EURJPY failed in its last few attempts to break past the 123.00 area, creating a double top formation on its 4-hour chart. Price has yet to break below the neckline at the 118.00 major psychological mark before confirming the longer-term drop. If that happens, price could fall by around 500 pips or the same height as the chart formation.
The 100 SMA is above the longer-term 200 SMA on this chart so the path of least resistance is still to the upside. However, the moving averages could be oscillating, which suggests that range-bound conditions might persist and support at 118.00 could hold.
Stochastic is dipping into the oversold area, which signals that sellers are getting tired and might let buyers take over. In that case, a bounce back to the range resistance at 123.00 could take place or at least until the middle around 120.50 to 121.00.
Economic data from the euro zone turned out mostly weaker than expected last week, with headline flash CPI down from 2.0% to 1.5% versus the 1.8% forecast and the core CPI down from 0.9% to 0.7%. German retail sales and unemployment change data turned out stronger than expected but data from France fell short of consensus.
As for the yen, Japanese reports also turned out mixed but the lower-yielding currency is taking advantage of weaker US bond yields and the pickup in risk aversion. Household spending is down 3.8% year-over-year versus the projected 1.6% drop while preliminary industrial production turned out stronger than expected.
Earlier today, Japan’s Tankan survey printed mixed results as the manufacturing component improved from 10 to 12 versus the estimated reading of 14 while the non-manufacturing component rose from 18 to 20, outpacing the consensus at 19.
USDCAD has been moving sideways on its 1-hour time frame, bouncing off support at the 1.3285 area and resistance at 1.3400. Price is currently testing the top of the range at the moment and if it holds as a ceiling, another drop to the range support could be due.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that the range resistance is more likely to hold than to break. Stochastic is indicating overbought conditions and is turning lower, also hinting that sellers could take price back down to 1.3285.
However, if a breakout occurs, price could head north by an additional 100 pips or the same height as the chart formation. Similarly a break lower could push USDCAD lower by 100 pips as well.
Economic data from the US has been in line with expectations as the ISM manufacturing PMI fell from 57.7 to 57.2 as expected. The sub-index for prices advanced from 68.0 to 70.5, outpacing the consensus at 68.5, while the employment component also increased. Indices for production and inventories were down.
In Canada, the BOC Business Outlook Survey indicated optimism among respondents that domestic demand is picking up and that upward pressures are seen on price levels and hiring. However, the Loonie was dragged down by the dip in crude oil as traders await the latest batch of inventory reports.
Both the EIA and API reports reflected a slower than expected build in stockpiles for the other week so a similar outcome could give a boost to crude oil and the Canadian dollar. On the other hand, another strong increase could revive oversupply concerns. FOMC minutes, NFP data, and Canadian jobs figures are due later on in the week.
USDCAD recently broke out of its range and reached the 1.3450 minor psychological resistance before pulling back down to the broken resistance. Applying the Fib tool on the latest swing low and high shows that the 38.2% level is close to the area of interest and might keep losses in check.
If so, USDCAD could head back to the swing high or much higher. However, the 100 SMA is still below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. Stochastic is indicating oversold conditions and is turning higher, though, suggesting that bullish pressure could return. A bit of bullish divergence can be seen as well since price made higher lows while stochastic had lower lowers.
Economic data from the US turned out stronger than expected as the trade balance printed a narrower deficit due to stronger export activity. As for Canada, its trade balance slipped from a surplus of 0.4 billion CAD to a deficit of 1.0 billion CAD.
The FOMC minutes are up for release in the US trading session and hawkish remarks could allow the dollar to regain ground. On the other hand, disappointment over the lack of conviction when it comes to future rate hikes could mean losses for the US currency.
The US ISM non-manufacturing PMI and ADP non-farm employment change are also lined up, and these could provide hints on how the NFP report due on Friday could turn out. Meanwhile, US crude oil inventories data could show a draw of 0.1 billion barrels in stockpiles which might be positive for crude oil and the correlated Loonie.
By Kate Curtis from Trader’s Way
GBPAUD formed lower highs and higher lows, creating a symmetrical triangle formation on the 4-hour time frame. Price is starting to break past the triangle resistance, signaling that pound bulls are taking control of price action and could push for more gains.
Stochastic is heading north to show that buyers are on top of the game, but the oscillator is nearing the overbought zone to signal potential weakness in buying pressure. If sellers take over, price could pull back to the top of the triangle or probably even make another move towards support.
The 100 SMA is below the 200 SMA, also indicating that the path of least resistance is to the downside. In addition, the 100 SMA seems to be holding as dynamic resistance at the moment.
UK data came in stronger than expected as the services PMI climbed from 53.3 to 55.0, higher than the consensus at 53.5. Prior to this, the RBA statement turned out less upbeat than expected as the central bank emphasized the weakness in the jobs sector. Australian retail sales also missed expectations while the trade balance came in stronger than expected.
There’s not much in the way of top-tier data from the UK or Australia today so consolidation could still take place. However, China just reported a weaker than expected Caixin services PMI, which could signal weaker demand for Australia’s raw material products. UK manufacturing production and a speech by BOE Governor Carney are lined up on Friday.
GBPUSD has formed lower highs and higher lows on its 1-hour time frame, creating a symmetrical triangle pattern that could be due for a breakout soon. Price is currently testing the triangle support at 1.2460, still trying to decide whether to go for a bounce or a break.
A candle closing below the 1.2450 minor psychological level could be enough to confirm a break lower, which could set off a longer-term drop for the pair. Note that the chart pattern is approximately 200 pips tall so the resulting breakdown could be of the same size. Similarly, a break past the triangle resistance around the 1.2500 mark could set off a 200-pip climb.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. However, the gap is pretty close so moving averages could be oscillating to indicate range-bound conditions. Stochastic is heading south so there’s some selling pressure left before it indicates oversold conditions.
Event risks for this trade setup include the release of UK manufacturing and industrial production reports. The former could show a 0.3% gain while the latter is slated to post a 0.2% uptick. The goods trade balance is also due, along with the UK Halifax HPI.
The bigger catalyst could be the US NFP release as this could be indicative of future Fed policy changes. Analysts are expecting to see an increase of 174K in hiring, with leading indicators such as the ADP non-farm employment change report and the ISM manufacturing PMI surveys showing mixed signals.
GBPUSD had previously been trading inside a range with support at 1.2100 and resistance at 1.2700. Just recently, price made an upside breakout, signaling that further gains are likely. The rectangle is 600 pips tall so the resulting uptrend could be of the same size.
In addition, a bullish flag appears to have formed, also serving as a continuation signal. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, and the gap between the moving averages is widening to reflect stronger buying pressure.*
Stochastic has been on the move down but is turning higher once more to indicate a return in bullish momentum. Still, a pullback to the broken range resistance around 1.2700 could be possible before price resumes its climb.
The French elections over the weekend left Macron and Le Pen as frontrunners for the next set of polls in May, allowing European pairs to stage a relief rally on hopes that Macron could take the lead. Meanwhile, the recently announced UK snap elections has been positive for the British currency on hopes of a new Brexit strategy.
There are no major reports due from the UK today while the US has a speech by dovish member Kashkari. Later on in the week, both the UK and the US will print their preliminary Q1 2017 GDP readings.
GBPJPY recently had lower highs and found support at the 137.00 major psychological level, creating a descending triangle pattern. Price just recently broke above the resistance at 139.00, indicating that bulls are taking control of price action. The chart pattern is approximately a thousand pips tall so the resulting breakout could last by the same amount.
However, the 100 SMA is still below the 200 SMA on this chart so the path of least resistance could be to the downside and a pullback to the broken triangle resistance at 138.00-139.00 could take place. In addition, stochastic is turning down from the overbought zone to show that sellers are regaining control of price action.
The outcome of the first round of the French elections turned out positive for European markets, adding to the already strong bullish pressure on the pound spurred by the announcement of the UK snap elections. The main event risk for the pound might be the UK preliminary GDP release later in the week as analysts are expecting to see a slightly weaker 0.4% growth figure.
As for the yen, the BOJ statement could also pose some risks especially if the central bank starts jawboning the yen. After all, a strong currency isn’t good for the country’s exports and domestic inflation so the BOJ might be keen on dampening the yen’s gains.
EURUSD is moving inside an ascending channel on its 4-hour chart and is currently approaching the resistance at 1.0950 to 1.1000. If this area keeps gains in check, the pair could head back to support at the 1.0700 major psychological level or at least until the mid-channel area of interest.
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 is more likely to hold than to break. The moving averages are close to the bottom of the channel, adding to its strength as a potential floor. Stochastic is already in the overbought zone, which means that buyers might already be exhausted and willing to let sellers take over.
There are no major reports due from the euro zone today so the main event risk might be Trump’s tax reform announcement. If market watchers are unimpressed by the details or likelihood that the changes will be implemented by the end of the year, the dollar could wind up giving up more ground against its counterparts. Data from the US turned out mixed recently, with housing data coming in stronger than expected and consumer confidence falling short.
As for the euro, the optimism after the first round of the French elections continues to keep the shared currency supported. To top it off, polls continue to show a widening lead in favor of Macron, lowering the odds of a Le Pen victory and a Frexit.
USDCAD has formed higher lows on its 4-hour time frame, moving above a new ascending trend line connecting the lows since mid-February. Price found resistance at the 1.3650 minor psychological level and seems to be in the middle of a correction.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 38.2% level lines up with an area of interest or former resistance at the 1.3500 major psychological level. The 100 SMA just crossed above the 200 SMA to suggest that the path of least resistance is to the upside.
Stochastic is just turning down from the overbought region, though, indicating that buyers are taking a break and letting sellers take over. In that case, a larger pullback to the trend line or 61.8% Fib near the moving averages could be possible.
Canadian retail sales data turned out mixed as the core reading came in better than expected while the headline figure fell short of estimates. The CMHC warned that property markets in Toronto could be overheating but the US crude oil inventories report showed a larger than expected draw in stockpiles, easing oversupply concerns for the commodity.
Meanwhile, the Trump tax reform plan turned out disappointing for dollar bulls as it didn’t contain as many details as expected. Also, the White House announcement on Trump agreeing not to terminate NAFTA for now is leading to short-term gains for CAD.
USDJPY has been on a climb recently but zooming out to the longer-term charts shows that it’s still on a downtrend. Price is moving inside a descending channel pattern on its daily and 4-hour time frame but is in the middle of a correction at the moment.
Using the Fib tool on the latest high and low shows that the 61.8% level coincides with the channel resistance around the 112.50 minor psychological mark. This also lines up with a former support zone, which could hold as resistance.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Once the selloff resumes, the pair could test the swing low at 108.00 or move down to the channel support. Stochastic is heading south from the overbought zone to show that sellers are in control of price action.
Economic data from Japan came in mixed earlier today as household spending and preliminary industrial production came in weaker than expected while inflation readings were mostly strong. Retail sales also beat expectations with a 2.1% year-over-year gain versus the projected 1.6% increase.
The main event risk for the dollar is the advance GDP release, which might show a slower growth figure of 1.3% compared to the previous period’s 2.1% gain. The price index and employment cost index are likely to influence inflation expectations as well. Chicago PMI and speeches by FOMC members Brainard and Harker are lined up.
EURAUD has been trending higher recently but profit-taking could happen as the pair is testing the top of its ascending channel on the 4-hour chart. If so, the pair could head back to the channel support at the 1.4300 area for a quick pullback.
This support area lines up with the 100 SMA dynamic inflection point, adding to its strength as a floor. The 100 SMA is above the longer-term 200 SMA on this time frame, confirming that the path of least resistance is to the upside.
Stochastic is on the move down to show that sellers are in control of price action. This also signals that the channel resistance around 1.4650 could keep gains in check for the time being and that a correction is due.
Over the weekend, China printed its official PMI readings and reported declines in both manufacturing and non-manufacturing sectors. The former dipped from 51.8 to 51.2 versus the projected fall to 51.7, reflecting a much slower pace of industry expansion than expected. The latter dropped from 55.1 to 54.0.
European banks are closed for the holiday today so lower liquidity is expected and no major reports are lined up. In Australia, the RBA statement is coming up on Tuesday so traders might price in their expectations as early as today. Later in the week, expectations for the second round of French presidential elections could have an impact on euro movement.
GBPAUD recently broke to the upside from a symmetrical triangle formation and is now breaking past a double bottom neckline around 1.7100. This would mean strong bullish signals for the pair, as the chart patterns are approximately a thousand pips in height.
The 100 SMA is still below the longer-term 200 SMA on the daily time frame so the path of least resistance is to the downside. However, the gap between the two is narrowing to indicate a potential upside crossover and draw more bulls in the game.
Still, it’s worth noting that stochastic is indicating overbought conditions at the moment and could turn lower to reflect a pickup in selling pressure. In that case, GBPAUD could still make it back down to the bottoms at 1.6000 if selling pressure kicks in.
The RBA is scheduled to announce its monetary policy statement today and no changes to interest rates are eyed. In their earlier statement, the RBA sounded less upbeat about the economy as they acknowledged the slowdown in hiring.
Aside from that, PMI reports from China turned out weaker than expected. Over the weekend, both the official manufacturing and non-manufacturing PMI printed steeper than expected declines to reflect a slowdown in industry growth. Earlier today, the Caixin version of the manufacturing PMI indicated a fall from 51.2 to 50.3 versus the projected rise to 51.4.As for the pound, UK PMI readings are also due this week and more signs of resilience in the economy even with Brexit concerns could keep traders bullish on the currency.
EURJPY has formed higher lows and higher highs, creating a rising wedge formation on its 1-hour time frame. A breakout in either direction is possible, setting the tone for longer-term trends for this pair.
A move below the 122.30 wedge support could be enough to confirm that the pair is in for a selloff or perhaps a larger pullback from its ongoing climb. A break past the 122.65 wedge resistance could indicate that a steeper uptrend is underway.
The 100 SMA is above the longer-term 200 SMA on this 1-hour time frame so the path of least resistance is to the upside. However, stochastic is indicating overbought conditions, which means that euro bulls are tired. If the oscillator heads south, price could follow suit.
Economic data from the euro zone turned out mostly in line with expectations so far this week, and unemployment change reports from Germany and Spain are still lined up for today. However, traders could turn their focus to the second round of French elections on Sunday as polls are suggesting a narrowing lead for Macron and rallies are getting violent.
As for the yen, banks are closed for the holidays in the next couple of days so liquidity is expected to be low. Still, the pickup in risk appetite has proved bearish for the Japanese currency and changes to US bond yields could impact price action as well.
GBPUSD recently broke past its range resistance around the 1.2700 handle and found resistance at 1.2950. Price could be making a pullback to the broken resistance, and applying the Fib tool on the daily swing low and high shows that this area lines up with the 38.2% retracement level.
In addition, a rising trend line can be drawn to connect the lows since March this year and this support area also lines up with the Fibs and the 200 SMA. For now, the 100 SMA is below the 200 SMA to suggest that the path of least resistance is to the downside but the gap is narrowing to show that an upward crossover might be due.
Stochastic is heading south from the overbought region to show that bearish pressure is in play. This could keep the correction going until the 1.2650-1.2700 area, with the 61.8% Fib near the 100 SMA as the line in the sand for the uptrend.
Strong US leading jobs reports and the FOMC statement spurred dollar demand as both suggested that the US central bank could stay on track towards hiking rates two more times this year. Fed officials shrugged off the Q1 GDP miss and assessed that growth could continue at a moderate pace and that inflation is likely to hit its 2% target in the medium-term. The ADP jobs figure came in at 177K versus 175K while the ISM non-manufacturing PMI rose from 55.2 to 57.5, higher than the 56.1 consensus.
As for the pound, UK PMI readings have also been beating expectations, with both manufacturing and construction sectors reporting stronger expansions rather than a slowdown. The services PMI is due next and this usually has a stronger impact on the currency. Analysts are expecting to see a drop from 55.0 to 54.6 but an upside surprise might be in the cards.
AUDUSD formed lower highs and found support at the .7500 major psychological level, creating a descending triangle chart pattern. Price just broke below the triangle support, signaling that a downtrend is due.
The chart pattern is approximately 250 pips tall so the resulting selloff could last by the same amount. The 100 SMA is below the 200 SMA and lines up with the triangle resistance, indicating that the path of least resistance is to the downside.
Stochastic is already indicating oversold conditions so buyers might take over from here. If so, a pullback to the broken triangle support could be underway before more bears join in on the action.
Economic data from Australia has been weaker than expected as the trade surplus narrowed from 3.66 billion AUD to 3.11 billion AUD, lower than the estimated 3.33 billion AUD figure. To top it off, official and Caixin PMI readings from China from both the manufacturing and non-manufacturing sectors printed weaker than expected results and indicated a slowdown in expansion, likely dampening demand for Australia’s commodity exports down the line.
Meanwhile, the dollar has gained support after the FOMC retained their upbeat economic outlook, keeping rate hike expectations in play. Also, the healthcare bill passed the House of Representatives, reflecting a small victory for the Trump administration and their fiscal policy agenda. US NFP data is due today and leading indicators have been suggesting an upside surprise so there could be room for more dollar rallies.
USDCAD has been trading inside an ascending channel on its long-term time frames and is currently testing resistance. If this holds, price could make a correction to support and the nearby Fib levels. In particular, the 61.8% retracement level coincides with the 1.3450 minor psychological mark and a former resistance area.
The 100 SMA is above the longer-term 200 SMA on the daily chart so the path of least resistance is to the upside. In addition, both moving averages are close to the channel support, adding to its strength as a potential floor.
Stochastic is indicating overbought conditions and is turning lower to show that bearish pressure is coming into play. Price could follow suit and could continue dropping until the oscillator reaches the oversold area and turns back up.
US economic data turned out stronger than expected on Friday as the NFP report indicated a 211K increase in hiring versus the projected 194K figure. However, there were downward revisions to earlier reports. The jobless rate improved from 4.5% to 4.4% instead of rising to the estimated 4.6% reading while average hourly earnings increased 0.3% as expected.
Meanwhile, Canada printed a 3.2K increase in hiring, short of the estimated 20K gain and the earlier 19.4K increase. The jobless rate improved from 6.7% to 6.5% instead of staying unchanged. The Ivey PMI ticked up from 61.1 to 62.4, slightly higher than the projected 62.3 reading. Crude oil price changes could also influence Loonie price action from here.
NZDUSD could be in for a reversal from its selloff as the pair formed a double bottom pattern on its 1-hour chart. Price still has to test and breakout from the neckline at the .6960 level before confirming that an uptrend is in order.
The chart pattern is approximately 100 pips tall so the resulting breakout could be of the same size. The 100 SMA just crossed above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. Also, stochastic is pointing up and heading north so NZDUSD might follow suit.
However, US economic reports have been mostly stronger than expected in the past few days as the NFP report printed a higher than expected 211K gain in hiring versus the estimated 194K reading. Also, the Fed labor market conditions index enjoyed a large upgrade from 0.4 to 3.6 in March.
The main catalyst for this short-term setup might be the RBNZ decision, which could show a slight shift to a less dovish bias. Economic reports from New Zealand have been coming in mostly stronger than expected while the latest Global Dairy Trade auctions have reflected gains in dairy prices.
No actual policy changes are expected from the RBNZ this month so traders will pay close attention to any changes in rhetoric. Meanwhile, the US has its CPI and retail sales reports lined up at the end of the week.
NZDUSD has formed lower highs and higher lows on its 1-hour chart, creating a symmetrical triangle pattern. Price just bounced off support and could be due for a move back to resistance.
The 100 SMA is below the longer-term 200 SMA on this chart so the path of least resistance is to the downside. However, the moving averages could simply be oscillating so range-bound conditions could persist.
Stochastic is on middle ground but is on the move up to show that buyers are in control of price action. If a breakout happens, the pair could move by an additional 100 pips or the same height as the triangle pattern.
The main catalyst for the move could be the upcoming RBNZ interest rate statement. No actual rate changes are expected for now but traders could get some clues on future policy action based on any shift in rhetoric. Economic data from New Zealand has been mostly upbeat so policymakers could signal that they’re not looking to cut rates anytime soon.
Only US import prices and the federal budget balance are lined up in the New York session so traders might turn their attention to political headlines. So far, North Korea’s announcement about another missile test has kept risk-taking in check and investors are also wary about Comey’s resignation.*
NZDUSD has been trading inside what appears to be a falling wedge pattern on its daily chart. Price is currently testing support and seems to be pushing for a break lower, indicating that a steeper selloff is about to happen. Stochastic has made it out of the overbought zone to suggest a return in buying pressure, but the oscillator appears to be having difficulty sustaining its climb.*
This wedge formation is approximately 600 pips tall so the resulting downtrend could be of the same size. 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 200 SMA lines up with the wedge resistance, adding to its strength as a ceiling in case the pair bounces back up.
A few hours back, the RBNZ made its interest rate decision and announced that it would be keeping rates unchanged at 1.75% as expected. The actual statement was not as upbeat as many expected, leading the Kiwi to tumble across the board. Policymakers also highlighted several uncertainties and gave no indication that they’re looking to hike soon.
Meanwhile, the dollar has enjoyed some support from mostly upbeat US medium-tier reports and hawkish Fed rhetoric. Rosengren reiterated his view that three more rate hikes seem reasonable this year and even though he’s not a voting member, US markets and bond yields closed mostly higher on these remarks.
Up ahead, US PPI and initial jobless claims are due but the bigger market-movers for the dollar might be the retail sales and CPI reports due on Friday. Only the Business NZ manufacturing index is lined up from New Zealand for the rest of the trading week but quarterly retail sales reports due over the weekend could lead to gaps in the next trading week.
