USDCAD bounced off long-term support around the 1.3100 major psychological level recently and seems to be setting its sights on the top of the range at the 1.3550 minor psychological mark. Price has already moved past the middle of the range, indicating that buying momentum is strong.
Also, the 100 SMA is above the longer-term 200 SMA on the daily time frame so the path of least resistance is to the upside. In addition, the 100 SMA dynamic support is right around the middle of the range, adding to its strength as a potential near-term support area.
Stochastic is in the overbought zone, which means that buying pressure could fade soon and that the range resistance could keep gains in check. In that case, a selloff back to the support near the 200 SMA dynamic inflection point could happen later on.
Last Friday, several FOMC members gave testimonies, most of which confirmed that an interest rate hike could be on the table this month. If so, the dollar could extend its rally across the board as the US central bank stays on track towards tightening three times this year.*
However, this could all depend on the NFP report due on Friday as policymakers are still going to base their decision on whether or not the momentum in hiring and inflation is sustained. Analysts are expecting to see a 185K increase in hiring for February, slower than the earlier 227K gain.
As for the Canadian dollar, the BOC statement was slightly more dovish than expected as Poloz reiterated that they are open to the idea of further cuts and that the pickup in price levels and employment could be temporary. Canada is also set to print its jobs report on Friday.
By Kate Curtis from Trader’s Way
AUDUSD recently broke below its ascending channel support around the .7650 minor psychological mark and dipped to .7550. Price seems to be showing signs of pulling back and applying the Fib tool on the latest swing high and low shows that the 61.8% level is close to the broken channel.
The 100 SMA also coincides with the 61.8% Fib to add to its strength as a potential ceiling. If this holds, another move towards the swing low could take place. The 100 SMA is above the longer-term 200 SMA for now to show that the path of least resistance is to the upside, but the gap is narrowing so a downward crossover may be imminent.
Stochastic is also heading up to indicate that buyers are in control of price action at the moment. Once the oscillator hits the overbought area and turns lower, selling pressure could return.
The RBA is set to announce its monetary policy decision today and is likely to keep interest rates unchanged at 1.50%. In their previous statement, the central bank sounded upbeat about growth and inflation, leading market watchers to believe that no further rate cuts are in the cards. This time around, the RBA might acknowledge that Aussie strength has dampened export demand and overall trade activity.
The US dollar continues to stay supported by expectations of a March rate hike but additional volatility is still expected around the NFP release. Analysts are expecting to see 185K in hiring gains, slower than the earlier 227K increase. Weaker than expected data could cast doubts about a hike and send the dollar lower.
On the other hand, upbeat results could spur more dollar gains as this would keep the Fed on track towards hiking rates thrice this year. Fed speeches last week were mostly in line with this bias, with Fed head Yellen herself acknowledging that waiting too long to hike could do more harm than good.
By Kate Curtis from Trader’s Way
USDJPY seems to be tired from its selloff as it formed a double bottom pattern on its 4-hour chart. Price failed in its last two attempts to break below the 111.50 area and might be due for a break of the neckline at 114.50. If that happens, price could move up by an additional 300 pips or the same height as the chart formation.
The 100 SMA seems to be crossing above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is also making its way out of the oversold zone to indicate a potential pickup in buying pressure. However, if the current resistance at the 114.50 minor psychological level holds, price could head back to the bottoms at 111.50, possibly creating a range for USDJPY.
Demand for the dollar has been sustained recently as traders continue to look forward to a Fed rate hike this month. Economic data has been more or less on track towards achieving their inflation and employment goals so odds of tightening keep increasing while FOMC officials have reiterated the need to hike sooner rather than later.
The main event risk for this is the NFP report due on Friday, as a weaker than expected read could cast doubts on a hike the following week. Analysts are hoping to see a 188K increase, slower than the earlier 227K gain, but a higher figure could seal the deal for tightening and lead to more dollar gains.
As for the Japanese yen, the BOJ statement is also coming up next week and no additional easing measures are expected since recent economic reports from Japan have shown some improvements. Earlier today the final GDP reading was upgraded from 0.2% to 0.3%, just a notch short of the 0.4% consensus, while the current account balance turned out weaker than expected.
By Kate Curtis from Trader’s Way
EURUSD is making its way to the bottom of its longer-term range at the 1.0500 major psychological level and might be due for a bounce. If so, price could make its way back up to the range resistance at the 1.0600 area or at least halfway until the 1.0550 minor psychological mark.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the moving averages are oscillating to reflect range-bound conditions. Stochastic is heading south to show that sellers are in control of price action, but the oscillator is already in the oversold area so buyers could regain the upper hand soon.
Economic data from the euro zone has been mixed recently, although Germany has been showing a lot of weak spots. Earlier in the week, German factory orders showed a 7.4% slide versus the projected 2.5% dip while the French trade balance showed a larger than expected deficit.
But what’s driving this pair’s price action more predominantly these days is dollar strength, as traders are pricing in strong expectations of a Fed rate hike this month. The ADP non-farm employment change for February came in at 298K versus the projected 185K figure while the January reading was upgraded. This signals a potential upside surprise for the NFP due on Friday and this would confirm that a rate hike is underway for the Fed meeting next week.
The ECB is set to announce its monetary policy decision today and no changes are expected. However, the accompanying press conference could mean a lot of volatility for the euro, especially if Governor Draghi shares more insight on their next policy steps. If he continues to downplay developments in the region or highlights the risks, the euro could break below its range against the dollar.
By Kate Curtis from Trader’s Way
GBPJPY has formed lower highs and lower lows, moving inside a descending channel on the 1-hour chart. Price is currently approaching the resistance at the 140.00 major psychological level and if this keeps gains in check, the pair could head back to the channel support at the 138.00-138.50 area.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the two is widening, which means that bearish pressure is getting stronger. Stochastic is already in the overbought zone, which indicates that buyers are exhausted, but the oscillator has yet to cross down to reflect a return in selling pressure.
The Japanese yen could benefit from a return in risk aversion, although it is currently being weighed down by the pickup in dollar demand. However, European currencies are currently enjoying some support after the ECB statement presser as the central bank upgraded growth and inflation forecasts while Draghi admitted that there’s no more urgency to ease.
In the UK, the RICS house price balance showed a 24% increase versus the projected 23% gain. UK manufacturing production is due today and it could show a 0.6% decline, erasing part of the earlier 2.1% increase. Industrial production could dip by 0.4% after rising by 1.1% in the previous period.
The US NFP report could provide some volatility for this pair today as the results would likely have a strong impact on USDJPY. If it sparks profit-taking ahead of the weekend and the Fed meeting next week, JPY could benefit and this pair could head back down.
By Kate Curtis from Trader’s Way
AUDUSD has been trending lower on its 1-hour time frame, moving below a descending trend line connecting the latest highs of price action. Price is currently pulling back to this trend line, which lines up with the 61.8% Fibonacci retracement level on the latest swing high and low.
If this area keeps gains in check, price could head back south to the swing low at the .7500 major psychological level or create new lows. On the other hand, an upside breakout could trigger a reversal from the ongoing selloff.
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 getting wider so bearish pressure could get stronger. Stochastic is pointing up but is already testing the overbought region, which reflects weakening buying pressure and a potential return by sellers.
US data came in stronger than expected on Friday, as the economy added 235K jobs versus the projected 188K increase and the previous month’s gain, which was upgraded from 227K to 238K. The unemployment rate dropped from 4.8% to 4.7% as expected but average hourly earnings fell short of estimates and posted a meager 0.2% uptick instead of the projected 0.3% increase.
Still, the upbeat jobs report boosted Fed rate hike expectations for the month, and the actual FOMC meeting is scheduled for this week. Fed officials are strongly expected to hike rates by 0.25% and signal scope for further tightening down the line, keeping them on track towards hiking rates three times this year.
Meanwhile, China has its industrial production figures due and this could have a strong impact on AUD price action. Later on in the week, Australia will release its jobs figures and downbeat results could push the currency back on its downtrend.
By Kate Curtis from Trader’s Way
EURAUD is starting to trend higher these days, moving inside a rising channel connecting the latest highs and lows of price action. Price is moving closer to support and a bounce could take it back up to the channel resistance at the 1.4250 minor psychological level.
Applying the Fib tool on the latest swing high and low shows that the 50% retracement level is holding as near-term support. A larger correction could last until the 61.8% Fib at 1.4000, which is closer to the channel support and the 200 SMA dynamic inflection point.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is on the move up, which means that buyers are in control of price action. However, once the oscillator reaches the overbought zone and turns lower, sellers could get back in the game.
The euro is still enjoying its post-ECB rally after Governor Draghi mentioned in the presser that there is no more urgency to ramp up easing as deflationary risks are subsiding. This reflects a notable shift in the central bank’s bias to a less dovish one, leading bulls to hop in and bears to book profits off their earlier short positions.
On the other hand, the Australian dollar is being weighed down by risk aversion and the prospect of a Fed rate hike. Higher borrowing costs in the US could dampen spending and investing activity all over the globe, which then hurts demand for commodities.*
Apart from that, China just reported weaker than expected retail sales data at 9.5% year-over-year in February versus the projected 10.5% figure and the earlier 10.9% gain. Fixed asset investment came in at 8.9% year-to-date versus the projected 8.2% figure while industrial production advanced from 6.0% to 6.3%.
By Kate Curtis from Trader’s Way
EURJPY recently broke out of its descending channel pattern, signaling a reversal from the selloff. Price reached a high of 122.83 before showing signs of a pullback, and applying the Fib tool on the latest swing high and low shows that the 38.2% retracement level is closest to the broken resistance.
If this holds as support, the pair could head back up to the swing high or higher. A larger pullback could last until the 50% Fib at the 120.50 minor psychological level or at the 120.00 major psychological mark. A break below these levels could put the pair back on a downtrend.
The 100 SMA is still below the 200 SMA so the path of least resistance might still be to the downside. However, the gap between the moving averages is narrowing to show a pending upward crossover, which could draw more buyers to the game. Stochastic is already indicating oversold conditions, which means that selling pressure is exhausted and that buyers could regain control.
The euro seems to be correcting from its post-ECB run, during which Governor Draghi’s remarks during the presser indicated that the central bank is no longer considering further easing. He said that there is no more urgency to increase stimulus as deflationary risks are lower.*
However, the shared currency is also reeling from political uncertainty as French election updates revived “Frexit” concerns. Le Pen has led in the polls against Macron and presidential favorite Fillon is currently under formal investigation for allegedly diverting public funds.*
Meanwhile, the Japanese yen is awaiting the BOJ interest rate decision this week and any dovish remarks could push the currency back down. On the other hand, a shift to a less dovish tone could also mean gains for the lower-yielding currency. Changes in bond yields after today’s FOMC statement could also push yen pairs around.
By Kate Curtis from Trader’s Way
Cable recently bounced off its long-term support at the 1.2100 major psychological mark and seems to be pulling up from its recent selloff. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the descending trend line, 100 SMA dynamic inflection point, and the 1.2350 minor psychological mark.
Meanwhile, the 61.8% Fib could also hold as resistance since it lines up with a broken support level and the 200 SMA. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.*
Stochastic is on the move up but is dipping into overbought territory, which suggests that bullish pressure might be weakening. Once it crosses down and turns lower, selling momentum could return and take GBPUSD for another test of 1.2100.
UK economic data turned out stronger than expected as the claimant count showed an 11.3K reduction in joblessness versus the expected 3.2K rise. Also, the unemployment rate fell from 4.8% to 4.7% for January but the average earnings index slid from 2.6% to 2.2% versus the 2.4% forecast.
In the US, the Fed hiked interest rates as expected and their dot plot confirmed that three rate hikes are still possible for the year. Their official statement contained a few upgrades in assessment for inflation and sentiment, but dollar bulls didn’t seem so impressed by the lack of hawkishness.
It will be the BOE’s turn to announce their monetary policy decision today and no changes to interest rates or asset purchases are expected. In the US, building permits and housing starts are due, along with the Philly Fed index and initial jobless claims.
By Kate Curtis from Trader’s Way
EURAUD recently broke below its ascending channel on the 1-hour time frame and might be due for a pullback before heading further south. Applying the Fib tool on the latest swing high and low shows that the 61.8% level is closest to the broken support but that the 50% Fib already appears to be keeping gains in check.
This retracement level lines up with the moving averages, which usually hold as dynamic inflection points. The 100 SMA is gearing up for a downward crossover, possibly drawing more sellers to the mix and pushing for a move to the swing low at the 1.3900 mark.
Stochastic is turning lower to show that sellers are regaining control of price action. In that case, EURAUD could break below the previous lows and head further south to the next areas of interest closer to 1.3800.
After giving up some ground on election-related uncertainty, the euro regained its footing on upbeat remarks from a couple of ECB policymakers. For Nowotny, the central bank might consider increasing the deposit rate before making adjustments to the benchmark rate and asset purchases. Meanwhile, Praet acknowledged the recent improvements in the economy but clarified that the ECB might not be ready to reduce easing yet.
As for the Australian dollar, jobs data from the Land Down Under fell short of estimates. The employment change figure showed a 6.4K drop in hiring for February while the unemployment rate rose from 5.7% to 5.9%. There are no major reports from both Australia and the euro zone today so market sentiment and political headlines could push this pair around.
By Kate Curtis from Trader’s Way
USDJPY sold off after the FOMC decision as traders booked profits off the event. As a result, resistance at the 115.25 area held and price made its way back to the range support at 112.35. If this floor holds, another bounce back to resistance could be in the cards.
Stochastic is pointing down but is already indicating oversold conditions. This means that sellers are already exhausted and that buyers could take over price action once the oscillator heads back up.
The 100 SMA is also above the 200 SMA so the path of least resistance is to the upside. This signals that the support is more likely to hold than to break, but in case bears keep pushing price down, a range breakdown could push the pair lower by around 300 pips or the same height as the rectangle.*
Japanese banks are closed for the holiday today so there might not be enough volatility to trigger a break lower. There are no major reports due from the US economy but President Trump has a speech scheduled and any remarks concerning fiscal policy could still have a strong effect on US markets and overall sentiment.
The FOMC just hiked interest rates as expected last week but dollar bulls seemed disappointed that policymakers weren’t overly hawkish. Still, the central bank upgraded growth and inflation forecasts while showing room for three rate hikes this year.
As for the BOJ, there were no changes to monetary policy but the yen seems to be more influenced by bond yield performance lately. Later on in the week, the BOJ will release its meeting minutes while Fed Chairperson Yellen has a speech scheduled.
By Kate Curtis from Trader’s Way
EURAUD looks ready for a downtrend as the pair formed a head and shoulders pattern on its 1-hour time frame. Price has yet to break below the neckline at the 1.3900 area to confirm the potential selloff.
The 100 SMA crossed below the longer-term 200 SMA to show that the path of least resistance is to the downside. Price seems to be pulling back but the 100 SMA could serve as near-term dynamic resistance. A break below the neckline could take the pair down by around 300 pips or the same height as the chart formation.
Stochastic is on the move up to suggest that buyers are still in control of price action. However, the oscillator is already nearing the overbought zone which would reflect weaker buying pressure. Once it turns lower, sellers could regain control.
The euro got a bit of a boost from the French presidential elections debate which ended up giving the lead to Macron in the polls. This eased fears of a Le Pen victory and therefore lowered the odds of a “Frexit” or further instability in the region.
Meanwhile, the Australian dollar got bogged down by the RBA meeting minutes which revealed that the central bank is keeping close tabs on housing market risks. The quarterly HPI posted a larger than expected 4.1% gain in prices for Q4, outpacing the projected 2.4% pickup.
There are no major reports due from Australia and the euro zone in the next few days, although the latter has the PMI reports from Germany and France due on Friday. Election-related updates could continue to influence euro action while market sentiment could push the Aussie around.
By Kate Curtis from Trader’s Way
GBPUSD has been moving back and forth between support at the 1.2100 major psychological level and resistance at 1.2700. Price just bounced off the floor recently and seems to be setting its sights on the top of the range again.
Stochastic is on the move up to show that bullish pressure is present and that price could make its way up to the ceiling soon. However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.
In addition, the 100 SMA appears to be holding as dynamic resistance at the moment, although a move higher could still find resistance at the 200 SMA closer to the top of the range. Once stochastic hits the overbought zone and turns lower, more sellers could get back in the game and push for a drop to support again.
UK CPI reports turned out stronger than expected, with the headline figure up to 2.3% versus the 2.1% forecast and the core reading up from 1.6% to 2.0% versus the projected 1.7% figure. Underlying inflation reports also printed upbeat results, except for the PPI input prices which dipped 0.4%.
The pound also gained support from some signs of strength by the UK government in approaching Brexit negotiations. PM May already confirmed that they will invoke Article 50 to formally begin the exit process by March 29, removing speculations that they will not push through with Brexit.
Meanwhile, the dollar is giving up ground on weaker US equities performance and the lack of fiscal policy updates from the Trump administration. Fed officials continue to reiterate that at least three rate hikes are possible this year while data has been stronger than expected. Existing home sales data is due next.
By Kate Curtis from Trader’s Way
USDJPY recently broke down from its range visible on the 4-hour time frame, signaling that a selloff is in order. Price seems to be in the middle of a correction to this area of interest, though, and the 38.2% retracement level could serve as resistance.
However, the 100 SMA is still above the longer-term 200 SMA so the path of least resistance might still be to the upside. If the pair breaks past the Fibs, it could be on track towards testing the range resistance at 115.00 once more.
Stochastic is indicating oversold conditions and is pulling up, indicating a return in buying pressure. Once the oscillator reaches the overbought zone and turns lower, sellers could gain the upper hand a push for a test of the swing low at 110.75.
The main event risk for the dollar is the healthcare vote in Congress, as this would be indicative of whether or not the Trump administration can be able to push its agenda when it comes to other reforms. A victory in repealing Obamacare could revive gains in the US markets and the dollar on stronger expectations of tax reform and financial deregulation.
On the other hand, being unable to repeal Obamacare would deal a large blow to confidence for the Trump presidency, leading investors to doubt if fiscal policy changes can be enacted soon. Meanwhile the Japanese yen is benefitting from both anti-dollar and risk-off flows.
Fed Chairperson Yellen also has a testimony lined up and this should provide more insight on the Fed’s hawkishness. Other policymakers have previously confirmed the possibility of seeing three rate hikes this year so similar remarks from Yellen could keep the dollar supported.
By Kate Curtis from Trader’s Way
EURUSD is starting to trend higher on its 1-hour time frame, moving inside an ascending channel and just coming off a bounce from resistance. A pullback to the channel support at the 1.0750 minor psychological level could take place.
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 channel support, adding to its strength as a floor. Price seems to be breaking below the near-term dynamic inflection point at the 100 SMA to indicate a bit of selling pressure.
Stochastic has already reached the oversold area, which means that sellers are already getting exhausted. Once the oscillator pulls higher, buyers could gain more traction and trigger a bounce back to the channel resistance past 1.0800 or at least until the recent highs.
Dollar traders seem to have been disappointed by Congress’ decision to postpone the vote on the healthcare bill since they weren’t able to gain enough support. According to the Freedom Caucus, they cannot make a decision based on the current form of the new bill since they want a broader repeal of Obamacare.
Discussions could continue in Washington and the uncertainty could weigh on dollar demand. After all, this vote is seen as a test of the Trump administration when it comes to their strength in pushing their agenda through Congress, which would set the tone for their future policy changes like tax reform and financial deregulation.
As for the euro, PMI readings from the manufacturing and services sectors of France and Germany are lined up today. Apart from that, polls continue to show a lead for Macron, which is bullish for the euro because it eases concerns of a victory by pro-Frexit Le Pen.
By Kate Curtis from Trader’s Way
EURGBP has been trending lower on its 1-hour time frame, moving inside a descending channel connecting the latest highs and lows of price action. Price gapped higher over the weekend and is about to test the channel resistance around .8670.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, the 200 SMA coincides with the channel resistance, adding to its strength as a ceiling. Stochastic is making its way down from the overbought zone to indicate a return in selling pressure.
In that case, the pair could head back down to the channel support around .8570 or until the previous lows close to the .8600 major psychological level. On the other hand, a climb past the channel resistance could lead to a reversal from the downtrend.
Economic data from the euro zone turned out mostly stronger than expected last Friday, as flash manufacturing and services PMI readings from Germany and France printed improvements and showed a much stronger pace of expansion among the industries. There were no economic reports out of the UK then.
German Ifo business climate data is due today and a rise from 111.0 to 111.2 is eyed, indicating a pickup in confidence. Stronger than expected data could lead to another boost for the shared currency as most economic figures have been supporting the shift in the ECB’s stance to a less dovish one.
There are no major reports due from the UK today, but the pound has also drawn some support from upbeat CPI and retail sales data. However, the main theme for the currency’s price action this week is the looming Article 50 date on March 29 as the European Council’s response could set the tone for upcoming negotiations.
By Kate Curtis from Trader’s Way
EURAUD Channel Retracement (Mar 28, 2017)
EURAUD has formed higher lows and higher highs, moving inside an ascending channel pattern visible on its 4-hour chart. Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the channel support just above the 1.4000 major psychological level.
This is also close to the 100 SMA dynamic support, which is safely above the 200 SMA and indicating that the path of least resistance is to the upside. The gap between the moving averages is widening to reflect stronger bullish momentum. The 200 SMA is slightly below the channel support but could serve as the line in the sand for a larger correction.
Stochastic is pointing down from the overbought area to indicate that sellers are about to take control of price action, opening the opportunity for a countertrend trade to short at this channel resistance. If selling pressure is strong enough, price could even break below the channel support and spur a reversal.
Economic data from the euro zone turned out better than expected once more, with the German Ifo business climate index rising from 111.1 to 112.3, outpacing the consensus at 111.2 to signal a much stronger pickup in optimism. This follows stronger than expected manufacturing and services PMI releases from Germany and France last Friday, underscoring the ECB’s shift to a less dovish stance.
As for the Aussie, there have been no major events so far, save for a speech by RBA Assistant Governor Debelle. The currency seems to be taking its cue from risk appetite and traders look wary of higher-yielding assets these days. The next big event for the Aussie might be the Chinese CPI releases on Friday.
By Kate Curtis from Trader’s Way
NZDUSD seems to be tired from its climb as a short-term reversal pattern formed on its 1-hour chart. Price failed in its last two attempts to break past the .7050 minor psychological resistance and is testing the support near .7000, creating a double top formation.
A break below the neckline could set off a drop of at least 50 pips or the same height as the chart pattern. Price could also drop all the way down to support at the .6900 major psychological mark.
The 100 SMA seems to be making a downward crossover to show that bears are gaining the upper hand. However, stochastic is pulling up from the oversold region to suggest that buyers might take over soon. If so, a bounce back to the tops at .7050 could be possible.
Economic data from the US turned out stronger than expected, as the CB consumer confidence index rose from 116.1 to 125.6 - its highest reading in more than 16 years. The Richmond manufacturing index also turned out higher than consensus as it rose from 17 to 22 instead of dipping to 16. Aside from that, Republicans have emphasized that they will continue to pursue healthcare reform, reviving market confidence in the Trump administration’s plans.
There were no major reports out of New Zealand yesterday and none are due today so market sentiment could be the main driver of Kiwi price action. Note that the UK government will officially trigger Article 50 today and a few press conferences are lined up, which should provide a glimpse of how the negotiations could go and spark more volatility than usual in the markets.
By Kate Curtis from Trader’s Way
GBPJPY continues to trend lower and is moving inside a descending channel on its 4-hour chart. Price just bounced off support at the 137.50 minor psychological level and could be on its way for a test of resistance at the 139.00 major psychological mark.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the downtrend is more likely to continue than to reverse. The 100 SMA is also close to the channel resistance, adding to its strength as a ceiling.
Stochastic is pulling up from the oversold region, which suggests a return in buying pressure. If bulls are strong enough, price could break past the channel resistance and go for a test of the 200 SMA dynamic inflection point at 140.00.
Brexit-related events seemed to go by without a hitch in the past trading sessions so the pound did not sell off too much. Still, the lingering uncertainty surrounding the negotiation process could be enough to keep a lid on the currency’s gains in the near term.
As for the Japanese yen, there have been no major reports from Japan recently, leaving the yen to move based on market sentiment. So far, risk-off flows and falling US bond yields have been positive for the Japanese currency.
On Friday, Japan will print its household spending, industrial production, and CPI readings. Improvements could be enough to give the yen another boost on weaker expectations of additional BOJ easing. For today, US final GDP data and political headlines could also influence yen flows.
By Kate Curtis from Trader’s Way
EURUSD has been selling off recently but it could be approaching a turning point as it nears the bottom of the longer-term ascending channel visible on the 4-hour time frame. Price could test support at the 1.0650 minor psychological level and bounce right back up to the resistance at 1.0950 to 1.1000.
Stochastic is deep in oversold territory, which means that sellers are already exhausted. Once the oscillator turns higher and climbs out of the oversold area, buying pressure could kick in and keep losses contained. However, if selling pressure persists, EURUSD could break below the channel support and start a downtrend.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. Price broke below the 100 SMA dynamic support to reflect some bearish momentum but it could still find support at the 200 SMA dynamic inflection point near the bottom of the channel.
Economic data from the euro zone turned out weaker than expected, with the Spanish flash CPI showing a 2.3% gain versus the projected 2.6% increase and the German preliminary CPI up 0.2% versus 0.4%. This led traders to doubt that the ECB can sustain its shift to a less dovish stance with weaker inflationary pressures in play.
To top it off, Brexit-related uncertainties could continue to dampen the shared currency’s gains as forcing the UK to give up access to the single market could also have repercussions for euro zone trade activity. UK net lending to individuals came in line with expectations but BBA mortgage approvals came up short.
German retail sales data is due today and a 0.7% rebound is eyed. German unemployment change is also due, along with French consumer spending and preliminary CPI. As for the UK, the final GDP reading for Q4 is lined up, along with the current account balance. No revisions are expected for the 0.7% growth figure.
By Kate Curtis from Trader’s Way
