Daily Technical Outlook

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GBPUSD Descending Channel (Nov 4, 2015)

GBPUSD has been trending lower on its 4-hour and 1-hour charts, moving inside a descending channel pattern. Price is currently testing the top of the range around the 1.5450 minor psychological level and might be due for a drop back to the bottom at 1.4950-1.5000.

The 100 SMA is still above the 200 SMA for now, although the moving averages are crossing back and forth. Stochastic formed a slight bearish divergence, with the oscillator making lower highs and price making higher highs. RSI is also heading south, indicating a potential pickup in bearish pressure.

However, a return in bullish momentum could trigger an upside breakout from the channel and further gains for GBPUSD. Price could draw support around 1.5200-1.5250 in the event of a small pullback.

One of the biggest catalysts for this setup is the UK Super Thursday, which consists of the BOE monetary policy statement, MPC meeting minutes, and BOE Inflation Report release. No actual policy changes are expected for this month, but traders are keen to find out of the UK central bank is shifting its monetary policy stance.

For today, the UK services PMI is due and a small rise in activity is eyed. Strong data could revive positive growth prospects and allow the pound to keep up its rally. Analysts are expecting to see a climb from 53.3 to 54.6, most likely because services industry activity picked up during the Rugby World Cup last month.

As for the dollar, the upcoming US jobs release for October could be crucial in determining its trends. Analysts are expecting to see a 179K gain, stronger than the previous 142K increase, with the jobless rate projected to hold steady at 5.1%. Revisions to previous data could also influence Fed rate hike expectations.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Ranging Ahead of NFP (Nov 5, 2015)

USDJPY has been moving sideways on its 4-hour time frame, finding support at the 118.50 minor psychological level and testing resistance at the 121.50 mark. Stochastic is indicating overbought conditions, which suggests that the top of the range might keep gains in check.

The moving averages are oscillating so the range-bound movement might carry on. If so, USDJPY could head back to the bottom of the range for another test of support. RSI is starting to point down also, which might also bring bearish momentum back.

The main event risk for this setup is the US non-farm payrolls release, which could have significant implications on the Fed's potential interest rate hike decision. Analysts are expecting to see a 179K increase in hiring for October, stronger than the previous month's 142K gain and enough to keep the jobless rate unchanged at 5.1%.

Earlier labor indicators are giving mixed signals, as the ISM manufacturing survey showed a decline in its employment component while the non-manufacturing survey recorded a strong rise. The ADP non-farm employment change report came in line with expectations with a 180K increase.

According to Fed head Janet Yellen, a December rate hike remains a "live possibility" depending on how upcoming data turns out. This suggests that all eyes and ears will be on the October NFP release, although the economy still has the November jobs report lined up before the December FOMC meeting.

As for the Japanese yen, the BOJ seems to be in no mood to change monetary policy soon, even as data from Japan have been mostly weaker than expected. This suggests that the yen could draw a lot of support in the event of an NFP disappointment.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Range Support (Nov 9, 2015)

AUDUSD has broken below its mid-range area of interest and is now aiming for the bottom around the .6950 minor psychological level. A test of this support could yield either a bounce or a break, with technical indicators suggesting that bearish momentum is in play.

The 100 SMA is safely below the longer-term 200 SMA, which means that the path of least resistance is to the downside. In that case, a break of support could yield at least 400 pips in losses since this is the same height as the rectangle pattern.

Stochastic and RSI are both pointing down, also confirming that sellers are in control of price action at this point. However, a bounce off the range support could spur a move back to the resistance at .7350 or at least until the middle at .7150.

Last week, NFP data from the US led to a strong dollar rally since the results came in much better than expected. This supported expectations of a Fed interest rate hike in December, as FOMC policymakers have mentioned that they're just waiting to see more evidence of growth in the jobs market before giving the green light for tightening.

Meanwhile, the Aussie is currently being weighed down by downbeat trade data from China. While the surplus was wider than that of the previous month, underlying components revealed a drop in exports and a much sharper decline in imports. This spells downbeat prospects for Australia's commodity shipments, particularly that of iron ore.

Event risks for this AUDUSD setup this week include inflation figures from China and employment data from Australia. Strong figures could keep the Australian currency supported and inside the range while dismal readings could serve as catalysts for a downside break. US retail sales could prop up the dollar once more if the actual results are strong.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Uptrend Channel (Nov 10, 2015)

GBPAUD has been trending higher on its 4-hour chart, moving inside a rising channel visible on that time frame. Price just bounced off the channel support at 2.1150 and may be aiming for the top at 2.1800-2.1900.

Price could still encounter a bit of resistance at the mid-channel area of interest, which might spur another test of the channel support. Still, strong bullish momentum might be enough to sustain a climb all the way to the resistance.

Stochastic is on the move up, which means that buyers are very much in control of price action. However, the oscillator is already nearing the overbought zone, which could convince sellers to hop back in. RSI is also heading north, indicating that buyers are in play for now.

The SMAs appear to be on the verge of making an upward crossover, adding confirmation that the path of least resistance is to the upside.

Event risks for this trade include the release of jobs data from both the UK and Australia. A slower pace of job declines is expected for the UK, which might be enough to keep the pound afloat. However, Australia is expected to post a strong 14.8K rebound in hiring, which could also yield gains for the Aussie.

Earlier this week, China printed a strong headline trade balance but underlying components reflected a huge slump in demand. In particular, this could mean weaker imports from Australia, especially for its iron ore commodity shipments.

Chinese CPI data came in below expectations, adding further downside pressure on the Australian dollar. Fixed asset investment and industrial production reports are still up for release tomorrow and more signs of weakness could keep the Aussie's gains limited.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Long-Term Range (Nov 11, 2015)

EURGBP is hovering at the bottom of its long-term range, ready to make a bounce off support or a breakdown depending on how data turns out. A bounce off the support at the .7050 area could lead to a rally back up to the .7400 levels or at least until the middle at .7200.

Technical indicators are hinting at a bounce, as stochastic is moving up from the oversold zone. Similarly, RSI is turning higher, showing that buying pressure might be building up.

The 100 SMA is below the 200 SMA for now but is nearing the long-term moving averages, perhaps going for an upward crossover. If that happens, it would add more confirmation that a bounce is in order. On the other hand, a break below support could spur a stronger selloff for EURGBP.

The main event risk for this setup is the UK jobs report, which is expected to show a 1.6K increase in claimants. This would be a smaller increase compared to the previous month's 4.6K gain, although revisions are still possible.

Also of interest is the average earnings index, which might reflect a faster pace of wage growth and put upside pressure on inflation. The central bank has been pretty downbeat with its outlook lately, citing that the economy is facing more risks compared to a few months back. Still, stronger than expected data could renew faith in the UK economy and put the BOE on track to hiking rates sometime next year.

In the euro zone, data has been mostly weaker than expected, particularly in the top economies like Germany and France. The German trade balance recently missed expectations while the French industrial production figure also fell short.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Head and Shoulders (Nov 12, 2015)

GBPAUD could be in for a long-term reversal, as a head and shoulders pattern has formed on its 4-hour forex chart. Price is on its way to test the neckline support at the 2.1200 area, with a downside break likely to confirm that a selloff is in order.

The chart formation is approximately 500 pips in height so the resulting breakdown could be of the same size, potentially taking GBPAUD down to the 2.0700 handle or much lower. Stochastic is on the move down, which means that sellers are in control of price action.

RSI is also heading down, but it's already closing in on the oversold region, which suggests that selling pressure might fade soon. The 100 SMA is still above the longer-term 200 SMA so a bounce off the nearby support areas might be possible.

Earlier today, Australia printed a stronger than expected jobs report, adding a whopping 58.6K jobs in October versus the consensus of a 14.8K gain. To top it off, the previous report was upgraded to show a smaller decline in hiring of 0.8K from the initially reported 5.1K decline. This was enough to bring the unemployment rate all the way down from 6.2% to 5.9%.

In contrast, headline jobs figures from the UK came short of expectations, as the claimant count increased by 3.3K instead of the estimated 1.6K rise. The average earnings index was unchanged at 3.0% instead of showing the projected 3.2% increase, but the unemployment rate dipped from 5.5% to 5.4%.

There are no other reports due from both the UK and Australia for the rest of the week, which suggests that this difference in employment data might keep driving GBPAUD price action. Prior to this, the rate statements from both economies indicated a shift in stance, with the BOE sounding less hawkish and the RBA appearing not too dovish.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDCAD Long-Term Channel Bounce (Nov 13, 2015)

AUDCAD is slowly trending higher on its 4-hour time frame, just having bounced off the bottom of the range at the .9300 major psychological level. A short-term double bottom pattern can be seen, indicating that further rallies towards the top of the channel at the .9600 major psychological level could take place.


For now, price is stalling at the mid-channel area of interest, with both stochastic and RSI indicating overdone conditions. The oscillators haven't turned down from the overbought zone yet, which means that there may be a bit of buying pressure left for a move up to the channel resistance.


The 100 SMA is above the 200 SMA for now but the moving averages are edging closer together, perhaps getting ready for a downward crossover. If so, AUDCAD might make another test of the channel support and probably attempt to break lower.


Earlier this week, Australia printed a much stronger than expected jobs report for October. The economy added 58.6K jobs during the month, enough to bring the jobless rate down from 6.2% to 5.9%. However, analysts are treating the data with skepticism, as the ABS made previous adjustments to their seasonality calculations.


As for the Loonie, oil prices have been pushing the currency around these days. The latest US crude oil inventories report showed a buildup in stockpiles from 2.8M to 4.2M barrels, weighing on prices.

There are no other reports lined up from both Australia and Canada for today, although the upcoming US retail sales release could impact the Loonie because of Canada's close trade ties to the US.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Trend Line Support (Nov 16, 2015)

USDJPY sold off on Friday but is currently testing support at a rising trend line connecting the lows on the 1-hour time frame. Price could be due for a bounce from here, possibly taking it up to the previous highs around the 123.50 minor psychological level.

The trend line coincides with the 200 SMA, which has served as a dynamic inflection point in the past, adding to its strength as a support area around the 122.50 minor psychological level. The 100 SMA is above this long-term moving averages, confirming that the path of least resistance is to the upside.

Meanwhile, stochastic is moving up from the oversold area, indicating that a bounce is likely to take place. RSI is also pointing north, suggesting another round of gains for USDJPY. However, a break below the 122.00 level might signal that a reversal is in order.

Friday's release of US retail sales and PPI data saw weaker than expected results, casting doubts on whether the Fed can be able to hike interest rates before the end of the year. Still, the Japanese economy remains on much weaker footing since the GDP figure released in today's Asian session indicated that it's back in recession.

Later on in the week, the FOMC minutes are up for release and this should have more clues on whether or not the Fed is set to tighten soon. Another event risk for this play is the BOJ interest rate statement, as calls for further easing have intensified.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Consolidation Ahead of CPI (Nov 17, 2015)

GBPUSD is consolidating tightly in a symmetrical triangle pattern visible on a short-term time frame, just below an area of interest indicated on the 4-hour time frame. Price could go either way, depending on the outcome of the UK CPI release in the upcoming London trading session.

Price appears to have found resistance at the 50% Fibonacci retracement level or the 1.5200-1.5250 levels, which coincide with a broken support level. Stochastic is on the move down, confirming that the selloff is likely to resume, possibly taking the pair to its previous lows near the 1.5000 major psychological mark.

The 100 SMA just crossed below the long-term 200 SMA, adding another signal that the path of least resistance is to the downside. RSI is also heading south, which means that sellers are in control of price action.

The October CPI release from the UK could serve as a strong catalyst for a breakout, with an upside surprise likely setting off a rally to the next resistance at 1.5300 and beyond. A downside surprise, on the other hand, could yield more losses for the pair.

Analysts are expecting to see another 0.1% decline in price levels, reminding market watchers that the BOE is no longer so upbeat about tightening monetary policy in early 2016. The core CPI is expected to hold steady at 1.0%.

Data from the US came in weaker than expected, as the Empire State manufacturing index showed a small climb to -10.7 instead of the projected surge to -5.3, but the dollar managed to stay afloat against its peers thanks to risk aversion. While traders still seem to be divided on a December liftoff, the US currency is able to hold on to its safe-haven appeal in the midst of market uncertainty.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Descending Channel (Nov 18, 2015)

AUDUSD has been trending lower on its 1-hour forex chart, moving inside a descending channel connecting the highs and lows of price action since last month. Price is currently testing the resistance at the .7100 major psychological level and might be due for a move back to the bottom.

The 100 SMA just crossed below the 200 SMA, indicating that the downtrend could carry on, and is also holding as a dynamic resistance level. If so, price could fall until the channel support at the .6950 minor psychological level or at least until the middle of the range around .7000-.7050.

Stochastic is on the move up, though, hinting that buyers could stay in control and push for an upside breakout. RSI is on middle ground, barely offering any strong directional clues at the moment.

Earlier in the week, the RBA printed the minutes of its latest monetary policy meeting and showed more signs of shifting away from its previous dovish stance. A couple of medium-tier leading indicators are up for release in today's Asian trading session, with more signs of improvement likely to keep supporting the Aussie.

As for the US dollar, the biggest catalyst could be the FOMC meeting minutes. Although the Fed decision revealed that a December liftoff is still on the table, some policymakers have been sharing mixed views on a rate hike. The transcript of their meeting should shed more light on whether or not Fed officials are leaning towards tightening before the end of the year.

Data from the US came in mixed, with the headline and core CPI printing 0.2% upticks as expected. Industrial production fell 0.2% in October while capacity utilization declined in the same month.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Signs of Retracement(Nov 19, 2015)

EURUSD has been on a steady downtrend, barely showing any signs of a pullback until recently. Price bounced off the lows at 1.0615 and may be ready for a retracement to the Fibonacci retracement levels based on the latest swing high and low on the 1-hour time frame.

In particular, the 38.2% retracement level lines up with a broken support area at the 1.0700 major psychological mark. It is also near the 100 SMA, which might hold as a dynamic resistance level. A higher pullback could last until the 50% Fib, which is closer to the long-term 200 SMA.

Speaking of moving averages, the 100 SMA is below the 200 SMA so it's safe to assume that the path of least resistance is to the downside. If any of the Fib levels allow the selloff to resume, EURUSD could make its way down to the previous lows or much lower.

Stochastic is on the move up, with a small bullish divergence, so buyers might still be in control for now. RSI is also pointing north, confirming that sellers are taking a break.

Earlier today, the FOMC minutes showed that most policymakers have taken a hawkish stance, supporting the idea of a Fed liftoff in their December meeting. Some even voted to hike interest rates during their October statement but others pointed out that the economy is not ready yet.

Meanwhile, ongoing raids in the euro zone to prevent further terror attacks are weighing on the shared currency. There were no reports released from the region yesterday, as market uncertainty continues to weigh on the euro.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Retracement Setup (Nov 20, 2015)

NZDUSD has been trending lower across most time frames but is showing signs of a large pullback from its latest drop. Price bounced off support at the .6425 area and is retreating to the Fib levels marked on the swing high and low on the 4-hour chart.

At the moment, the pair is testing resistance at the 38.2% Fibonacci retracement level near the .6600 major psychological mark. No reversal candlesticks have formed yet, which suggests that the correction might carry on to the next potential resistance.

An area of interest is located between the 50% and 61.8% Fib levels, which might be enough to keep further gains in check. The 100 SMA just crossed below the 200 SMA to confirm that the downtrend is likely to carry on while stochastic and RSI are nearing the overbought levels.

The main event risks for this setup this week have already passed, as the FOMC minutes and New Zealand quarterly PPI readings have been released. The transcript of the Fed meeting supported the idea of a December liftoff but reiterated that the trajectory of further tightening moves would be gradual.

Meanwhile, the PPI readings from New Zealand printed surprisingly good results, with input prices up by 1.6% and output prices up by 1.3%. Then again these don't incorporate the latest slump in dairy prices since the middle of October, which might weigh on inflation figures later on.

With that, the path of least resistance for this pair is still to the downside, with the latest rallies likely spurred by profit-taking activity. Risk appetite remains weak, favoring the safe-haven US dollar against the higher-yielding Kiwi.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Ascending Channel (Nov 23, 2015)

GBPJPY has been moving on an uptrend on its 4-hour time frame, with an ascending channel connecting the latest highs and lows of price action. Price is currently testing the channel support at the 186.50 minor psychological level and might be due for a bounce back to the resistance at 189.00.

The pair also seems to be drawing support from the 100 SMA, which has held as a dynamic inflection point. This short-term moving average is above the longer-term 200 SMA, indicating that the uptrend is likely to carry on.

Meanwhile, stochastic has already reached to oversold area so the recent rally might soon turn. RSI is also indicating oversold conditions and might be ready to climb, with price likely to follow suit.

There were no reports released out of the UK and Japan on Friday, and Japanese banks are on holiday today so there are no reports lined up as well. Later on in the week, the BOJ monetary policy meeting minutes are up for release and might spur volatility among yen pairs.

There are no major reports out of the UK, with most of the focus on Japan. The Tokyo and national core CPI readings are lined up on Friday, along with the unemployment rate and household spending data. Strong figures could support the idea that the BOJ isn't likely to increase its easing efforts anytime soon while weak data could keep the likelihood of more easing in play.

As for the UK, recent reports have been mixed, suggesting that the economy is no longer as strong as it used to be. The BOE has shifted to a less hawkish stance, hinting that they might hike rates much later than initially anticipated.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Trend Line Pullback (Nov 24, 2015)

AUDUSD has recently broken above the falling trend line visible on its 1-hour chart, indicating that a reversal is underway. Price is showing signs of pulling back to the broken resistance area and the 61.8% Fib at the .7100 handle might hold as support.

The pair seems to be bouncing off the 38.2% Fib already, indicating that bulls are eager to charge. However, a larger pullback to the lower Fib levels closer to the moving averages is still a possibility. Both stochastic and RSI are on the move down so sellers are still in control.

Meanwhile, the 100 SMA recently crossed below the 200 SMA, indicating that the downtrend might carry on. An upward crossover might be needed to confirm that an uptrend is starting to take place.

Earlier this week, the US printed a couple of bleak figures, namely its flash manufacturing PMI for November and its October existing home sales report. For today, the CB consumer confidence numbers are due and it might show a rise in confidence from 97.6 to 99.3.

Event risks for the Aussie include RBA Governor Stevens' speech today and quarterly private capital expenditure data lined up on Thursday. US durable goods orders data and personal income and spending reports are also up for release mid-week.

Keep in mind that the Fed is on track towards hiking interest rates in December, unless economic data hugely disappoints. Fed head Yellen recently emphasized that the path of rate hikes would be gradual, possibly to keep market expectations in check and prevent any sudden spikes in volatility.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Long-Term Range (Nov 25, 2015)

EURGBP appears to have made yet another bounce off the bottom of its long-term range. Price tested the .7000 major psychological level recently and is staring to make its way higher.

Stochastic is starting to head back up from the oversold area, indicating a return in bullish momentum. Similarly, RSI is also climbing out of the oversold region to show that buyers are regaining control.

The 100 SMA is below the 200 SMA for now but an upward crossover seems imminent. The moving averages are edging closer together and a crossover could add confirmation that a rally is in the cards.

Earlier this week, the BOE Inflation Report hearings were held, highlighting the shift of a less upbeat tone for the UK central bank. This echoes their less hawkish sentiment shared during the BOE statement and minutes, indicating that policymakers are inclined to keep rates low for much longer.

Meanwhile, the euro is recovering against most of its forex peers, following the terror attacks in Paris and the dovish ECB statement. On Monday, PMI readings from Germany and France came in mostly stronger than expected.

The only major events lined up from the euro zone are the Spanish flash CPI and French consumer spending data due on Friday. Meanwhile, the UK is set to print its second estimate GDP reading for Q3 and probably show no change from the initial 0.5% estimate.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Potential Pullback (Nov 26, 2015)

GBPAUD has sold off sharply recently, breaking below a significant support level around 2.1200. From there, the pair dipped to a low of 2.0715 before showing signs of a retracement.

Using the Fib tool on the latest swing high and low on the 4-hour chart shows that the 50% Fibonacci retracement level lines up with the broken support level, which might hold as resistance moving forward. A larger correction could last until the 61.8% Fib while a shallow pullback could reach until the 38.2% Fib at 2.1000.

The 100 SMA is starting to cross below the 200 SMA to indicate a pickup in selling pressure, confirming that GBPAUD could resume its drop at some point and possibly retest its previous lows. However, both stochastic and RSI are pointing up so sellers may allow buyers to take control in the short-term.

Earlier in the week, the BOE Inflation Report hearings reminded traders that the BOE has shifted to a less hawkish stance. According to BOE Governor Carney, interest rates could remain low for quite some time, as opposed to their earlier statements suggesting that they could start tightening monetary policy by early 2016.

Data from Australia has been less upbeat, though, as the quarterly construction work done report indicated a 3.6% drop versus the projected 1.8% decline. Later on, Australia is set to print its quarterly private capital expenditure report and might show a 2.8% slide, a slower pace of decline compared to the previous 4.0% drop.

Other event risks for the pound include the release of the second GDP estimate for Q3 2013. No revisions are expected for the initially reported 0.5% increase but any changes could push the pound in a particular direction.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Reversal Pattern (Nov 27, 2015)

USDJPY has been climbing recently but a reversal pattern just formed, indicating that a downtrend might be next. Price made a double top pattern on the 4-hour time frame and is currently testing the neckline at the 122.50 minor psychological level, with a downside break likely to confirm the selloff.

The chart pattern is approximately 100 pips in height so the resulting breakdown could be of the same size. However, the 100 SMA is above the longer-term 200 SMA, which means that the uptrend could still carry on.

Meanwhile, stochastic is on the move up so buying pressure is still present. Similarly, RSI is heading higher so price might follow suit. In that case, a move back to the tops or beyond could be seen.

Event risks for this setup include the release of Japanese spending and inflation reports in today's Asian trading session. Another decline in household spending and CPI readings are expected, although the BOJ has specified that they're not looking to expand their easing program anytime soon.

Stronger than expected data could support the BOJ's confident stance, pushing USDJPY below the neckline support and possibly until the 121.50 handle. US traders are off on the Thanksgiving holidays, which suggests that there might not be enough support for the Greenback.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Reversal Signal (Nov 30, 2015)

NZDUSD has been on a selloff but it looks like a reversal may be in order. Price is forming an inverse head and shoulders pattern on its 4-hour time frame, with an upside break of the neckline at the .6600 handle likely to send the pair up by 200 pips or the same height as the formation.

Technical indicators, however, are suggesting that the downtrend could still carry on. The 100 SMA is far below the 200 SMA and is showing no signs of making an upward crossover, which means that the path of least resistance is to the downside.

Meanwhile, stochastic and RSI are in the oversold regions so sellers might take control. In that case, NZDUSD could resume its drop to the .6400 major psychological support or much lower.

Event risks for this setup include the New Zealand Global Dairy Trade auction midweek, which might yield another decline in dairy prices. In addition, a bunch of top-tier reports are lined up in Australia and these might also influence Kiwi price action.

As for the US dollar, the non-farm payrolls release is due on Friday and another upbeat jobs reading could seal the deal for a Fed rate hike in their December meeting. For the month of November, a 201K increase in hiring is expected, slower than the previous 271K gain.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Range Resistance (Dec 1, 2015)

USDJPY has been moving sideways on the short-term time frames, still waiting for more catalysts to spur a trend in either direction. At the moment, price is approaching the top of its range around the 123.75 level.

If this area continues to hold as resistance, a move towards the bottom of the range at 122.40 might take place. On the other hand, a long green candle closing above the range resistance could signal that further gains are in the cards. The rectangle is approximately 135 pips in height so any breakouts could yield the same amount of pips in gains or losses.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. However, stochastic is already indicating overbought conditions so it's likely that the top of the range might still hold as a ceiling. Similarly, RSI is nearing the overbought area so a return in selling pressure might be seen.

Event risks for this setup include the US NFP release on Friday, as this could make or break the case for a December Fed liftoff. Although market expectations favor a rate hike in the next FOMC meeting, a very downbeat figure could still bring more uncertainty to the mix and spur losses for the US currency.

Earlier this week, data from Japan came in mixed, as retail sales beat expectations with a 1.8% gain while the preliminary industrial production report came up short with just a 1.4% increase. According to BOJ Governor Kuroda, additional stimulus isn't necessary to ward off deflation and boost economic growth.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Double Bottom (Dec 2, 2015)

GBPJPY could be in for a strong rally, as a reversal pattern can be seen on its 1-hour time frame. Price failed in its last two attempts to break below the 184.00 major psychological support and is testing the neckline resistance at the 186.00 handle.

An upside break from the neckline could confirm that an uptrend is in order, potentially taking price up by 200 pips or the same height as the chart formation. However if the neckline continues to keep gains in check, another move towards the bottoms could take place.

Stochastic has just reached the oversold area and turned higher, indicating a return in bullish momentum. Meanwhile, RSI is also starting to head north, which means that GBPJPY might follow suit. For now, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside but an upward crossover seems possible.

Event risks for this trade setup include the PMI releases from the UK, as these serve as leading indicators for economic growth. Other factors affecting market sentiment favor further gains for the pound, as risk appetite is in play.

News that the IMF added the Chinese yuan to its SDR with its reserve currency status has allowed higher-yielders to regain ground. This is because the move might open up Chinese markets for more trading activity, lending positive growth prospects for the global economy.

Only medium-tier reports are lined up from Japan next, although recent data has come in mixed. Retail sales indicated an upside surprise of 1.8% in gains while the preliminary industrial production fell short.

By Kate Curtis from Trader's Way