Daily Technical Outlook

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GBPJPY Long-Term Reversal (September 5, 2016)

GBPJPY could be due for a long-term reversal, as price formed a double bottom pattern on its 4-hour chart. The pair failed in its last two attempts to break below the 129.00 area and is on its way to test the neckline at the 141.00 mark. A break above this neckline could confirm the potential reversal and take price up by 1200 pips or the same height as the chart formation.

The 100 SMA is below the 200 SMA on this time frame for now, which suggests that the path of least resistance is still to the downside. However, the gap between the moving averages is narrowing so an upward crossover might take place and confirm that bullish pressure might be seen.

Stochastic is indicating overbought conditions and is turning lower, also suggesting that sellers are in control of price action for now. A quick pullback from the recent climb could still be seen before buying momentum strengthens.

The event risks lined up for this week could determine whether GBPJPY can break past the neckline resistance and carry on with its climb. The BOE Inflation Report hearings are scheduled midweek, possibly setting the tone for the UK central bank's next monetary policy steps.

For today, the UK services PMI is up for release and a strong read could continue to reassure traders that the UK economy has stayed afloat even after the Brexit vote. Prime Minister Theresa May has reiterated that the Brexit could pose huge risks but so far it seems that the economy is holding up well. Analysts are expecting to see a rise from 47.4 to 49.1 for the services PMI, and it's worth noting that the manufacturing and construction industry reports released last week turned out better than expected.

As for Japan, the dovish policy bias of BOJ Governor Kuroda in his Jackson Hole testimony the other week still keeps weighing on the yen. Data has been mostly weaker than expected also, confirming that the BOJ might pursue more aggressive stimulus efforts.

By Kate Curtis from Trader’s Way

 

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EURAUD Range Support (Sep 06, 2016)

EURAUD seems to be trading inside a range these days, finding support at the 1.4500 major psychological mark and resistance at 1.4850. Price bounced off the top of the range and seems to have its sights set on the bottom once more.

The 100 SMA is above the 200 SMA on the 4-hour time frame, indicating that the path of least resistance is to the upside. Also, the gap between the moving averages is widening so bullish pressure could build up.

Meanwhile, stochastic is already indicating oversold conditions, which suggests that sellers are already exhausted. Once the oscillator moves out of the oversold region, buyers could regain control of price action, but the pair might have to test the range support first.

There are plenty of event risks for the Australian dollar this week, among which is the RBA interest rate statement. No actual policy changes are expected as the central bank might keep rates unchanged at 1.50% but traders are likely to pay close attention to the tone of the statement.

Data from Australia has been mostly weaker than expected, particularly on the business and consumer spending fronts. However, the RBA has been less inclined to cut interest rates since they already did so back in August and are wary of possible repercussions on the housing market.

Later on in the week, Australia will release its quarterly GDP and trade balance. A weaker growth figure of 0.4% is eyed, compared to the earlier quarter's 1.1% expansion. Meanwhile, the trade deficit is expected to narrow to 2.65 billion AUD probably on stronger export activity. China's trade balance is also up for release.

As for the euro, the ECB statement is lined up for Thursday but no actual policy changes are expected. Still, any dovish remarks could keep the door open for additional stimulus, especially if Draghi highlights the downbeat flash CPI figures.

By Kate Curtis from Trader's Way

 

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GBPUSD Ascending Channel (Sep 07, 2016)

GBPUSD has been trending higher on its 1-hour chart, moving inside an ascending channel and testing the resistance. If the ceiling holds for now, price could pull back to the channel support before resuming its climb.

Applying the Fib tool on the latest swing low and high shows that the 50% to 61.8% levels are in line with the channel support around 1.3200-1.3250. The 100 SMA just crossed above the 200 SMA to confirm that the uptrend is likely to carry on. Also, these moving averages are edging close to the channel support, possibly adding to its strength as a floor later on.

Stochastic is indicating overbought conditions for now, which suggests that buyers are exhausted from the climb. This could allow profit-taking to happen and a quick correction to take place. However, a break below the channel support could be a signal that the uptrend is over.

Earlier this week, the UK printed a stronger than expected services PMI, rounding up the upbeat industry PMIs from the previous week. These confirm that the UK economy is holding up well even with looming uncertainties from the Brexit.

On the other hand, data from the US economy has been far from impressive, as the ISM non-manufacturing PMI saw a sharper than expected drop from 55.5 to 51.4 versus the estimated dip to 55.4. Apart from that, the Fed's labor market conditions index saw a -0.7 reading compared to the earlier 1.3 figure.

UK manufacturing production numbers are lined up for today and another batch of upbeat results could keep the pound afloat. Also lined up today is the BOE Inflation Report hearings, which might contain some reassuring remarks from policymakers. As for the US, FOMC member George is set to give a testimony and the JOLTS job openings report is up for release.

By Kate Curtis from Trader's Way

 

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EURAUD Inverse Head and Shoulders (Sep 08, 2016)

EURAUD failed to break past its double bottom neckline the other week but it still seems to be forming another reversal pattern on the 4-hour time frame. Price is still in the middle of completing its right shoulder on the inverse head and shoulders pattern, as a bounce off this 1.4650 minor psychological support could send the pair back up to the neckline around 1.4900.

A break past the neckline resistance could take EURAUD up by around 500 pips, which is roughly the same size as the chart formation. However, a break below the 1.4600 mark could send the pair to the bottom of the range around the 1.4400 major psychological level.

The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. The gap between the moving averages is widening, reflecting strengthening bullish pressure. Also, stochastic is on the move up to confirm that buyers are in control of price action.

The main event risk for today is the ECB interest rate decision, as aggressive easing measures could send the euro lower across the board. Traders are expecting anything from changing the QE parameters to additional asset purchases or lower deposit rates. However, less dovish moves could prove to be a disappointment and allow a strong bounce for the shared currency.

Earlier today, Australia reported a smaller than expected trade deficit for July but the Aussie was barely able to benefit since China's trade balance for August printed weaker than expected results. Still, the Aussie could stay afloat since the RBA refrained from cutting interest rates in their policy statement this month.

Medium-tier reports are lined up from the euro zone for Friday while the rest of the top-tier releases from Australia are due next week. China also has its industrial production and retail sales figures lined up in the coming week.

By Kate Curtis from Trader's Way

 

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GBPAUD Reversal Pullback (Sep 09, 2016)

GBPAUD recently broke above a descending trend line on its 4-hour time frame, indicating that price was in for a reversal from the downtrend. However, the pair found resistance at the 1.7700 major psychological mark and has started to make a pullback.

Applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with the broken trend line resistance, which might now hold as support. Price is already bouncing off the 38.2% Fib, though, as this area coincides with the moving averages.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, likely taking GBPAUD back up to the swing high at 1.7700 or beyond. If so, price could complete an inverse head and shoulders pattern, adding confirmation that an uptrend is in order. Stochastic is on the move up after forming a bit of bullish divergence, also suggesting that buyers are taking control.

The RBA refrained from cutting interest rates in their policy statement earlier this week while BOE Governor Carney shared a somewhat dovish view during the Inflation Report hearings. Still, data from both Australia and the UK have printed stronger than expected results so far.

Australia reported a smaller than expected trade deficit for July, followed by strong import and export components in China's August trade figures. This suggests that appetite for Australia's raw material commodity products could stay afloat in the coming months, lessening the need for the RBA to cut rates.

In the UK, the PMI readings have all beat expectations, reflecting strong business performance even with the Brexit. Still, the UK has a bit more uncertainty in play compared to Australia so fundamentals might favor further GBPAUD weakness.

By Kate Curtis from Trader's Way

 

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EURGBP Channel Retest (Sep 12, 2016)

EURGBP recently broke below its ascending channel support visible on the 4-hour time frame then dipped to a low of .8335. From there, price showed signs of a pullback and applying the Fib tool on the latest swing high and low shows that the 38.2% retracement level lines up with the broken channel support.

A higher pullback could last until the 50% Fib area, which is close to the dynamic inflection points at the moving averages. The 100 SMA is just crossing below the longer-term 200 SMA so the path of least resistance is to the downside and the selloff could resume sooner or later.

Stochastic is also on the move down, which confirms that bearish pressure is getting stronger. This could take EURGBP back down to the previous lows or much lower to the .8300 major psychological level.

There are plenty of top-tier U.K. reports lined up for this week which could bring a lot of volatility for this pair. UK CPI readings are due Tuesday while jobs figures are lined up for Wednesday. On Thursday, the UK retail sales report is due ahead of the BOE monetary policy statement.

Dovish remarks are expected from other BOE policymakers especially since Governor Carney sounded less upbeat than usual in his Inflation Report hearings last week. The UK central bank head highlighted the potential risks from the Brexit and added that he would welcome additional stimulus if necessary.

There are no major reports due from the euro zone, although the shared currency could continue to enjoy its relief rally after the ECB refrained from adding stimulus in last week's policy decision. The central bank also upgraded its growth forecast for the year while keeping its inflation estimate unchanged.

UK CPI readings are expected to show more gains while the jobs report could show a slight increase in claimants. UK retail sales are expected to fall by 0.4% after rising by 1.4% in the previous month. ECB head Draghi has a speech scheduled tomorrow ahead of the release of the ZEW economic sentiment figures from Germany and the region.

By Kate Curtis from Trader’s Way/i]

 

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GBPJPY Potential Breakout (Sep 13, 2016)

GBPJPY has formed higher lows and lower highs on its 4-hour chart, creating a symmetrical triangle pattern. The pair is just coming off a test of the resistance and might be aiming for the bottom of the triangle around 132.50.

However, the 100 SMA just crossed above the longer-term 200 SMA to signal that the path of least resistance is to the upside. In that case, an upside break of the triangle resistance at the 137.50-138.00 levels could be possible, likely taking GBPJPY up by 1500 pips or the same height as the chart formation.

Stochastic is on the move down, though, so sellers could still have some momentum left to trigger a test of the triangle support. Still, the moving averages around the middle of the triangle at 134.00 could hold as dynamic inflection points.

There are plenty of event risks from the UK economy this week, including the CPI numbers due today. Another uptick in price levels is eyed, with the headline figure slated to rise from 0.6% to 0.7% and the core reading expected to climb from 1.3% to 1.4%.

Tomorrow has the jobs data lined up but a pickup in joblessness is eyed, along with a drop in the average earnings index from 2.4% to 2.1% to show lower wages and downside inflation pressures. Thursday has the UK retail sales report due but the main mover could be the BOE decision.

No actual policy changes are expected for now since the UK central bank just eased last month. However, some policymakers might still vote for additional stimulus, depending on how this week's set of data turns out. Dovish remarks or a split in the MPC bias could mean pound weakness. As for the yen, the BOJ decision is set to take place on September 20 and easing expectations could also keep a lid on the currency's gains.

By Kate Curtis from Trader's Way

 

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USDJPY Ready to Break Out? (Sep 14, 2016)

USDJPY has been trending lower on the longer-term time frames but it looks like an upside breakout and reversal might be due. Price is making another test of the descending channel resistance on the daily time frame without even hitting the channel support previously.

The 100 SMA is below the 200 SMA so the path of least resistance could still be to the downside. The channel resistance is also near the 100 SMA, which might hold as dynamic resistance. Stochastic is on middle ground on its way down so there may be some selling pressure left.

However, USDJPY also seems to have formed a descending triangle formation with support around 100.00. Price has just recently bounced off this support level and is once again testing the triangle resistance. An upside breakout could lead to the formation of a double bottom pattern, another reversal signal.

There are no major releases from both the US and Japan today, leaving risk sentiment and central bank speculations as the main drivers of price action. On Monday, a speech by FOMC member Brainard weighed on Fed rate hike expectations since she emphasized the need to stay prudent and wait for more evidence of stronger consumer spending and inflation before tightening.

Meanwhile, a Nikkei report revealed that policymakers in the BOJ might be considering cutting interest rates deeper into negative territory. This could come with a countermeasure of trimming JGB purchases as the central bank might drop its timeline of achieving 2% inflation in two years. A BOJ official noted that these are still up for discussion but added that they have to weigh the benefits and costs of these moves first.

On Friday, the US will print its CPI and retail sales reports. These should provide a better idea of whether or not spending and inflation are picking up as expected, likely influencing Fed rate hike expectations before their actual decision next week. For now, the idea of a rate hike is weighing on risk sentiment and keeping the safe-haven dollar supported.

By Kate Curtis from Trader's Way

 

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USDCAD Ascending Triangle (Sep 15, 2016)

USDCAD has formed higher lows and found resistance at the 1.3200 major psychological level, creating an ascending triangle pattern on its 4-hour time frame. Price is currently testing the resistance, still deciding whether to go for a bounce or a break.

The moving averages are oscillating, which suggests that the consolidation could continue and that price could head back to the support near 1.2925. However, the 100 SMA seems to be crossing above the 200 SMA to indicate that the path of least resistance is to the upside. If so, a break higher could take place and bring USDCAD up by around 700 pips or the same height as the chart formation.

Stochastic seems ready to head down from the overbought zone to show a return in selling pressure. In that case, the resistance could still hold and force the pair to make its way back to the bottom of the pattern or even go for a breakdown.

Market catalysts for today could determine where this pair might be headed, as the US is set to print its retail sales and PPI reports. Headline retail sales could fall by 0.1% while core retail sales could increase by 0.3%, with weaker than expected data likely to dampen Fed rate hike hopes for next week.

Headline PPI and core PPI are both expected to print 0.1% gains. Import prices data released yesterday showed a sharper than expected 0.2% drop versus the projected 0.1% dip, likely adding downside pressure on producer prices. Other reports due from the US are the Philly Fed index, industrial production, current account balance, and initial jobless claims.

There are no major reports from Canada, leaving oil prices and market sentiment as the main drivers of price action. The recent US EIA oil inventories report showed a drop of 0.6 million barrels in stockpiles instead of the projected rise of 2.8 million barrels, but this failed to keep crude oil prices supported for very long.

By Kate Curtis from Trader's Way

 

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EURAUD Uptrend Pullback (Sep 16, 2016)

EURAUD recently broke above the neckline of an inverse head and shoulders pattern, signaling a reversal from its previous downtrend. Before price resumes its climb, it could still make a pullback to the broken resistance area.

Applying the Fib tool on the latest swing low and high on the 4-hour chart shows that the broken neckline coincides with the 50% Fibonacci retracement level, which might keep losses in check. The 100 SMA is also close to this area, adding to its strength as support, and is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside.

Stochastic is still on the move down to show that there's still some bearish pressure present. Once the oscillator reaches the oversold area and turns higher, buyers could regain control of price action and push for a climb to the recent highs at 1.5090.

Economic data from Australia came in weaker than expected yesterday, as the economy lost 3.9K jobs in August instead of reporting the estimated 15.2K gain. The jobless rate fell but mostly due to weaker labor force participation, reflecting weaker confidence in job prospects.

As for the euro zone, industrial production also missed expectations, contributing to the shared currency's slide. Final CPI readings were unchanged at 0.2% for the headline reading and 0.8% for the core figure.

There are no major reports due from both Australia and the euro zone today so a bit of consolidation could be seen or the pair could react to risk sentiment. Weaker risk appetite tends to favor the lower-yielding euro compared to the commodity currency.

By Kate Curtis from Trader's Way

 

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AUDUSD Reversal Confirmation (Sep 19, 2016)

AUDUSD seems to be tired from its climb since it already formed a head and shoulders reversal pattern on its 4-hour time frame. Price also broke below the neckline at the .7500 major psychological level, confirming its potential selloff.

The 100 SMA just crossed below the 200 SMA to indicate that the path of least resistance is to the downside and that the downtrend could gain traction. However, stochastic is still pointing up to suggest that there's a bit of buying pressure in play.

In that case, AUDUSD could still pull up to the dynamic resistance around the moving averages, which might keep gains in check. A stronger rally could push price up to the resistance near the .7700 major psychological mark.

Economic data from Australia turned out mostly weaker than expected last week, as the economy lost 3.9K jobs in August and reported a drop in labor force participation. Data from China was mixed, with industrial production and retail sales beating expectations while CPI fell short.

This week, the RBA minutes are up for release and this should contain more clues on what the Australian central bank has in mind for the rest of the year. The RBA kept interest rates on hold in their previous decision, citing concerns about the housing market but still maintaining a relatively neutral view.

The bigger market mover for the week would likely be the FOMC statement, as market watchers are still divided on what the US central bank might do or say. Most market watchers seem to have priced against an interest rate for now but might be looking out for clues that tightening could still take place in December.

By Kate Curtis from Trader's Way

 

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GBPUSD Range Setup (Sep 20, 2016)

GBPUSD has been trading sideways on its 4-hour time frame, moving between support at the 1.2900 area and resistance at 1.3450. Price is nearing the bottom of the range at the moment and might be due for another bounce.

The 100 SMA is above the longer-term 200 SMA, indicating that the path of least resistance is still to the upside and supporting the idea that the range support would hold. Stochastic is also on the move up from the oversold region to show that bears are exhausted and that pound bulls could take over.

If so, the pair could make its way back up to the top of the range or at least until the middle around 1.3150. A breakdown from support, on the other hand, could lead to a selloff of around 550 pips, which is roughly the same height as the chart formation.

Last week, the BOE refrained from adding stimulus since they already cut rates and boosted bond purchases in their August decision. Still, policymakers seem to be keeping the door open for further cuts if the Brexit does more damage on the UK economy. On Friday, UK Chancellor Hammond warned that they risk losing access to the single European market if they push for immigration reforms in the Brexit negotiations.

Meanwhile, the US dollar is facing the upcoming FOMC statement later this week. Traders still seem to be divided on their expectations for the outcome as economic data has been showing improvements but these might not be enough to convince policymakers to tighten. Updated projections for growth and inflation are also due so these should give an idea of what the Fed has in mind for the rest of the year.

Cautious remarks could force the dollar to turn as bulls unwind their rate hike positions. Also, this could bring risk appetite back to the table since businesses and consumers could enjoy low borrowing rates for a bit longer. Additional volatility is expected during this event so wider stops are recommended.

By Kate Curtis from Trader’s Way

 

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EURGBP Uptrend Channel (Sep 21, 2016)

EURGBP has been trending higher on its 4-hour chart, moving inside an ascending channel pattern and making its way towards the resistance around the .8800 major psychological level. For now, price seems to be pulling back to the mid-channel area of interest before resuming its climb.

A test of resistance could lead to another move back to the channel support since stochastic is already indicating overbought conditions. This means that bullish pressure is fading and that sellers could take control soon. If so, a selloff back to the .8400 handle could ensue.

The 100 SMA is also below the longer-term 200 SMA, signaling that the path of least resistance is to the downside. However, an upward crossover could draw more buyers to the mix and give EURGBP enough momentum to break past the channel resistance.

There were no major releases from both the euro zone and the UK earlier in the week, as most of the main event risks have already passed. Both the ECB and the BOE have decided to keep monetary policy unchanged, although the UK central bank seems more inclined to implement more easing in the near term.

UK public sector net borrowing data is due today while there are still no other reports lined up from the euro zone. Thursday has a speech by ECB Governor Draghi and a testimony by BOE Governor Carney later in the day, likely providing additional volatility for this pair.

On Friday, euro zone flash PMI readings are due, providing an early glimpse of business conditions in the region for September. Small declines are eyed for both Germany and France, likely weighing on the shared currency's gains by then.

By Kate Curtis from rader’s Way

 

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USDJPY Triangle Support (Sep 22, 2016)

USDJPY suffered a sharp selloff after the BOJ and FOMC policy decisions. Price is now moving close to the bottom of its descending triangle pattern visible on the 4-hour time frame. Another bounce off the 100.00 major psychological mark could lead to a climb back to the triangle resistance at 102.00.

On the other hand, a break lower could spur a 700-pip drop, which is roughly the same height as the chart formation. Similarly, a break past the resistance could lead to a 700-pip rally. The 100 SMA is above the 200 SMA for now so the path of least resistance is to the upside and the support might still hold. In addition, stochastic is already in the oversold area so sellers are feeling exhausted. Buyers could take over around the 100.00 level, triggering a bounce.

The FOMC decided to keep interest rates on hold at <0.50% but this came at the dissent of three policymakers (George, Rosengren, and Mester), reflecting a tilt to a more hawkish stance. Policymakers acknowledged that the case for a rate hike has strengthened and that they would look closely at upcoming data before deciding when to tighten.

In her press conference, Yellen also emphasized that the economy has been improving and that they could stay on track towards hiking before the end of the year if data continues on this trajectory. This could keep market watchers on guard for a likely hike in November or December, which might be enough to keep the dollar supported in the coming weeks.

Meanwhile, the BOJ announced a change in its policy towards targeting the yield curve. In their comprehensive assessment, Japanese policymakers acknowledged the persistent inflation drags and added that they will need to implement stronger efforts to boost price levels and expectations. With that, the yen could remain under pressure once more details of these measures are discussed and implemented.

By Kate Curtis from Trader’s Way

 

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EURJPY Area of Interest (Sep 23, 2016)

EURJPY recently broke below support around the 114.00 major psychological level then dipped close to the 112.00 mark before pulling up. Applying the Fib tool on the latest swing high and low shows that this broken support and area of interest is between the 38.2% and 50% Fibonacci retracement levels, which might keep further gains in check.

The 100 SMA is above the 200 SMA on this 4-hour time frame, though, which means that the path of least resistance is still to the upside. The gap between the moving averages is narrowing so a downward crossover might be imminent, possibly signaling a buildup in bearish pressure. In addition, the 200 SMA lines up with the 50% Fib and area of interest, possibly acting as dynamic resistance.

Stochastic is on the move up to show that buyers are in control of price action for now. This suggests that the correction could carry on until reversal candlesticks form or the oscillator reaches the overbought zone to show bullish exhaustion.

Japanese banks were closed for the holiday yesterday so traders likely booked profits after the BOJ statement earlier in the week. The central bank announced some adjustments in its monetary policy goals, shifting towards targeting the yield curve and sharing plans for more aggressive stimulus. Earlier today, Japan reported a strong flash manufacturing PMI reading, which is up from 49.5 to 50.3 in September instead of falling to 49.3.

As for the euro, there were no major reports out of the region yesterday although the LTRO showed a drop from 399.3 billion EUR to just 45.3 billion EUR, reflecting a lower value in the long-term loans issued to banks. Euro zone flash PMI readings are due today and small declines in the manufacturing and services sectors of Germany and France are expected.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Descending Channel (Sep 26, 2016)

AUDUSD is starting to trend lower, forming a descending channel pattern on its 4-hour time frame. Price is currently testing the resistance near the .7650 minor psychological level and could be due to resume its drop to the channel support at .7450.

Stochastic is turning lower and making its way out of the overbought zone to indicate that sellers are taking control of price action. Also, the 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside.

However, the gap between the moving averages is narrowing so an upward crossover could be due. In that case, Aussie bulls could try to push price higher, especially if the moving averages also hold as near-term dynamic support.

The RBA minutes released last week indicated that the Australian central bank is no longer inclined to cut interest rates in the next few months, citing a relatively upbeat assessment of their economy. On the other hand, the FOMC disappointed dollar bulls by refraining to hike interest rates during their policy decision.

Still, the Fed noted that they'll be keeping close tabs on data to see if they can be able to tighten monetary policy by the end of the year. There's not much in the way of US reports this week, though, as traders will have to wait for the NFP report due the following week to gauge if employment continues to improve.

A number of FOMC policymakers are set to make testimonies this week, including George, Tarullo, Bullard, and Fischer. Fed Chairperson Yellen also has a couple of testimonies lined up and she could reiterate their hawkish bias, possibly allowing the dollar to regain ground.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Channel Break Correction (Sep 27, 2016)

NZDUSD was previously trading inside an ascending channel formation before making a downside break and hitting a low of .7220. From there, price showed signs of a pullback and looks ready to make a retest of the broken channel support at the .7300 major psychological level.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level also coincides with the broken channel support, adding to its strength as potential resistance. If it holds as a ceiling, NZDUSD could resume its drop to the previous lows or much lower.

The 100 SMA just crossed below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In addition, the moving averages appear to be holding as dynamic inflection points at the moment. Stochastic is already on the move down from the overbought zone to show that sellers are taking control of price action.

Last week, the RBNZ hinted that they're keeping the door open for additional rate cuts, citing concerns about inflation and weak demand from emerging economies. Governor Wheeler also emphasized that the Kiwi is trading at high levels, which is dampening export activity and overall growth.

Meanwhile, the FOMC also decided to keep rates on hold for the time being but hinted that they could still tighten in their next policy meetings. Three members voted to hike in September, reflecting a shift to a more hawkish committee. For now, policymakers have indicated that they'll be keeping close tabs on upcoming data to see if they can stay on track towards hiking rates soon.

There's not much in the way of top-tier reports from both economies this week, though, so these monetary policy biases could be the main driver of price action. Apart from that, overall market sentiment could also be influenced by the US presidential debates and the OPEC meetings, with risk-off moves favoring the safe-haven USD.

By Kate Curtis from Trader's Way

 

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EURUSD Descending Triangle (Sep 28, 2016)

EURUSD has formed lower highs and found support at the 1.1130 area, creating a descending triangle formation on its 4-hour chart. Price is currently testing the triangle resistance and might be due for a drop back towards support.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, adding confirmation that the triangle resistance could keep gains in check. Stochastic is also on the move down, which suggests that sellers are in control of price action for now.

However, the oscillator is nearing the oversold zone so this bearish pressure could fade soon. In that case, price could make another bounce off support and go for a climb back to the resistance at 1.1250. Stronger bullish momentum could trigger a breakout, which could result in a rally of around 200 pips, which is the same height as the chart formation.

Economic data from the US came in mostly stronger than expected yesterday, with both the flash services PMI and CB consumer confidence index beating expectations and hinting at stronger business and consumer activity down the line. Data from the euro zone fell short of estimates, with German import prices down 0.2% versus the projected 0.1% dip, adding downside pressure on inflation.

For today, Germany will print its GfK consumer climate index and likely show no change from the previous 10.2 reading. The US is set to report durable goods orders data, with analysts expecting to see a 1.0 drop in the headline figure and a 0.5% decline in the core reading. Fed head Yellen and FOMC member Bullard also have testimonies lined up, as hawkish remarks could keep the dollar supported on rate hike hopes.

ECB head Draghi also has a testimony lined up but his speech earlier in the week didn't contain much surprises. Still, any remarks cautioning about the impact of the Brexit on the euro zone economy could keep a lid on the shared currency's gains.

By Kate Curtis from Trader's Way

 

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USDCAD Reversal Pattern (Sep 29, 2016)

USDCAD failed in its recent attempts to break past the 1.3250 minor psychological resistance and is moving closer to testing support at the 1.3000 mark. This could complete the formation of a double top pattern, with a break below the neckline likely sending the pair lower by at least 250 pips.

However, the 100 SMA just crossed above the 200 SMA to show that the path of least resistance is to the upside. This means that the 1.3000 level could still hold as support and push price to bounce back up to the 1.3250 resistance for the formation of another top or even an upside break. Stochastic is already indicating oversold conditions, which means that bearish momentum is exhausted, so buyers might take over.

The OPEC gathering in Algiers concluded with energy ministers saying that they've reached an agreement. However, this refers only to an outline for an output deal and not an actual production cap just yet. As it turns out, they have yet to agree on the size and scale of the program, and market watchers will have to wait until the next official OPEC meeting in November 30 to see if the deal will push through.

For now, crude oil bulls are pushing the commodity price up, which is supporting the positively-correlated Canadian currency as well. Stronger oil prices could mean strong revenues for Canada's energy sector, which comprises a huge chunk of its business and export activity.

As for the US dollar, traders still seem to be hopeful for a Fed rate hike in November or December. Data has been slightly better than expected in terms of durable goods orders for August but the July readings were downgraded. There's not much in the way of top-tier US data today so traders might hold out for next week's NFP release.

By Kate Curtis from Trader's Way

 

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EURAUD Channel Break Correction (Sep 30, 2016)

EURAUD was previously trading inside an ascending channel on its 4-hour time frame before breaking lower and showing that a reversal is due. Price has found support near the 1.4600 mark and has pulled up from its dive to retest the broken channel bottom around the 1.4700 major psychological level.

Applying the Fib tool on the latest swing high and low shows that the 23.6% retracement level lines up with the broken support area and might be enough to keep further gains in check. A higher retracement could last until the 38.2% Fib which is near the moving averages.

The 100 SMA is still above the 200 SMA for now so the path of least resistance could be to the upside. However, the gap between the moving averages is narrowing so a downward crossover could be due. Also, stochastic is nearing the overbought zone and a turn lower could draw more euro bears to the mix.

News of hedge funds moving their derivatives holdings away from Deutsche Bank inspired risk aversion in recent trading sessions, triggering a flight to safety in financial assets. However, the euro managed to hold on to its gains against the Aussie, which is a higher-yielding and riskier currency.

Economic data from the euro zone came in mixed, as German and Spanish flash CPI readings beat expectations but the German unemployment change report showed a 1K rise in joblessness versus the projected 5K increase in hiring. There were no reports out of Australia yesterday but the commodity currency could still draw support from the lack of dovishness in the RBA minutes released earlier in the month.

For today, Australia will release its numbers on private sector credit and HIA new home sales. The Chinese Caixin manufacturing PMI is also due and a rise from 50.0 to 50.1 is eyed for September, likely shoring up demand for the Aussie, especially if the actual results beat expectations.

By Kate Curtis from Trader's Way