GBPAUD Support Turned Resistance (Oct 11, 2017)
GBPAUD previously broke through support at the 1.6950 minor psychological level then fell to a low of 1.6785 before making a correction. Applying the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the broken support is close to the 38.2% level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to resume. The 200 SMA could also hold as a dynamic resistance level, but the gap between the moving averages is narrowing to signal a potential upward crossover. If this materializes, bullish pressure could kick in and trigger a climb past the Fib levels.
Stochastic is on the move down, though, which means that there’s some bearish pressure in play. If any of the Fib levels keep gains in check, price could fall back to the swing low or lower.
Data from the UK has been mixed, with manufacturing production beating expectations and the goods trade balance showing a wider than expected deficit due to slower exports. The pound has also been more vulnerable to Brexit-related updates, especially since Prime Minister May appears to be losing support and unable to inspire confidence in the economy.
In Australia, the Westpac consumer sentiment reading improved from 2.5% to 3.6% to reflect stronger optimism. Data, however, wasn’t so upbeat last week as retail sales posted a surprise 0.6% drop while trade balance components weren’t promising either.
Looking ahead, there are no major reports lined up from the UK and Australia, although China still has its trade balance due. Earlier this week, the Caixin services PMI turned out to be a disappointment and this is keeping a lid on the Aussie’s rallies. Another downbeat figure from its top trade partner could mean more Aussie weakness while an upbeat result could spur gains.
By Kate Curtis from Trader’s Way
AUDUSD Support Turned Resistance (Oct 12, 2017)
AUDUSD recently fell through support at the .7800 level then dipped to .7750 before pulling back up. Applying the Fibonacci retracement tool on the latest swing high and low on the 4-hour time frame shows that the 23.6% level lines up with the broken support that might now hold as resistance.
A larger pullback could last until the 38.2% Fib close to the 100 SMA or the 50% Fib near the 200 SMA. The short-term moving average is below the longer-term moving average to signal that the path of least resistance is to the downside, which means that the selloff is likely to resume.
Stochastic is pointing up to signal that bullish pressure is in play but the oscillator is dipping into overbought territory to suggest rally exhaustion and a return in selling pressure. In that case, AUDUSD could fall back to the swing low or lower.
The FOMC minutes turned out less hawkish than expected as a good number of Fed officials still expressed concerns about another hike. In particular, many policymakers worried that the drop in inflation might not be transitory after all. Still, the committee concluded that a gradual pace of tightening would be appropriate as long as the economy stays at its current pace.
The next event risk for the dollar is the release of the CPI and retail sales reports on Friday. This should give market watchers a better idea of how inflation is actually faring, with a downbeat result likely to dampen December hike forecasts. The upcoming PPI release should have some clues on how the CPI figures might fare.
As for the Australian dollar, the lack of top-tier reports from Australia could keep it sensitive to market sentiment. Data from China hasn’t been as impressive so expectations of weaker demand for Australia’s products could stay in play.
By Kate Curtis from Trader’s Way
EURJPY Short-Term Correction Setup (Oct 13, 2017)
EURJPY previously broke past the resistance at the 132.50 to 133.00 levels then zoomed up to a high of 133.46. Price has since pulled back to the broken resistance and the Fib tool on the latest swing low and high on the 1-hour time frame shows that the 38.2% level lines up with the area of interest.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the rally is more likely to continue than to reverse. The 100 SMA is also close to the 50% Fib, which might also hold as support in a deeper pullback, while the 200 SMA is slightly above the 61.8% Fib at 132.50.
Stochastic is pulling up from oversold levels to indicate a return in bullish momentum that might take EURJPY up to the swing high or higher. However, a break below the Fibs or moving averages could force it down to the swing low near 132.00 or lower.
The euro got a bit of a boost from ECB official Coeure’s warning on how prolonging the asset purchase program could pose risks to financial stability. However, the shared currency gave up some of those gains when Governor Draghi lauded the central bank’s negative interest rates and QE efforts.
Economic reports from the euro zone turned out mixed as industrial production beat expectations with a 1.4% gain versus the estimated 0…6% increase while the French final CPI was downgraded to show a larger 0.2% downtick from the earlier 0.1% dip.
Data from Japan was also mixed as PPI came in line with expectations of a 0.1% gain while the tertiary industry activity index surprised to the downside with a 0.2% drop versus the estimated 0.1% uptick. There are no reports due from Japan today while the euro zone has the German final CPI lined up.
By Kate Curtis from Trader’s Way
NZDUSD Neckline Retest (October 16, 2017)
NZDUSD previously broke below a head and shoulders reversal pattern neckline, indicating that a downtrend is in the cards. The chart pattern is approximately 350 pips tall so the resulting selloff could be of the same size.
However, price is still making a correction to this broken neckline to gather more bearish pressure. Applying the Fib tool on the latest swing high and low shows that this lines up with the 38.2% retracement level and the .7200 major psychological resistance.
The 100 SMA is still above the longer-term 200 SMA, though, so there may be some bullish pressure left. If so, price could still break past the area of interest and resume its uptrend. At the same time, stochastic is pulling up from the oversold region to signal that buyers are regaining the upper hand.
US data came in mostly weaker than expected on Friday, with downbeat CPI readings taking the spotlight and weighing on Fed rate hike expectations for December. Headline inflation came in at 0.5% versus 0.6% while the core reading stood at 0.1% versus 0.2%. Retail sales data turned out mixed, with the headline reading up 1.6% versus 1.7% and the core figure at 1.0% versus 0.9%.
Over the weekend, Yellen gave a testimony which contained upbeat remarks on heir assessment and outlook for the economy. There’s not much in the way of top-tier reports from the US today since only the federal budget balance is lined up.
As for the Kiwi, New Zealand’s CPI is due next and a 0.4% uptick in price levels is eyed for Q3 after the report printed a flat reading for Q2. Stronger than expected data could keep the currency bid while downbeat results could allow the selloff to resume.
By Kate Curtis from Trader’s Way
EURUSD Potential Reversal Formation (Oct 17, 2017)
EURUSD is in the process of forming a head and shoulders pattern on its daily time frame as it completes the right shoulder. The neckline is located at 1.1700 and a break below this support could send price down by around 400 pips or the same height as the reversal formation.
However, the 100 SMA is safely above the longer-term 200 SMA so the path of least resistance is still to the upside. In addition, the gap is widening to signal that bullish pressure is getting stronger. Stochastic is also on the move up so EURUSD might follow suit while bulls remain in control.
Germany reported a stronger than expected increase in WPI of 0.6% versus 0.4% while the region’s trade balance also beat expectations with a 21.6 billion EUR surplus versus the consensus at 20.3 billion EUR.
While euro zone economic data has been mostly stronger than expected, the focus has mostly been on political uncertainties, particularly in Spain. The government has given Catalonia eight days to declare independence but Puigdemont has called for talks instead. Meanwhile, the elections in Austria also reflected growing dissatisfaction with the status quo.
As for the US dollar, the currency drew some support on rumors that Trump is also considering John Taylor for the Fed Chairmanship position. He is perceived to be a more hawkish candidate compared to the other contenders in the list, and traders are also looking forward to Trump’s meeting with Yellen later this week.
Data from the US also turned out better than expected as the Empire State manufacturing index rose from 24.4 to 30.2. Industrial production data is up for release today and a 0.3% rebound is eyed. Data on import prices and capacity utilization are also lined up.
By Kate Curtis from Trader’s Way
USDCAD Reversal Pattern (Oct 18, 2017)
USDCAD previously broke below its ascending channel formation then pulled up for a retest, creating a head and shoulders pattern visible on the 4-hour time frame. Price has yet to complete the right shoulder and test the neckline around the 1.2450 minor psychological level.
A break below this support could lead to a drop of around 150 pips or the same height as the chart pattern. Stochastic is turning lower to signal the presence of bearish momentum, but the 100 SMA is above the longer-term 200 SMA so the path of least resistance might still be to the upside.
Price is also moving close to testing the 100 SMA dynamic support that might keep losses in check. If so, USDCAD could bounce back up to the 1.2600 area and beyond.
The US dollar has gained some support from strong medium-tier reports and rumors that Trump is leaning towards appointing a more hawkish Fed head than previously expected. December rate hike expectations remain in play but market watchers seem to be turning their attention to the odds of more tightening moves next year.
As for the Canadian dollar, the slow progress in NAFTA renegotiations has actually been positive since this might delay scrapping any trade agreements. Mexico and Canada have rejected the latest batch of proposals from the Trump administration and another round of talks is scheduled for next month.
Up ahead, US building permits and housing starts figures are due, but the bigger movers might be speeches from FOMC members Dudley and Kaplan. Canada has its manufacturing sales figure due and analysts are expecting to see a smaller 0.1% dip this time.
By Kate Curtis from Trader’s Way
EURAUD Triangle Break and Retest (Oct 19, 2017)
EURAUD recently broke out of its symmetrical triangle formation on the daily time frame to indicate that bullish momentum is getting stronger. Price reached a high of 1.5246 before turning back down for a retest of the broken triangle resistance.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 61.8% level lines up with the broken triangle resistance that might hold as support. The 100 SMA is also close to these Fib levels, acting as an extra layer of defense, and is above the longer-term 200 SMA to signal that the climb is more likely to resume than to reverse.
The gap between the moving averages is getting wider to indicate strengthening bullish momentum. However, stochastic still has room to fall so there may still be some bearish pressure left for a larger correction.
Economic reports from China came in mostly in line with expectations, which appears to have been bullish for the Aussie. Industrial production and retail sales came in slightly better than expected, signaling stronger demand for Australian commodity products.
Meanwhile, the political uncertainties in Europe continue to weigh on the shared currency. Catalonia has said that it will declare independence if Spain takes away its autonomy, but it is not clear how this situation might play out. Meanwhile, the polls in Austria also signal a leaning towards the far-right political leadership.
There hasn’t been much in the way of top-tier data from the euro zone yesterday and today so the shared currency could continue to be driven by market sentiment and political developments. As for Australia, its freshly released jobs report printed stronger than expected results of 19.8K in employment gains and a drop in the unemployment rate from 5.6% to 5.5%.
By Kate Curtis from Trader’s Way
GBPAUD Broken Triangle Pullback (Oct 20, 2017)
GBPAUD recently dropped below the descending triangle support at 1.6800, signaling that further losses are in the cards. Price bounced off the 1.6700 area and might be due for a correction to the broken support.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the 38.2% level coincides with the broken support, which might hold as resistance moving forward. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to continue.
Stochastic is still pulling up from the oversold region to indicate a return in buying pressure or that the correction could carry on until the oscillator hits overbought levels and turns back down. Price could pull up to the higher Fibs as well, with the longer-term 200 SMA dynamic inflection point serving as the line in the sand for the downtrend.
The pound was weighed down by weaker than expected retail sales data, which indicated that consumer spending fell by 0.8% versus the projected 0.1% dip. Brexit updates also pushed the currency around as German Chancellor Merkel said that there wasn’t enough progress made for talks to proceed to the next round of negotiations.
As for the Australian dollar, data from China came in mostly in line with expectations, with retail sales and industrial production reflecting gains. Australia’s jobs figures also beat expectations, adding fuel to the Aussie’s ascent.
Only the public sector net borrowing report is due from the UK today and there are no reports due from Australia or China. This means that Brexit updates, particularly those coming from the EU summit in Brussels, could continue to drive pound price action while overall market sentiment could drive AUD direction.
By Kate Curtis from Trader’s Way
USDJPY Descending Triangle Breakout (October 23 2017)
Yen bears came out in full force after the elections in Japan over the weekend, causing USD/JPY to break past the descending triangle resistance. This chart pattern is approximately a thousand pips tall so the resulting uptrend could last by the same amount.
However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance might still be to the downside. These moving averages are still oscillating to indicate consolidation, so these have yet to catch up to the latest upside break. Stochastic has room to climb, which means that there is some buying pressure left in play.
Elections in Japan yielded strong support for Japanese PM Abe and his political party, giving him scope to implement another tax hike in 2019 and push for constitutional reform. This could also mean more support for the BOJ’s ultra easy monetary policy, which is bearish for the yen.
Data from the US economy turned out better than expected on Friday as existing home sales rose from 5.35 million to 5.39 million instead of falling to 5.30 million. The federal budget balance also showed a surplus of 8.0 billion USD instead of the estimated 0.9 billion USD deficit and was a huge improvement over the earlier 107.7 billion USD shortfall.
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Up ahead, the reaction to the Japanese elections could go on for a while as there are no major reports lined up from the Japanese economy. There are also no reports due from the US economy today so market sentiment and speculation over Trump’s next Fed Chairperson pick could push this pair around.
By Kate Curtis from Trader’s Way
GBPAUD Descending Channel (Oct 24, 2017)
GBPAUD has been trending lower, moving inside a descending channel on its 4-hour chart. Price is currently testing the resistance at 1.6900, still deciding whether to make a bounce or a break.
A bounce could take it back down to the bottom of the channel at 1.6600 while an upside breakout could mark the start of a reversal. Stochastic is already indicating overbought conditions and looks ready to turn lower, which could mean that bearish pressure would return. A bearish divergence can also be seen as stochastic made higher highs while price had lower highs.
The 100 SMA is still 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 and a downward crossover seems imminent, also suggesting a pickup in bearish momentum.
UK data turned out weaker than expected yesterday as the CBI industrial order expectations slipped from 7 to -2 instead of improving to 9. This signals weakening business conditions in the coming months as firms expect lower order volumes. Also, BOE member Cunliffe expressed doubts about a November interest rate hike, citing that the economy has slowed on the squeeze to real incomes and imported inflation from sterling weakness.
There are no reports due from Australia and the UK today, so market sentiment could be in charge of price action. Brexit updates would likely impact movements as well. On Wednesday, Australia has its quarterly CPI due and the headline figure could show a gain from 0.2% to 0.8%.
By Kate Curtis from Trader’s Way
GBPJPY Channel Support (Oct 25, 2017)
GBPJPY has been trending higher on its short-term time frames, moving inside an ascending channel on its 1-hour chart. Price just bounced off resistance and could be due to test support at the 149.00 major psychological level.
This potential floor lines up with the 61.8% retracement level and the 200 SMA dynamic inflection point. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is the upside, which means that the rally is more likely to resume than to reverse.
Stochastic has already pulled up from the oversold region to signal a return in bullish momentum but is turning back down to indicate that sellers are putting up a fight. However, the 100 SMA is also holding as dynamic support so far and might be enough to push price back to the swing high or channel resistance.
Yen weakness has been in play since the Japanese elections over the weekend as the victory for PM Abe and his political party meant the likely implementation of another tax hike in 2019 and the continuation of the BOJ’s easy monetary policy. However, dollar weakness as also been in play recently, buoying the yen higher in effect.
As for the pound, the only piece of data released so far was the CBI industrial order expectations index which fell from 7 to -2 instead of improving to 9. Brexit concerns are also lurking and any negative updates could weigh heavily on the currency.
Up ahead, the UK preliminary GDP is due and analysts are expecting to see another 0.3% growth figure. Stronger than expected data could assure traders that the economy is staying resilient ahead of Brexit but a downside surprise could undermine confidence. As for Japan, the next set of data isn’t due until Friday and this comprises the national and Tokyo core CPI readings.
By Kate Curtis from Trader’s Way
GBPAUD Triangle Resistance (Oct 26, 2017)
GBPAUD has been on a strong climb recently and may have enough momentum to break past its symmetrical triangle resistance around 1.7200. The chart pattern spans 1.5900 to 1.7700 so the resulting uptrend could be of the same size.
The moving averages are still oscillating to reflect consolidation action on the daily time frame but the 100 SMA is starting to cross below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the resistance is more likely to hold than to break.
If so, GBPAUD could head back to the triangle support currently at 1.6500-1.6600. Stochastic is heading north but is already in the overbought zone, so profit taking could force the rally to pause.
UK economic data turned out better than expected, though, as the economy grew by 0.4% in Q3 according to the preliminary GDP release. This is higher than the estimated 0.3% expansion and the earlier 0.3% growth figure.
Meanwhile, the Aussie was previously weighed down by weaker than expected quarterly CPI. Headline inflation rose 0.6% versus 0.8% while the trimmed mean CPI was up 0.4% versus 0.5%. This could keep a lid on RBA tightening expectations while rising inflation in the UK increases the pressure on the BOE to act.
Earlier today, Australia reported a 1.6% slump in import prices for Q3, further weighing on inflation prospects. Only the CBI realized sales index is lined up from the UK but a drop from 42 to 14 is eyed, which might be pound bearish.
By Kate Curtis from Trader’s Way
EURUSD Head and Shoulders Breakdown (Oct 27, 2017)
EURUSD broke below the neckline of its long-term head and shoulders pattern, confirming that a downtrend is underway. The chart pattern is approximately 400-500 pips tall so the resulting selloff could last by the same amount.
The 100 SMA is still sufficiently above the longer-term 200 SMA on the daily time frame, so the path of least resistance is to the upside. However, price is breaking below the dynamic inflection point to signal a pickup in bearish pressure.
Stochastic was on its way up but turned back down to indicate a return in selling momentum. The oscillator is closing in on the oversold region, though, so a bounce on profit-taking might happen.
The ECB announced its plans to maintain its 60 billion EUR monthly asset purchase program until the end of the year then tapering it down to 30 billion EUR per month from January to September 2018 or beyond if necessary. Bulls seemed unimpressed by this announcement as many expected an earlier or larger reduction.
During the presser, Draghi admitted that the decision was not unanimous and that inflation has not been encouraging. Still he expressed optimism about growth and employment, but euro traders appeared to brush these positive remarks aside.
Meanwhile, the Greenback has gotten a boost from news that the House passed a budget resolution to allow the tax bill to clear Senate without achieving a supermajority. This means that Republican support could be enough to carry the bill through, even as Democrats strongly oppose the proposals.
US advance GDP data for Q3 is due next and hopes are running high after the durable goods orders report suggested a stronger contribution from the business sector for the period. Analysts are expecting to see a 2.6% growth figure, slower than the earlier 3.1% expansion. News on Trump’s Fed Chair pick could also lead to big moves for the dollar.
By Kate Curtis from Trader’s Way
EURAUD Channel Support (Nov 6, 2017)
EURAUD is trending higher and is moving inside an ascending channel on its 4-hour time frame. Price has just bounced off support and looks ready for a test of resistance at 1.5400-1.5450.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that the rally is more likely to continue than to reverse. In addition, the moving averages are close to the channel support, adding to its strength as a floor.
Stochastic is on the move up to reflect the presence of bullish momentum. However, the oscillator is nearing overbought levels to signal exhaustion among buyers. In that case, another dip to support at 1.5150 is still possible.
The main event risk for the Australian dollar is the RBA interest rate decision, during which the central bank could keep rates on hold at 1.50%. The RBA is one of the less hawkish central banks around, but any shift in their tone could still lead to big moves for the pair.
As for the euro, the shared currency had a bearish reaction to the ECB announcement earlier on, but the fact remains that the central bank will begin tapering its asset purchases by next year. German factory orders data is due next and a 1.0% decline is eyed.
There are no other major events lined up for both economies for the rest of the week, so there’s a chance that the current trend could carry on, barring any major changes in monetary policy bias. Overall risk sentiment could also drive price action, with risk-off moves favoring the euro over the Aussie.
By Kate Curtis from Trader’s Way
GBPJPY Broken Channel Retest (Nov 07, 2017)
GBPJPY was previously trending higher inside an ascending channel before breaking below support to signal a reversal. Price bounced off the 148.75 level before showing signs of pulling back to the broken support.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 50% Fib and the 150.00 major psychological mark. This is also close to the moving averages’ dynamic inflection points.
However, the 100 SMA is still above the longer-term 200 SMA on this time frame, so the path of least resistance is to the upside until a crossover forms. Stochastic is already indicating overbought conditions to show rally exhaustion and a potential return in selling pressure.
Yen weakness was in play at the start of the week after the dovish BOJ minutes and speech by Governor Kuroda. Risk-taking also came into play later on in the sessions, further weighing on the lower-yielding yen.
Meanwhile, the UK BRC retail sales monitor printed a 1.0% decline, erasing part of the previous 1.9% gain. The Halifax HPI is due next and a smaller 0.2% uptick is set to follow the previous 0.8% gain.
Later in the week, Japan will release its data on core machinery orders and the current account balance. The Economy Watchers Sentiment index and the tertiary industry activity index are also on the docket. UK manufacturing production is due on Friday and a 0.3% uptick is eyed.
By Kate Curtis from Trader’s Way
USDCAD Uptrend Correction (Nov 08, 2017)
USDCAD continues to trend higher and is moving above an ascending trend line connecting the lows on the 4-hour time frame. Price looks prime for another correction and the 50% level lines up with the trend line support at 1.2700.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the rally is more likely to continue than to reverse. Stochastic is on its way up to signal that bullish momentum is already in play.
A larger pullback could last until the 61.8% Fib or the 200 SMA, but if the rally is already resuming from here, a move towards the swing high at 1.2900 or higher could be underway.
In his testimony this week, BOC head Poloz warned that slack in the labor market could keep a lid on wage growth and overall inflation. He reiterated that policymakers are more careful about future rate hikes and that there are several uncertainties present. However, he also mentioned that the BOC would be comfortable with inflation overshooting its 2% target.
As for the dollar, roadblocks in tax reform such as the possibility of Senate imposing a one-year delay before implementing tax cuts have weighed on the currency. Congress is scheduled to vote on the proposal next week and there has been some opposition within the GOP, so nothing is set in stone yet.
Medium-tier data from the US came in stronger than expected on Tuesday but there are no reports due today, so the focus could remain on tax reform. There are also no reports due from Canada so the crude oil inventories data could push the Loonie around.
By Kate Curtis from Trader’s Way
NZDUSD Downtrend Correction (Nov 09, 2017)
NZDUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is also moving below a descending trend line connecting the highs since mid-September.
A pullback to this trend line appears to be underway after the pair bounced off the .6825 level. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the trend line at the .7000 handle.
The 100 SMA is still below the longer-term 200 SMA, so the path of least resistance is to the downside. The 200 SMA is close to the Fibs and trend line resistance, potentially acting as the last line of defense in this downtrend correction. Stochastic is moving up to reflect bullish presence but is nearing overbought conditions.
The RBNZ decided to keep interest rates on hold as expected at 1.75% but the central bank adjusted its forecast for when New Zealand would hit its inflation target by a few months earlier. This also meant adjustments to its OCR timeline.
Apart from that, Acting Governor Spencer also assured that proposed government changes to the central bank mandate would have little effect on economic conditions.
Meanwhile, the US dollar is being bogged down by setbacks in tax reform as Senate is set to unveil their version of the bill within the week. This is said to have huge differences from the Congress version, which will be voted upon next week.
By Kate Curtis from Trader’s Way
EURUSD Area of Interest (Nov 10, 2017)
EURUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is now moving inside a descending channel pattern and looks ready for a pullback to the resistance.
Applying the Fibonacci retracement tool on the swing high and low shows that the 50% to 61.8% levels are close to the channel resistance. This also coincides with the 200 SMA dynamic inflection point.
The 100 SMA is below the longer-term moving average so the path of least resistance is to the downside, which suggests that the downtrend is likely to continue. Stochastic is still pointing up but already dipping into overbought territory to reflect rally exhaustion.
The US dollar took some hits on setbacks to the tax plan as the Senate version contained several key differences with the one in Congress. This suggests that it would take much longer than initially expected before any of these are implemented, especially since Senate is also proposing a one-year delay for the cuts.
Medium-tier US data has been mixed, with initial jobless claims coming in higher than expected and final wholesale inventories printing a 0.3% increase as expected. US banks are closed for the holiday today but the UoM preliminary consumer sentiment index is still up for release and analysts are expecting to see an increase from 100.7 to 100.8.
The euro drew support from upgraded forecasts by the EU, which supported the idea of tapering next year and possibly an interest rate hike later on. ECB member Coeure also had a testimony with hawkish remarks suggesting that QE cannot go on indefinitely.
By Kate Curtis from Trader’s Way
EURJPY Range Support (Nov 13, 2017)
EURJPY has been trading sideways recently, bouncing off support near 132.00 and resistance at 136.25. Price is testing support once more and could be due for another climb to the top or at least until the middle of the range around 133.00.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside, which means that support is more likely to hold than to break. However, stochastic is already indicating overbought conditions and is starting to turn lower to signal a pickup in selling pressure. A downside break of support could lead to a drop of around 400 pips or the same height as the chart pattern.
Economic data from the euro zone turned out mostly weaker than expected on Friday as French preliminary private payrolls and Italian industrial production came in short of consensus. Japanese data was also downbeat as the tertiary industry activity index posted a 0.2% decline instead of the estimated 0.1% dip.
Only the preliminary machine tool orders data is due from Japan today and a stronger increase compared to the earlier 45% year-over-year gain could be positive for the yen. Meanwhile, Germany is set to print its wholesale price index and might show a 0.4% increase.
Flash GDP readings from the euro zone nations and the region itself are lined up for the next few days and this should give traders more insight on how the ECB might proceed with its policy changes. Japan also has its preliminary GDP reading due and a 0.4% expansion is expected for Q3.
By Kate Curtis from Trader’s Way
AUDUSD Range Breakdown (Nov 14, 2017)
AUDUSD was previously trading sideways between support around .7650 and resistance at .7700-.7725. Price has just broken below the range support and looks ready for a pullback before heading further south.
Using the Fib tool on the breakout move shows that the 38.2% level is close to the broken support that might now hold as resistance. Stochastic is climbing out of the oversold region to indicate that sellers are taking a break.
Still, the 100 SMA is below the longer-term 200 SMA on this time frame to indicate that the path of least resistance is to the downside, which means that the selloff is likely to resume at some point. These moving averages are closer to the 61.8% Fib, which might be the line in the sand for the downtrend.
The US dollar has been extra sensitive to tax reform updates from Washington in the past few days as the economy is waiting on tax cuts before the end of the year. The House is scheduled to vote on their version of the bill by Thursday and US President Trump is set to give a speech to urge them to work together before the vote.
In terms of data, CPI and retail sales are up for release from the US on Wednesday and strong upside surprises could revive dollar demand. Speeches from a number of FOMC members are lined up on Thursday as well.
As for the Australian dollar, the employment report is due later in the week but the currency could take its cue from Chinese reports earlier on. Industrial production and fixed asset investment are foreseen to dip, which would mean lower demand for raw material commodity products and a likely drop in risk appetite.
By Kate Curtis from Trader’s Way
