GBPAUD is moving inside an ascending channel connecting its highs and lows since mid-April. Price just bounced off the resistance and could be due for a test of support at the 1.7400 major psychological level.
Using the Fib retracement tool on the latest swing low and high shows that this support area lines up with the 38.2% level while the 50% level coincides with the channel support. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is more likely to resume than to reverse.
Stochastic is pulling up from the overbought zone to indicate that buyers are regaining control of price action. However, the gap between the moving averages is narrowing to suggest that bullish momentum is fading. A break below the lowest Fib around 1.7300 could be enough to indicate that a downtrend is about to take place.
The BOE statement turned out less hawkish than expected even as the central bank kept monetary policy unchanged. Policymakers warned that Brexit risks could weigh heavily on consumer spending and living conditions due to subdued wage growth and rising price levels.
Economic data also turned out weaker than expected, with manufacturing production down 0.6% and industrial production down 0.5%. There were no reports released from Australia then, allowing the Aussie to take advantage of the pickup in commodities. However, these gains could be returned as China reported a steep fall in iron ore prices again.
[I]By Kate Curtis from Trader’s Way[/I]
AUDUSD has been trending lower recently and is now moving inside a descending channel on its 4-hour chart. Price just bounced off support and is looking to pull back to the resistance at the .7450 minor psychological level.
This is in line with the 50% Fib and a broken support zone. A larger pullback could last until the channel resistance closer to the 61.8% retracement level and the 100 SMA dynamic resistance. This short-term MA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside.
Stochastic is also heading down from the overbought zone to indicate that selling pressure is about to pick up. If any of the nearby resistance levels hold, price could make its way back down to the swing low at .7325 or onto the channel support closer to the .7300 handle.
Economic reports from China and Australia have been mostly disappointing last week and the RBA statement did acknowledge these signs of a slowdown. Earlier today, China reported a lower than expected industrial production reading of 6.5% year-over-year versus the projected 7.0% gain and the earlier 7.6% increase. Fixed asset investment and retail sales also slowed significantly.
Over in the US, the dollar was bogged down by weaker than expected CPI and retail sales figures. Headline CPI came in at 0.2% versus 0.3% while core CPI printed a meager 0.1% uptick. Headline retail sales increased 0.4% versus 0.6% while core retail sales advanced by 0.3% versus 0.5% to signal that the consumer sector is not that strong yet.
By Kate Curtis from Trader’s Way
NZDUSD has been gaining ground recently but could be due to resume its drop as it approaches the channel resistance. Price has been trading inside a shallow descending channel with the top around the .6930 level.
If this keeps gains in check, the pair could head back down to support at the .6800 major psychological mark. The 100 SMA is below the longer-term 200 SMA on the 1-hour time frame, signaling that the path of least resistance is to the downside. However, stochastic is turning up from the overbought zone to suggest that buyers are trying to regain the upper hand.
Over the weekend, New Zealand printed stronger than expected quarterly retail sales figures. This allowed the Kiwi to recover after bulls were disappointed by the less hawkish than expected RBNZ statement last week. Up ahead, PPI data and the Global Dairy Trade auction could lead to more volatility. Analysts are expecting to see gains in producer prices, which would likely translate to higher consumer inflation down the line.
As for the US, traders are starting to doubt that the Fed can hike rates in June after the Empire State manufacturing index slid from 5.2 to -1.0 instead of improving to 7.2. Underlying data showed declines in new orders and shipments. Building permits and housing starts, along with industrial production and capacity utilization, are lined up from the US today.
By Kate Curtis from Trader’s Way
EURJPY is still trending higher and has recently broken past the resistance at the 124.50 minor psychological level. Price zoomed up close to the 126.00 resistance from there but could be due for a pullback before posting more gains.
Applying the Fibonacci retracement tool on the latest swing low and high reveals that the 61.8% retracement level lines up with the broken resistance that might now hold as support. The 100 SMA is above the 200 SMA to suggest that the uptrend could continue and is also close to the area of interest.
Stochastic is indicating oversold conditions so buyers could take over soon. A shallow correction could find support at the 38.2% Fib or 125.00 handle while a larger correction could last until the rising trend line support.
Euro zone economic data turned out mixed, with the region’s flash GDP coming in line with expectations of 0.5% growth and Germany’s ZEW economic sentiment posting a weaker than expected climb from 19.5 to 20.6 versus the consensus at 22.3. Euro zone trade balance and the region’s ZEW index came in better than expected.
In Japan, core machinery orders posted a meager 1.4% gain versus the projected 2.6% jump. Revised industrial production data is due next and no change from the preliminary 0.5% uptick is eyed.
Market sentiment and US bond yields appear to be influencing yen price action as well, with the latest national security issues in the Trump administration dampening demand for the dollar and keeping the yen supported. However, the North Korea situation remains an issue and could weaken support for JPY as well.
By Kate Curtis from Trader’s Way
GBPUSD has been trending higher recently, moving inside an ascending channel visible on its 1-hour and 4-hour charts. Price just bounced off support and could be due for a test of resistance from here.
The 100 SMA is above the longer-term 200 SMA on the 4-hour chart so the path of least resistance is to the upside. However, stochastic is approaching the overbought zone to indicate a return in selling pressure so the ceiling might still hold. If so, a pullback to the channel support at 1.2925-1.2950 could offer a better long entry level.
UK economic data has been mostly stronger than expected, with CPI readings indicating a strong surge in headline and core inflation. Jobs data was also upbeat as the claimant count came in at 19.4K versus the earlier 33.5K increase while the unemployment rate edged down from 4.7% to 4.6%. The average earnings index advanced from 2.3% to 2.4% as expected to reflect a bit of wage growth.
Meanwhile, the dollar is currently being weighed down by political headlines as the focus has shifted to Trump’s alleged intelligence information leak to Russia. An official probe has been ordered by the Justice Department, leading market watchers to worry that any fiscal reforms would likely be delayed by these issues. Initial jobless claims and the Philly Fed index are lined up today.
By Kate Curtis from Trader’s Way
GBPUSD enjoyed additional volatility recently but is still trading safely inside its ascending channel on the 1-hour time frame. Price just bounce off support and could be due for another test of resistance.
The 100 SMA is also above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, this short-term moving average lines up with the channel support, adding to its strength as a floor. However, stochastic is turning back down to suggest that another dip is possible.
Economic data from the UK has been stronger than expected this week. Headline and core CPI both beat expectations but traders had been wary of the consumer sector feeling the pinch from higher prices of goods. Jobs data still reflected upside momentum in hiring while the average earnings index and the latest retail sales figure reflected resilience among consumers.
However, the dollar made a pretty strong comeback in the latter sessions as the investigations on Trump’s alleged intelligence information leak to Russia went on. Other government officials attempted to reassure that progress is still being made in terms of fiscal policy reform, leading to a bounce in US equities as well.
In terms of data, US initial jobless claims and the Philly Fed manufacturing index beat expectations. Only the CBI industrial orders expectations index is due from the UK today and there are no reports due from the US.
By Kate Curtis from Trader’s Way
EURJPY recently broke below its short-term ascending trend line to indicate that a reversal from the uptrend is in order. Price dipped to the 122.50 minor psychological support then pulled back up to the broken support, which might now keep gains in check.
Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the broken support zone. However, the 100 SMA is still above the longer-term 200 SMA on the 1-hour chart so there may still be room for some gains.
Stochastic is already turning down from the overbought area to suggest that selling momentum is about to kick in. If so, EURJPY could make its way back down to the swing low or create new ones.
Over the weekend, the focus was back on Brexit issues as the UK said that it is not willing to pay the bill that the EU is charging. This led to speculations that talks or even the Brexit itself might get delayed, lending some support for the shared currency. There’s not much in the way of top-tier data from the euro zone today so traders might turn their attention to the speech by UK PM May.
As for the yen, Japan’s trade balance came in weaker than expected at 0.10 trillion JPY versus the consensus at 0.25 trillion JPY. To top it off, the earlier reading was downgraded to show a smaller surplus of 0.11 trillion JPY. Still, market sentiment and US bond yields could drive yen pairs around.
[I]By Kate Curtis from Trader’s Way[/I]
GBPAUD has formed lower highs and found support at the 1.7375 area, creating a descending triangle formation on its 1-hour time frame. This chart pattern is around 250 pips tall so a breakout in either direction could result in a rally or selloff of the same height.*
Price is currently testing support and could be due for a downside break as the 100 SMA is below the longer-term 200 SMA. However, the gap between the moving averages has narrowed to indicate a potential upside crossover that might draw more buyers to the mix. In addition, stochastic is pulling up from the oversold zone to reflect a return in bullish momentum.
The British pound is currently being weighed down by reports of an explosion in Manchester Arena in the UK, leading to 19 fatalities and at least 50 injured. To top it off, political risk is back in the spotlight as the UK could walk out of Brexit talks if the EU slaps them with a bill. Negotiations and the snap election are set to happen next month.
Meanwhile, concerns about the Chinese and Australian economies are starting to fade as the focus appears to be shifting back to geopolitical risks. There have also been no major reports out of Australia and China so far this week. Either way, changes in market sentiment could also be a driving factor for this pair moving forward.
By Kate Curtis from Trader’s Way
NZDJPY recently broke below a short-term rising trend line support and dipped close to the 76.00 mark. Price pulled up from there and looks ready to retest the broken support.
Applying the Fib tool on the latest swing high and low on the 1-hour chart shows that the 61.8% level lines up with the broken trend line, which might now hold as resistance. If so, NZDJPY could make its way back down to the swing low.
The 100 SMA is above the longer-term 200 SMA, though, so the path of least resistance is to the upside. However, stochastic has been indicating overbought conditions for quite some time and turning lower could draw more sellers to the game.*
The Kiwi has been one of the more resilient currencies lately, holding up well against the yen and dollar even when risk aversion picks up. After all, economic data from New Zealand has been mostly upbeat in the past couple of weeks, underscoring the RBNZ’s inclination to refrain from cutting rates in the near future.
However, the yen could draw more support if geopolitical uncertainties persist and risk aversion extends its stay in the financial markets. Apart from that, changes in dollar demand owing to Fed rate hike expectations could also push the yen around.
By Kate Curtis from Trader’s Way
EURAUD is still moving safely inside its short-term ascending channel and has recently pulled back to support again. Applying the Fib tool on the latest swing low and high shows that the channel bottom lines up with the 50% Fibonacci retracement level near the 1.4900 major psychological mark.
The 100 SMA is above the longer-term 200 SMA on the 1-hour chart so the path of least resistance is still to the upside. In addition, the 100 SMA is moving close to the Fibs and channel support, adding to its strength as a potential floor. Also the gap between the moving averages is widening to reflect stronger bullish pressure.
Stochastic seems to be climbing out of the oversold region to suggest a return in bullish pressure. If you’re waiting for more confirmation, a break past the small descending triangle resistance around 1.4950 could be indicative of upside momentum.
Moody’s recently downgraded China’s outlook from “stable” to “negative” on forecasts of eroding financial strength and slowing growth. The credit rating agency noted that rising government debt levels won’t be enough to keep overall economic performance supported, signaling even weaker demand for Australia’s commodity exports down the line.
There are no reports due from Australia for the rest of the week so market sentiment could push AUD around. In the euro zone, PMI readings have been mostly stronger than expected while business and consumer sentiment figures from Germany have indicated improvements. French and German banks are closed for the holiday today.
By Kate Curtis from Trader’s Way
GBPAUD failed in its last two attempts to break below support around 1.7275, creating a double bottom pattern with the neckline at 1.7415. Price has yet to break past the neckline before confirming this reversal formation but if that happens, the pair could *head north by an additional 140 pips or the same height as the chart pattern.
However, the 100 SMA is below the longer-term 200 SMA and seems to be holding as dynamic resistance, which indicates that the path of least resistance is to the downside. Also, stochastic is heading down to show that sellers are in control of price action at the moment.*
The British pound was one of the weaker performers of the day as the UK second estimate GDP featured a downgrade from 0.3% to 0.2% instead of holding steady. This cast doubts on traders’ outlook that the UK economy could stay resilient even with Brexit going on, adding to the current list of issues already dampening the currency’s gains.
Meanwhile, the Australian dollar could be poised to benefit from a rebound in commodities after the OPEC decided to extend their output deal by another nine months. Although crude oil reacted by selling off on profit-taking, this decision could keep oversupply concerns in check and support other commodities as well.
By Kate Curtis from Trader’s Way
USDCAD has pulled back from its rally to the 1.3785 area to test the Fibonacci retracement levels visible on its daily chart. This lines up with a former resistance level at the 1.3400 area that might now hold as support.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, these moving averages are close to the 61.8% Fib, which might be the line in the sand for the uptrend.
Stochastic is already indicating oversold conditions and is turning higher, suggesting that buyers could regain control of price action. RSI is pulling up as well so USDCAD might follow suit.
Economic data from the US came in mostly stronger than expected last week, with only the core durable goods orders figure falling short. This report printed a 0.4% drop versus the projected 0.4% uptick. However, traders appear to have focused on the upside surprise in preliminary Q1 GDP, which was upgraded from 0.7% to 1.2%, outpacing the estimated 0.9% growth figure.
Meanwhile, the Loonie has gained a lot of support from the OPEC decision to extend its output deal by nine months as expected. This could keep a lid on global supply and allow prices to stay afloat even as demand weakens, something that is positive for the Loonie.
By Kate Curtis from Trader’s Way
EURGBP has been trending lower on the daily time frame and is currently testing the resistance of its descending channel. If this keeps gains in check, price could head back down to support at the .8300 major psychological level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages is pretty narrow so a crossover could happen anytime.
Stochastic is already indicating overbought conditions and appears ready to turn lower, possibly drawing sellers back to the game. On the other hand, sustained buying pressure could lead to a break past the channel resistance at .8700 and a reversal from the selloff.
In his latest testimony, ECB head Draghi acknowledged that economic risks have subsided but warned that headline inflation could remain subdued. He also mentioned that an extraordinary amount of monetary policy support is needed, leading to some euro weakness.
Meanwhile, the latest poll from ComRes indicated a 12-point lead for Theresa May’s Conservative party at 46% versus the 34% of Labour. This is a wider gap compared to the YouGov results at a 5-point lead, assuring market watchers that the UK can avoid additional political uncertainty ahead of Brexit negotiations.
By Kate Curtis from Trader’s Way
GBPNZD has sold off quite sharply recently but this dive could come to a halt as price nears an area of interest. Recall that the pair also broke past the neckline of a double bottom pattern, indicating that further gains are in the cards.
Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level lines up with the former resistance and neckline at the 1.7700 major psychological mark, which might now hold as support. If so, the pair could make its way back up to the swing high near 1.9000.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside while stochastic is indicating oversold conditions. However, the gap between the moving averages is narrowing to indicate that a downward crossover and pickup in bearish pressure could come into play.
The latest poll from YouGov suggests a narrowing lead for PM May’s Conservative Party and indicated that it would fall 16 seats short of securing the majority. This could mean more political uncertainty down the line and a weaker bargaining stance for the UK government in Brexit talks.
Meanwhile, the RBNZ just released its Financial Stability Report and mentioned that risks are fading. The central bank reiterated that the country’s financial system remains sound but that risks stem from higher funding costs. The RBNZ also noted that house price pressures are slowing but are still elevated relative to income and rent.
By Kate Curtis from Trader’s Way
NZDJPY Range Setup (Jun 01, 2017)
NZDJPY has been moving sideways, bouncing off support around the 78.00 major psychological level and resistance at 78.85. Price just got rejected on its test of the resistance and could be setting its sights back on support.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. In addition, the 100 SMA appears to be keeping losses in check at the moment since it lines up with the mid-range area of interest.
Stochastic is on the move down to show that sellers are still in control of price action. However, the oscillator is nearing the oversold area to show that buyers might be ready to get back in the game soon.
The latest RBNZ Financial Stability Report reflected lower risks in the housing sector as price pressures are reportedly abating. The report also acknowledged improving global financial conditions. New Zealand is due to release its quarterly overseas trade index next and a 4.0% increase is eyed.
As for the yen, Japan is set to release its capital spending figure and might show a 3.9% increase, slightly higher than the previous 3.8% figure. The final manufacturing PMI is also lined up and no changes to the initial 52.0 figure is expected.
By Kate Curtis from Trader’s Way
GBPJPY Channel Resistance (Jun 02, 2017)
GBPJPY has been trending lower on its 1-hour chart, moving inside a descending channel formation. Price is currently testing the resistance and could be due for a move back to support around 140.50.
The 100 SMA is below the longer-term 200 SMA on this time frame, indicating that the path of least resistance is to the downside. In addition, the 200 SMA coincides with the channel resistance, adding to its strength as a ceiling.
Stochastic is already hovering around the overbought zone to indicate that buyers are tired from the rally and that sellers might take over. On the other hand, if bulls stay in control, a break past the resistance at 143.50 could mark the start of an uptrend.
Economic data from the UK showed a bit of a slowdown, with the manufacturing PMI down from 57.3 to 56.7, just slightly above the consensus at 56.5. Nationwide HPI showed a 0.2% drop in price levels versus the projected 0.2% uptick.
In Japan, reports have printed stronger than expected results. Capital spending is up 4.5% versus 3.9% in the first quarter while the final manufacturing PMI was upgraded from 52 to 53.1 to reflect a stronger pace of industry expansion.
Japan’s consumer confidence index is due next and an improvement from 43.2 to 43.6 is expected. In the UK, the construction PMI is due and a drop from 53.1 to 52.7 is eyed.
By Kate Curtis from Trader’s Way
EURCAD Rising Wedge (Jun 05, 2017)
EURCAD has formed higher lows and higher highs, consolidating in a rising wedge formation on its 4-hour chart. Price seems to have bounced off the resistance at the 1.5250 minor psychological level and could be due for a test of support.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This could either mean that an upside breakout is due or that the wedge support would keep losses in check. Note that stochastic is indicating overbought conditions and is turning lower to indicate a return in bearish pressure.
Economic data from the euro zone has been mostly stronger than expected last week but Draghi has stayed cautious in his recent speeches. This suggests that this week’s ECB statement might not contain any major shifts in bias, especially since the flash CPI readings turned out weaker than expected.
Meanwhile the Loonie has still been under selling pressure as oil failed to stage a strong rebound even after the OPEC decided to extend their output deal by nine months. Traders could continue to pay attention to inventories data from the API and EIA to see if the reductions in supply could continue.
By Kate Curtis from Trader’s Way
EURJPY Symmetrical Triangle (Jun 06, 2017)
EURJPY has formed lower highs and higher lows, creating a symmetrical triangle formation visible on its 4-hour time frame. Price just bounced off the resistance and is on its way to testing support at the 124.00 major psychological mark.
The 100 SMA is above the longer-term 200 SMA on this time frame so it’s more likely for support to hold than to break. Also, the 100 SMA appears to be holding as dynamic support at the moment.
Stochastic is indicating oversold conditions, which means that sellers might book profits soon and let buyers take over. Once the oscillator pulls up from the oversold area, buying pressure could take price back up to the resistance at 125.00.
Most euro zone banks have been closed in observance of Whit Monday and data has been less upbeat than usual. These are just the final services PMI readings from the top economies, though, and the bigger event risk is likely the ECB statement due later this week.
As for the yen, the Japanese currency has gained some support from a weaker dollar when the US NFP disappointed last week. Japanese average cash earnings data is due next and a 0.3% increase is eyed.
By Kate Curtis from Trader’s Way
EURNZD Reversal Formation (Jun 07, 2017)
EURNZD seems to be ready to head further south as it formed a head and shoulders pattern on its 1-hour chart. Price has yet to break below the neckline at 1.5650 before confirming that further losses are in the cards.
The chart pattern is approximately 600 pips tall so the resulting breakdown could be of the same size. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside.
However, the gap between the moving averages is narrowing to reflect weaker bullish pressure and a potential downward crossover. Still, stochastic is indicating oversold conditions, which means that sellers might book profits from here and let buyers regain control.
Earlier today, New Zealand reported a 0.6% gain in dairy prices during the latest GDT auction. This marks the sixth consecutive increase, which means that the dairy industry has been on a good streak for the past three months. The ANZ commodity price index in New Zealand also chalked up a 3.2% rebound over the earlier 0.2% drop.
In Europe, the upcoming snap elections in the UK is weighing on investor sentiment. Traders are also on edge ahead of the ECB decision, although the central bank might sound less dovish this time owing to another round of data improvements.
By Kate Curtis from Trader’s Way
EURCAD Rising Wedge Still Intact (Jun 08, 2017)
EURCAD recently sold off to the bottom of its wedge formation on the 4-hour time frame then bounced right back to the top. Another test of the resistance could be underway, but a breakout might be looming soon as the consolidation is getting tighter.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. If price breaks higher, it could rally by an additional 400 pips or roughly the same height as the chart formation. Stochastic is on the move up, also indicating that buyers are in control of price action.
Earlier in the day, there were rumors that the ECB would cut its inflation outlook in their upcoming monetary policy statement. However, the shared currency quickly recovered from the drop that ensued.
As for the Loonie, the surprise buildup of 3.3 million barrels in oil stockpiles revived oversupply concerns as analysts had been expecting to see a reduction of 3.1 million barrels. Canadian building permits also printed weaker than expected results with a 0.2% dip versus the projected 2.4% gain.
Up ahead, the ECB statement could spur a breakout for this pair as the tone of Draghi’s testimony could have some clues on future policy moves. Canada has NHPI and housing starts due, along with a speech by BOC Governor Poloz.
By Kate Curtis from Trader’s Way
