initial jobless claims, goods trade balance, flash services PMI, and new home sales due from the US. The euro zone is set to print the Spanish unemployment rate, German GfK consumer climate index, and Italian retail sales.
By Kate Curtis from Trader’s Way
GBPUSD seems to be tired from its dive, as the pair formed a reversal pattern on its longer-term charts. Price failed in its last two attempts to break below the 1.1975 area, creating a double bottom formation with the neckline at 1.2750. A break past that level could take price up by around 800 pips.
However, the 100 SMA is below the longer-term 200 SMA on the daily chart so the path of least resistance is to the downside. Also, the 100 SMA seems to be holding as dynamic resistance for now. If it continues to keep gains in check, another move towards the 1.1975-1.2000 handle could be in the cards.
Stochastic is also indicating overbought conditions so buyers might need to take a break or book profits and let sellers take over. A bit of bearish divergence can also be seen as price made lower highs while stochastic had higher highs.
UK preliminary GDP came in better than expected for Q4 2016, as the economy expanded by 0.6% versus the projected 0.5% growth figure. To top it off, the earlier reading was upgraded to show 0.6% growth. BBA mortgage approvals also ticked higher, indicating a robust housing market even with Brexit risks.
As for the US, data came in mixed with new home sales falling short of expectations and initial jobless claims signaling a higher rise in unemployment. Still, the flash manufacturing PMI beat expectations by rising from 53.9 to 55.1.
Up ahead, the US will print its advanced GDP reading and might show slower growth of 2.1% for Q4. A weaker than expected result could mean more losses for the dollar, which is already being weighed down by rising risk appetite.
By Kate Curtis from Trader’s Way
USDJPY has been trading sideways recently, bouncing off support at the 112.65 level and resistance at 115.30. Price recently made a test of resistance and seems to be heading back to the bottom of its range again.
The 100 SMA is below the 200 SMA for now so the path of least resistance is to the downside. However, the gap between the two is narrowing so an upward crossover might be due, signaling that the path of least resistance is to the upside. In that case, the pair could attempt to break higher and climb by an additional 250-300 pips.
Stochastic is heading south so sellers are in control at this point, but the oscillator is already dipping into the oversold region. Once it starts heading back up, buyers could regain control and push price further north.
The main event risks for this setup this week are the BOJ decision, the FOMC statement, and the US NFP release. No actual policy changes are expected from the Japanese central bank this week, although they’ve made some changes in their bond-buying program in targeting the yield curve late last week.
Meanwhile, no policy changes are expected from the Fed as well but policymakers could drop some hints on whether or not they can be able to hike interest rates again in March. Trump’s fiscal policy plans are likely to be at the front and center of discussions as market watchers would like to find out how the new administration’s first few days in office have influenced the Fed’s bias.
As for the NFP, another strong jobs figure could reinforce the view that a March rate hike is possible. Analysts are expecting to see 170K in hiring gains, higher than the earlier 156K increase. A weak result, on the other hand, could be bearish for the dollar.
By Kate Curtis from Trader’s Way
GBPJPY recently broke past a descending trend line visible on its 4-hour time frame and is showing signs of a pullback. Applying the Fib tool on the latest swing high and low shows that the 50% retracement level lines up with the broken resistance, which might now hold as support.
The 100 SMA is still below the 200 SMA so the path of least resistance is to the downside. However, the 100 SMA is close to the 38.2% Fib and might function as dynamic support. Stochastic is indicating oversold conditions, which means that sellers need to take a break and might let buyers take over.
If so, GBPJPY could resume its climb to the swing high at 144.75 or higher. On the other hand, a break below the lowest Fib at 139.75 could put the pair back on the downtrend.
The BOJ refrained from making any policy changes in their statement today but this comes after a round of bond-buying adjustments last week. Recall that they skipped the schedule to buy short-term maturities while increasing their long-term bond purchases in their attempt to target the yield curve.
Up ahead, the BOE Super Thursday is lined up and this could mean a lot of volatility for pound pairs. Although no actual policy changes are expected from the central bank, the focus will be on Brexit-related discussions and potential adjustments. Traders might also get a glimpse of how policymakers are reacting to Trump’s decisions so far.
Earlier today, Japan reported stronger than expected household spending and preliminary industrial production data, shoring up demand for the yen and underscoring the BOJ’s upgraded growth forecasts in their previous statement. The yen is also drawing support from the selloff in US assets as traders seem to be pricing in additional uncertainty.
By Kate Curtis from Trader’s Way
The bottom of the long-term range on EURAUD seems to be holding as a floor, with a small double bottom formation materializing. Price is testing the neckline at the 1.4300 major psychological level and a break past this resistance could send the pair up by 200 pips or the same height as the chart formation.
In that case, the pair could make it up to the range resistance at the 1.4500 major psychological mark. However, the 100 SMA is below the 200 SMA so the path of least resistance could still be to the downside. Also, the 200 SMA appears to be holding as dynamic resistance for the time being.
Stochastic is moving up but is already dipping into the overbought region, signaling that buying pressure is exhausted and that sellers could take over. If that happens, another test of the range support could be seen.
Economic data from China showed a small dip in manufacturing activity, as the official PMI for the industry fell from 51.4 to 51.3. The non-manufacturing component improved from 54.5 to 54.6. However, the Aussie seems to be moving in tandem with the Kiwi, which has recently been dragged down by its employment report miss.
In the euro zone, the flash CPI estimate turned out much stronger than expected. The headline reading climbed from 1.1% to 1.8%, outpacing the consensus at 1.5%, while the core reading was unchanged at 0.9% as expected. The region printed a higher than expected flash GDP reading of 0.5% versus the 0.4% consensus and the earlier 0.3% uptick.
For today, EU economic forecasts are lined up, along with final manufacturing readings from the region’s top economies. Australia is set to print its building approvals and trade balance in the next Asian session.
By Kate Curtis from Trader’s Way
EURUSD continues to trend higher, moving inside an ascending channel on its 1-hour chart. Price just bounced off the resistance at 1.0800 and might be due for a test of support at 1.0700.
The 100 SMA Is below the 200 SMA so the path of least resistance is to the downside. However, the moving averages are oscillating tightly so this could simply be indicative of consolidation. An upward crossover could draw more bulls to the mix and possibly allow the moving averages to hold as dynamic support around the middle of the channel.
Stochastic is on the move up to suggest that buyers are in control of EURUSD price action for now. In that case, the pair could make it back up to the resistance from here until the oscillator indicates overbought conditions and turns lower.
Economic data from the US came in stronger than expected, as the ADP jobs report printed a much larger than expected increase in hiring for January while the ISM manufacturing PMI also beat expectations. These signal that the January NFP could beat expectations and keep the Fed on track towards hiking rates soon.
However, the latest FOMC statement didn’t turn out as hawkish as many predicted. The Fed removed the phrase referring to transitory effects of energy prices on inflation and acknowledged that consumer and business sentiment have improved. Still, the FOMC maintained that conditions warrant gradual tightening and risks are roughly balanced.
Up ahead, ECB Governor Draghi has a speech coming up and this might trigger some volatility for the euro even though he might simply repeat his remarks from a testimony earlier in the week. US initial jobless claims and preliminary non-farm productivity and unit labor costs are due.
By Kate Curtis from Trader’s Way
GBPAUD has formed lower highs and higher lows on its daily time frame, creating a symmetrical triangle formation on the long-term chart. Price just bounced off the triangle resistance and could be due for another test of support.
Stochastic is pointing down to confirm that sellers are taking control of price action. If bearish pressure is strong enough, traders could push for a break below support at 1.6300 and a corresponding 1,800-pip selloff, which is the same height as the triangle formation.
The 100 SMA is below the 200 SMA on this time frame so the path of least resistance is downwards. Also, the 100 SMA lines up with the triangle resistance, adding to its strength as a ceiling. The gap between the moving averages is widening so bearish pressure is getting stronger.
In their latest policy statement, the BOE refrained from making any changes to interest rates or bond purchases as expected. The central bank raised its GDP forecasts while keeping inflation estimates unchanged, signaling that they are in no rush to tighten monetary policy.
Meanwhile, the Aussie is being weighed down by weaker than expected Chinese Caixin manufacturing PMI, which dipped from 51.9 to 51.0 instead of 51.8. This forced the currency to return some of its gains after seeing stronger than expected trade balance and building approvals data in the previous day.
UK services PMI is up for release and a fall from 56.2 to 55.8 is expected. Stronger than expected data could still shore up the pound while downbeat results could push the UK currency lower.
By Kate Curtis from Trader’s Way
