USD/JPY has recently broken below the long-term rising trend line on the 4-hour time frame, signaling that the uptrend may be over. Before heading any lower though, USD/JPY could still retrace to the broken support zone.
The US government is still shut down and the debt ceiling deadline is approaching. The lack of a deal could weigh on the dollar and reinforce the pair’s selloff. Stochastic is already in the overbought region but has yet to cross lower.
Setting a limit order for a short at 98.00 could yield a good reward on risk with a 75-pip stop and a large target of 95.00. This would yield a 4:1 ratio.
By Kate Curtis from Trader’s Way
GBP/JPY is still on a steady uptrend on its longer-term time frame, despite the selloff seen in the past few weeks. The pair has just bounced off the rising trend line on the daily time frame after finding support at the 38.2% Fibonacci retracement level.
A continued rally might be in the cards, as a bullish divergence can be seen when price made higher lows while stochastic made lower lows. In addition, the oscillator is starting to move out of the oversold zone, which means that there’s upward momentum already.
The pair could retest its recent highs around the 160.00 handle so a long trade at market with a stop below the trend line would still yield a good return on risk.
By Kate Curtis from Trader’s Way
A complex head and shoulders pattern seems to be forming on EUR/USD’s 4-hour time frame, as the pair is testing the neckline around the 1.3500 handle.
However, stochastic is in the oversold region, hinting at a possible short-term bounce. If the pair is unable to break past the recent highs though, it might suggest that buying pressure is very weak and that a strong selloff might be in the cards.
Waiting for a break of 1.3500 and setting a stop above 1.3600 for a short trade would be a 4:1 potential reward on risk with a target of the previous lows around 1.3100.
By Kate Curtis from Trader’s Way
GBP/JPY’s recent rallies might come to a halt and start to reverse as the pair is hitting resistance at the 157.50 to 158.00 psychological levels.
This is in line with a broken support level back in September and is also the 61.8% to 50% Fib levels on the 1-hour time frame. However, stochastic is not yet in the overbought zone, which means that pound bulls still have enough buying power.
A safer play might be to wait for a break below the recent consolidation, with a short order around the 38.2% Fib or lower. A more aggressive entry would be to short at market or at the 158.00 handle.
Aiming for the previous lows around 155.00 would yield a 1:1 to 3:1 reward on risk, depending on the entry levels. Setting a stop above the 158.00 mark or 61.8% Fib level would give the trade enough breathing room.
By Kate Curtis from Trader’s Way
NZD/USD staged a very strong rally yesterday on the heels of the approval of the debt ceiling deadline extension and the end of the U.S. government shutdown.
The pair found resistance around the .8500 mark and may need to retrace before heading any higher. With that, the pair could pull back to the .8300 area, which is in line with the 61.8% Fibonacci retracement level on the latest swing low and high on the 1-hour time frame.
Stochastic is already in the oversold region, suggesting a bounce might happen soon. The 38.2% Fib might also hold as support if the retracement is shallow. There’s a potential bullish divergence too, as price made higher lows while stochastic has lower lows.
Going long at the .8400 handle with a stop below .8300 and a target of new highs would make a good return on risk.
By Kate Curtis from Trader’s Way
EUR/USD has been on a tear after breaking past the 1.3600 major psychological level but it seems that a pullback could happen before the pair rallies any higher.
On the 1-hour time frame, using the Fib tool on the latest swing low and high shows that the 50% Fib coincides with a former resistance level. This could act as support from now on, especially since it lines up with the 1.3600 major psychological level.
Stochastic is still moving down which means that euro bears are in control of price action at the moment. Once the oscillator reaches the oversold region and starts moving higher, the bounce could take place.
Buying at 1.3600 with a 50-pip stop and a 100-pip target to the previous highs would be a 2:1 return on risk.
By Kate Curtis from Trader’s Way
NZD/USD seems to need more buying power before sustaining its recent rallies, and a quick retracement might be in the cards.
The Fibonacci retracement tool on its 1-hour time frame shows that the 38.2% Fib is in line with the previous highs around the .8400 handle while the 61.8% Fib is in line with a former resistance area around .8350. A pullback to these levels could result to a continuation of the pair’s uptrend.
Stochastic is still pointing down, which means that Kiwi bears could push the pair a bit lower. A turn from the oversold region could mean that the rally is underway.
Going long at .8350 with a stop below .8300 and a target of the previous highs around .8500 would be a good return on risk for a day trade.
By Kate Curtis from Trader’s Way
AUD/CAD’s rallies seem to be exhausted already as the pair is in the process of testing the resistance at parity. This is in line with a former support level, which has held last year.
Stochastic just reached the overbought zone but hasn’t crossed down yet which suggests that there’s not enough selling pressure for now. Waiting for the oscillator to start moving lower is a good confirmation that the selloff will resume.
Shorting around 1.0000 with a stop above the 61.8% Fibonacci retracement level or 150 pips would yield a good reward on risk for a position trade all the way back to the previous lows around .9200. Locking in gains midway around .9500 would be an excellent way to protect profits.
By Kate Curtis from Trader’s Way
EUR/USD is inside another consolidation pattern on its 1-hour time frame and, based on previous price action, this could mean another upside break.
Take note though that stochastic is already in the overbought region, which means that euro bulls are running out of buying power. However, the oscillator hasn’t quite crossed down from the 80.00 level yet, so there could be further upside potential.
The key level to break is the 1.3800 major psychological resistance. A break above that level might mean more rallies, possibly until the next major psychological resistance at 1.3900.
On the other hand, a downside break below 1.3750 might mean a move back to the former support around 1.3600. A straddle setup might be the best way to play this scenario with a 50-pip stop and a 100-pip target for a 2:1 return on risk.
By Kate Curtis from Trader’s Way
For the Kiwi bulls, the recent selloff in the Kiwi might be an opportunity to catch a long trade at a better price. However, the pair has still a few hundred pips to go before reaching potential buy zones.
On the daily time frame, the Fibonacci retracement tool shows that the 50% Fib is in line with a former resistance level. This is also aligned with the .8150 minor psychological level, and this kind of confluence could make it a strong support area.
Stochastic is still pointing down, which means that Kiwi sellers could push the pair much lower in the coming days. If you’re bearish on this pair, there might be some further downside to catch, possibly until the nearest Fib level around .8250.
Waiting for the bounce at .8150 might take a while but this is a long-term setup to watch, as it offers a good return on risk with a stop below .8000 and a potential target to .8550. It might also be worth holding on for the longer run, as it also offers a positive carry.
By Kate Curtis from Trader’s Way
There isn’t much in terms of data in today’s economic schedule, but there could be an opportunity for a quick scalp trade for GBP/USD. The UK is set to print its CBI realized sales report at 12:00 pm GMT today and possibly spark some volatility for the pair.
GBP/USD is currently trading inside a rising channel on its 1-hour time frame but it is testing the bottom. A break below this level, which might be sparked by a weak CBI figure, could take the pair to the next visible support at 1.5925. A bounce from the current levels could push GBP/USD to the top of the channel around 1.6275.
The rally is projected to be weaker than the possible selloff because sentiment for the UK is bearish lately. Risk appetite is also low, thanks to the downbeat sentiment spurred by China’s rising interest rates.
By Kate Curtis from Trader’s Way
On its 4-hour time frame, AUD/USD’s highs and lows can be connected to form an ascending channel. This shows that the pair’s uptrend is still intact, provided that the bottom of the channel holds as support for now.
Stochastic is already in deep in the oversold region, suggesting that selling pressure is already exhausted and that a bounce will take place soon. If that’s the case, the pair could climb back to the top of the channel at .9750 to .9800 or at least until the middle around .9650 to .9700.
A downside break, on the other hand, could last until the area of interest around .9300. If you’re bullish on this pair though, you could go long at market and set a tight stop below the channel support to get out of the trade as soon as the bottom breaks.
Going long at market or .9550 until .9750 with a 100-pip stop would be a 2-to-1 return on risk. Moving your stop to entry around the middle of the channel is a good way to manage risk and protect profits.
By Kate Curtis from Trader’s Way
Risk aversion has been keeping the franc’s gains at bay, as USD/CHF recently bounced off the .8900 major psychological support. Perhaps franc bulls are waiting for more buying momentum before pushing this pair lower.
With that, the pair could still pull back to the falling trend line forming on the 1-hour time frame before resuming its drop. This is in line with the 61.8% Fibonacci retracement level, right around the .9100 former support level.
However, the recent resistance at the .9000 major psychological level could already hold as stochastic is already in the overbought region. Shorting at market with a stop above .9100 and aiming for new lows would be a good position trade. Moving the stop loss to entry once the pair tests the .8900 support can help minimize risk.
By Kate Curtis from Trader’s Way
GBP/USD’s recent rallies seem to be over as the pair ranged between the 1.6200 handle and the 1.6000 area in the past few weeks. In fact, a reversal chart pattern can be seen on the daily time frame, as the pair made a double top formation.
The pair is still around a hundred pips away from testing the neckline of the pattern, but sellers could be drawn to that level in the coming days. Stochastic is moving down from the overbought region, which suggests that pound bears can push the pair lower.
Take note though that GBP/USD has yet to break below the key 1.6000 support level and the neckline of the pattern at 1.5900 before a longer-term downtrend is confirmed. The pattern is roughly 300 pips in height so the resulting breakdown could be of the same size.
By Kate Curtis from Trader’s Way
GBP/USD is approaching the bottom of its range on the 1-hour time frame, and it just might reach that support level depending on the UK manufacturing PMI release. The report is projected to post a small decline, reflecting a slight downturn in the industry.
If the decline is minimal or if the actual figure comes in stronger than expected, GBP/USD could hold above the 1.5950 minor psychological support and bottom of the range. Stochastic is moving up anyway, which suggests that there’s a stronger possibility of a rally instead of a drop. A bounce could last at least until the middle of the range, right around 1.6050.
On the other hand, if the report comes in much worse than expected, GBP/USD could break below the 1.5950 mark trade until the next support zones at 1.5800 to 1.5850.
By Kate Curtis from Trader’s Way
EUR/JPY suffered a heavy selloff starting Thursday last week when ECB officials hinted that a rate cut is in the cards. EUR/JPY dropped from the 135.50 area by close to 300 pips before making a quick bounce at the start of this trading week.
Sentiment remains very bearish for this pair but a retracement might take place before sellers push the pair lower. If that’s the case, EUR/JPY could pull back to the 38.2% Fib, which is in line with a former support level. It is also an area of interest, which means it could act as resistance from now on.
Stochastic is pointing down, suggesting that selling pressure is still strong. Shorting at 133.60 with a stop above the 134.00 mark and a target of new lows could make a good return on risk for a swing trade.
By Kate Curtis from Trader’s Way
USD/CHF’s rallies might soon be over, as the pair is approaching a potential resistance level. The .9200 major psychological mark has acted as support in the past and is around the Fibonacci retracement levels on the daily time frame, which means that it could keep the pair from climbing any higher.
Stochastic hasn’t quite reached the overbought zone yet though, so dollar bulls could still push this pair up to the .9200 mark for now. Be mindful of a turn and a downward crossover in stochastic, as this could suggest that dollar bulls are exhausted and that bears might jump in.
Shorting around .9200 with a stop above the highest Fib level and a target of the previous lows around .8950 could yield a high return on risk.
By Kate Curtis from Trader’s Way
GBP/USD bounced off the established support level around 1.5950 in yesterday’s trading, as the UK printed a better than expected services PMI figure. The pair was also able to break above the 1.6000 major psychological level then consolidate at 1.6050.
At the moment, GBP/USD is forming a bullish flag pattern, which hints at a rally continuation. Manufacturing production and Halifax HPI are both due from the UK today and these could serve as catalysts for a stronger rally or a potential selloff.
Setting a long order at the top of the consolidation pattern (1.6075) could catch the momentum of an upside move, possibly until the 1.6150 minor psychological resistance or the top of the range around 1.6200.
A short order below consolidation (1.6025) could catch the selloff, possibly until the bottom of the range again at 1.5950.
By Kate Curtis from Trader’s Way
NZD/JPY is about halfway through in climbing to the top of its range on the 4-hour time frame. The pair is approaching the 83.50 minor psychological level, which could hold as resistance.
Stochastic has made its way into the overbought region and has crossed down, indicating that Kiwi bears are ready to push the pair down. A selloff could take the pair back to the bottom of the range at the 80.50 minor psychological level or at least until the middle around 81.50.
Shorting at market with a stop above 83.50 and a target of 80.50 could serve as a good swing trade. More conservative traders could wait for the actual test of resistance for a better return on risk.
By Kate Curtis from Trader’s Way
Thanks to the better than expected headline GDP figure released yesterday, USD/CHF surged up to the .9200 major psychological level which was in line with the 50% Fibonacci retracement level and the falling trend line on the 4-hour time frame.
Stochastic crossed down from the overbought region, hinting that dollar bears will push this pair down, possibly until the previous lows near .8950. Shorting at market with a stop above the previous spike to .9250 and a target of .8950 will give a 2-to-1 return on risk.
Events risks for today include the non-farm payrolls release, which is expected to print a weak reading because of the recent government shutdown.
By Kate Curtis from Trader’s Way