Daily Technical Outlook

[katetrades]

AUDUSD Simple Correction (Jan 16, 2016)

AUDUSD suffered yet another sharp selloff towards the end of last week, breaking below a key support area around .6950-.7000. Price dipped to the .6800 levels before showing signs of a potential pullback to the broken support and Fibonacci retracement levels.

Price is currently testing the 50% level near the .6930 area but a higher pullback to the 61.8% Fib at the .6950 minor psychological level might still be possible. If these levels keep gains in check, a move towards the previous lows at .6800 could be in order.

The 100 SMA is still below the 200 SMA, confirming that the path of least resistance is to the downside. Stochastic is already indicating overbought conditions but hasn't turned lower, suggesting that the correction is still in play and that bears are still getting ready to gain the upper hand. RSI is on the move up and is nearing the overbought area.

Event risks for this week include the release of Chinese GDP and industrial production data, which might be strong drivers of overall market sentiment. Weaker than expected data could inspire another sharp stock selloff, weighing on risk appetite and investor confidence, which might drag down the higher-yielding Australian dollar.

The Chinese GDP is expected to come in at 6.9% but domestic demand has managed to stay resilient and possibly enough to keep the headline readings afloat. Export growth, on the other hand, has been markedly weaker so it might've weighed on business production.

As for the US dollar, the CPI readings could also prove to be catalysts as FOMC members are watching inflation closely to judge if they can afford to hike interest rates again in March. PPI numbers have been in line with expectations, as the headline figure indicated a 0.2% dip while the core figure posted a 0.1% uptick.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Simple Correction (Jan 18, 2016)

AUDUSD suffered yet another sharp selloff towards the end of last week, breaking below a key support area around .6950-.7000. Price dipped to the .6800 levels before showing signs of a potential pullback to the broken support and Fibonacci retracement levels.

Price is currently testing the 50% level near the .6930 area but a higher pullback to the 61.8% Fib at the .6950 minor psychological level might still be possible. If these levels keep gains in check, a move towards the previous lows at .6800 could be in order.

The 100 SMA is still below the 200 SMA, confirming that the path of least resistance is to the downside. Stochastic is already indicating overbought conditions but hasn't turned lower, suggesting that the correction is still in play and that bears are still getting ready to gain the upper hand. RSI is on the move up and is nearing the overbought area.

Event risks for this week include the release of Chinese GDP and industrial production data, which might be strong drivers of overall market sentiment. Weaker than expected data could inspire another sharp stock selloff, weighing on risk appetite and investor confidence, which might drag down the higher-yielding Australian dollar.

The Chinese GDP is expected to come in at 6.9% but domestic demand has managed to stay resilient and possibly enough to keep the headline readings afloat. Export growth, on the other hand, has been markedly weaker so it might've weighed on business production.

As for the US dollar, the CPI readings could also prove to be catalysts as FOMC members are watching inflation closely to judge if they can afford to hike interest rates again in March. PPI numbers have been in line with expectations, as the headline figure indicated a 0.2% dip while the core figure posted a 0.1% uptick.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Symmetrical Triangle (Jan 19, 2016)

GBPAUD has been forming lower highs and higher lows, creating a symmetrical triangle pattern on its 1-hour forex time frame. Top-tier events from the UK economy this week could determine which direction this pair might break out.

As for technical indicators, the 100 SMA is still below the 200 SMA for now so the path of least resistance is to the downside. This suggests that the top of the triangle around 2.0800 might continue to keep gains in check, allowing price to test the triangle support at 2.0700.

A break below that area could push GBPAUD lower by an additional 350-400 pips, which is the same height as the chart formation. Stochastic is on middle ground but pointing down while RSI is also poised to head south, indicating that price action could follow suit.

For today, the UK CPI is up for release, with the headline figure expected to hold steady at 0.1% and the core figure likely to stay unchanged at 1.2%. Underlying inflation data such as PPI, HPI, and RPI could also provide clues on future inflation trends and their implications on BOE policy biases.

Earlier today, China printed its GDP reading for Q4, which turned out to be slightly weaker than expected at 6.8%. Industrial production was also below expectations at 5.9% versus 6.0%, down from the previous 6.2% figure. Fixed asset investment and retail sales were also lower.

Later on, UK retail sales and jobs figures are up for release, with traders looking for signs that the slump in commodity prices might translate to stronger consumer spending. Still, weaker than expected data might be enough to push GBP lower against its counterparts.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Breakdown and Pullback (Jan 20, 2016)

GBPAUD had previously been consolidating inside a symmetrical triangle pattern on its 1-hour time frame before breaking lower. Price had dipped close to the 2.0400 major psychological support before showing signs of a retracement.

Using the Fib tool on the latest swing high and low shows that the 50-61.8% levels line up with the broken triangle support around 2.0600-2.0650, which might now hold as resistance. These are also close to the moving averages.

The 100 SMA is still below the longer-term 200 SMA, confirming that the downtrend is likely to carry on. Stochastic is on the move up, which suggests that a correction is taking place.

Event risks for this setup include the UK jobs release, which might show a 4.1K increase in claimants. The report is also expected to show a drop in the average earnings index from 2.4% to 2.1% but the unemployment rate is expected to hold steady at 5.2%.

As for the Aussie, the downbeat reports released from China yesterday are also weighing on its gains. In addition, the IMF's decision to lower their global growth forecasts for this year and the next is taking its toll on risk sentiment.

However, the pound might be in for more declines since BOE Governor Carney clarified that they're not looking to hike interest rates anytime soon. This led to a massive selloff for pound pairs yesterday, as traders pared expectations for a rate hike anytime this year.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Retracement Setup (Jan 21, 2016)

GBPJPY has been trending lower recently, moving below a descending trend line connecting the recent highs of price action. Price just broke below an area of interest at 166.50 then dipped to a low of 164.00 before pulling back.

Using the Fib tool on the latest swing high and low shows that the 50% level lines up with the area of interest while the 61.8% level coincides with the descending trend line and 100 SMA. These could serve as potential resistance areas if the downtrend would resume at some point.

Stochastic is already indicating overbought conditions with a slight bearish divergence while RSI is nearing the overbought area. Once these oscillators turn lower, bearish pressure could build up and possibly even push for a break of the previous lows. The shorter-term 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.

Event risks for this trade setup include the UK retail sales release on Friday, as analysts are expecting to see a 0.1% decline in consumer spending. Based on the latest employment report, wage growth was absent since the average earnings index slumped from 2.4% to 2.1% even though hiring picked up.

Earlier in the week, UK inflation numbers came in stronger than expected but this was overshadowed by BOE Governor Carney's downbeat speech. He pointed out that the UK central bank has no plans of tightening monetary policy anytime soon and that the slowdown in China poses risks to the global economy.

As for the Japanese yen, talks of further easing spurred risk aversion yesterday, allowing the lower-yielding currency to rally. The all industries activity index is up for release today and a 0.7% drop is eyed.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Trend Line Pullback (Jan 22, 2016)

USDCAD has been trending higher on its long-term time frames, with the recent selloff offering an opportunity to catch the uptrend. On the 4-hour time frame, an ascending trend line can be drawn to connect the recent lows of price action.

Using the Fib tool on the latest swing low and high on the 4-hour time frame shows that the 50% Fibonacci retracement level lines up with the trend line and the 1.4250 minor psychological level, which might hold as support for the pair. A larger correction to the 61.8% Fib near the 100 SMA might still be possible.

The 100 SMA is above the longer-term 200 SMA for now, confirming that the uptrend is likely to carry on. If so, USDCAD could make its way back up to the previous highs at 1.4680 once more.

Event risks for this setup include the top-tier releases from Canada today. These are the CPI and retail sales reports, which might provide more clues on whether the Canadian economy is doing well or not. Recall that BOC Governor Poloz refrained from cutting rates in their latest policy statement, citing that risks to their inflation outlook remain balanced.

Analysts expect the headline CPI to fall by 0.4% and the core CPI to show a 0.3% drop. Headline consumer spending is expected to show a 0.3% uptick while core retail sales could see a 0.4% gain.

As for the US, the flash manufacturing PMI and existing home sales data are up for release. Both reports are expected to show improvements but the risk-on flows that drove the dollar pairs yesterday might still be in play.

By Kate Curtis from Trader's Way

 

[TradersWay]

AUDUSD Retracement Levels (Jan 25, 2016)

AUDUSD recently broke below a rising trend line support visible on the 4-hour time frame, indicating that a downtrend is starting. Price found support at the .6825 area and is showing signs of a correction.

Using the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the broken trend line and is near the .7100 major psychological level. If this holds as resistance, AUDUSD could resume its drop to the previous lows or much lower.

Stochastic is already indicating overbought conditions, which suggests that sellers are eager to take control of price action. In this case, any of the nearby Fib levels at .7020 and .7080 might already keep further gains in check. The 38.2% Fib is in line with the 100 SMA and the 61.8% Fib is in line with the 200 SMA.

Event risks for this trade setup include the Australian CPI release, which might show a disappointment for Q4 2015. Another potential catalyst for a big move might be the FOMC statement, as Fed officials might downplay their tightening bias due to the ongoing slowdown in price levels and the global economy.

As in the previous weeks, risk sentiment could continue to play a big role in price action, as the stock market performance in China could still push the Australian dollar around. Another week of risk-off flows could be bearish for the Australian dollar, particularly if the selloff is spurred by Asian equities.

The BOJ statement could also impact overall risk sentiment towards the end of the week, as the previous central bank statements did so. Additional easing from the Japanese central bank could keep risk-taking supported if investors believe that this stimulus would be enough to keep global growth prospects afloat.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Reversal Pattern Forming (Jan 26, 2016)

EURAUD might be done with its recent rallies, as a reversal pattern seems to be forming on its 4-hour time frame. Price is in the middle of completing a head and shoulders formation but has yet to create the right shoulder before confirming the potential selloff.

The neckline is located at the 1.5375-1.5400 area and a break below this region could add confirmation about the longer-term drop. Using the Fib tool on the latest swing high and low shows that the 38.2% level at 1.5600 might hold as resistance for now.

Stochastic is still on the move up, which means that buyers are in control of price action. In addition, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. However, there's a nearby resistance at the 50% Fib or 1.5700, which might be the line in the sand for a correction.

Event risks for this setup include the release of Australia's quarterly CPI readings. Analysts are expecting to see a 0.3% uptick in price levels but we might be in for a disappointing read if the oil price slump from last year is already factored in.

As for the euro, the ECB's easing bias might keep the shared currency's gains in check and the upcoming CPI estimates could strengthen expectations of further stimulus. Germany's Ifo business climate index missed expectations yesterday, indicating that sentiment has turned sour once more.

Other potential catalysts include Australia's quarterly import prices report, along with flash GDP readings from the top euro zone economies.


By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Descending Channel (Jan 27, 2016)

EURJPY is currently testing the descending channel support visible on the daily time frame. A bounce could take it back to the channel resistance near the 131.00 major psychological mark, which might be enough to let the downtrend resume.

Drawing the Fibonacci levels based on the latest swing high and low shows that the top of the channel lines up with the 61.8% Fib and an area of interest. It is also around the 100 SMA, which is below the 200 SMA, indicating that the downtrend is likely to carry on.

Stochastic and RSI are on the move up, which means that euro bulls are in control of price action for now. However, stochastic is already nearing the overbought zone, suggesting that buying pressure could fade soon. RSI is still close to the middle so there's enough room for a large correction.

Event risks for this setup include the release of euro zone CPI estimates and the BOJ statement on Friday. While the ECB has already expressed its bias for adding to its stimulus program by March, the BOJ remained confident that the Japanese economy can stay resilient and meet its inflation targets.

However, some analysts believe that the BOJ might sound more dovish in this week's monetary policy statement since data from Japan continues to disappoint. Another set of inflation and spending reports are up for release just before the BOJ statement, giving more clues on what the central bank might announce.

As for the euro zone, negative CPI estimates could confirm that the ECB is on track to ease in March. Stronger than expected figures, on the other hand, could keep the shared currency supported.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Short-term Double Top (Jan 28, 2016)

NZDUSD could be in for more declines, as a double top pattern can be seen on its 1-hour time frame. Price failed in its last two attempts to break past the .6550 minor psychological mark and is currently testing the neckline around .6440.

A break below this support zone could push NZDUSD lower by an additional 100 pips or more, taking price down to the .6340-.6350 levels. However, the 100 SMA is above the longer-term 200 SMA, indicating that the path of least resistance is to the upside.

In addition, both RSI and stochastic are moving out of the oversold area, indicating a potential pickup in buying pressure. In that case, price could make another test of the resistance at .6500.

Earlier today, the RBNZ decided to keep interest rates on hold at 2.50% as expected, but Governor Graeme Wheeler reiterated that they are keeping the door open for additional easing measures. Around this time, Fonterra announced downgrades in its milk price and payout forecasts, acknowledging the challenging global conditions and imbalance in supply and demand.

Prior to this, the FOMC also decided to keep monetary policy unchanged for the time being. Fed officials noted that they are closely monitoring the developments in the global economy and removed the reference on balanced risks to their outlook, confirming that they are concerned about the slowdown in China and the drop in oil prices.

US durable goods orders and initial jobless claims are up for release next and strong results could reassure dollar traders that the US economy can stay resilient. As for the Kiwi, commodity price trends and market sentiment could drive its price action.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Triangle Formation (Jan 29, 2016)

NZDUSD has formed higher lows and lower highs on its 1-hour time frame, creating a symmetrical triangle formation. Price is making its way towards the top of the triangle, possibly to test the resistance at the .6500 major psychological level.

If this level keeps gains in check, price could move back to the bottom of the chart pattern and test support at the .6400-6450 area. A break below this level could take price down by an additional 250 pips, which is roughly the same as the height of the chart pattern. Similarly, an upside break from the triangle resistance could spur a 250-pip climb.

The moving averages are oscillating, which shows that buyers and sellers still haven't picked a clear direction. Stochastic and RSI are both on middle ground but are on the move up, indicating that buying pressure is present at the moment.

Earlier in the week, both the FOMC and RBNZ announced their decision to keep monetary policy unchanged for the time being. While the Fed reiterated that they'd be tightening at a gradual pace, they expressed a bit of concern about the global economic developments. Meanwhile, the RBNZ stated that they're open to easing again if the conditions call for it.

Prior to this, Fonterra announced downgrades in its milk price and payout forecasts, which confirms that the industry is having trouble staying afloat given the challenges in the global economy.

Up ahead, US advanced GDP readings are due and a 0.8% growth figure is eyed. Weaker than expected results could mean more losses for the US dollar while strong data could push NZDUSD lower.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Trend Line Pullback (Feb 01, 2016)

GBPUSD recently made a strong downside break from the short-term rising trend line support visible on its 1-hour time frame. This suggests that the pair might be in for a downtrend, although a pullback to the broken support area might be in the cards.

Using the Fib tool on the breakout move shows that the broken trend line coincides with the 61.8% Fibonacci retracement level, which might hold as resistance. This is also near the moving averages, which might serve as dynamic inflection points.

The 100 SMA is still above the 200 SMA, indicating that there's a chance that the uptrend might resume. Stochastic and RSI are both on the move up but are nearing the overbought levels, which means that sellers might take control of price action soon.

Event risks for this trade include the BOE Super Thursday events, which comprise the Inflation Report and central bank statement, along with the MPC meeting minutes. Recall that the UK central bank sounded dovish in their previous policy statement, citing that they're pushing back their time line for rate hikes. This downbeat sentiment was echoed by BOE Governor Carney in his recent testimonies, emphasizing the risks from China and falling commodity prices.

As for the US, the upcoming release of the NFP report could also have an impact on dollar price action, but Fed officials appear to be more concerned about inflation trends these days. Risk sentiment could also push the dollar around, with a return in risk aversion likely to weigh on the safe-haven currency.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Descending Triangle (Feb 2, 2016)

EURGBP is in a consolidation pattern and is currently testing the bottom of a descending triangle formation visible on the 1-hour time frame. Price appears to be bouncing off support at the .7550 minor psychological mark and might be due for a test of resistance at the .7600 level.

This resistance area lines up with the moving averages, which might hold as dynamic inflection points. The 100 SMA is below the 200 SMA, indicating that the path of least resistance is to the downside.

Both RSI and stochastic are moving out of the oversold levels so buyers might take control of price action from here. Once these oscillators reach the overbought level, euro sellers could gain more energy to push the pair back down.

Event risks for this setup include the BOE statement, along with the Inflation Report and MPC meeting minutes. BOE Governor Carney previously expressed his downbeat bias, citing that weak inflation trends could lead the central bank to tighten much later than initially anticipated.

No actual policy changes are expected this week but any shift to a dovish bias by other policymakers could mean more losses for the pound. The currency enjoyed a rally yesterday when the UK manufacturing production report printed stronger than expected results.

As for the euro, the prospect of further ECB easing is still weighing on the shared currency. However, it also appears to be gaining support in a risk-off market environment.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Potential Breakout (Feb 3, 2016)

EURUSD has been consolidating lately, forming higher lows and lower highs to create a symmetrical triangle pattern on its 4-hour time frame. Price is currently testing the top of the pattern, which might continue to hold as resistance.

If so, EURUSD could move back to the bottom of the pattern at the 1.0875 level or perhaps go for a downside break. Stochastic is already indicating overbought conditions, which suggests that buying pressure is exhausted. RSI starting to move south so price might follow suit.

The moving averages are still oscillating for now, indicating indecision between buyers and sellers. An upside break from the triangle resistance could spur gains of around 300 pips, which is roughly the same height as the chart pattern.

Event risks for this trade include the NFP release on Friday, with analysts expecting weaker hiring gains of 192K compared to the previous 292K figure. Earlier labor indicators from the ISM surveys have indicated declines in the employment component, hinting at the possibility of a downside surprise.

Final services PMI readings from the euro zone's top economies are up for release today, along with the US ADP non-farm employment change and ISM non-manufacturing PMI report. Strong data from the euro zone combined with weak readings from the US could be catalysts for an upside breakout.

ECB Governor Mario Draghi is set to give a testimony tomorrow and dovish remarks or hints of further easing could keep weighing on the shared currency. Other factors that could impact EURUSD action include changes in market sentiment, possibly driven by oil price moves.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Range Retracement (Feb 4, 2016)

EURGBP recently broke to the upside of its long-term range pattern visible on the daily time frame then zoomed up to the .7750 minor psychological level before showing signs of a pullback. Using the Fib tool on the swing high and low shows that the 38.2% to 50% levels line up with the broken range resistance at .7400-.7450.

The 100 SMA is closer to the 61.8% Fib and this might act as a dynamic support area as well. In addition, this short-term moving average is above the longer-term 200 SMA, indicating that the uptrend is likely to carry on. If so, EURGBP could make another test of the highs at .7750 and possibly move further north until the .8000 levels.

Stochastic is still on the way down, which means that sellers are in control of price action and that further losses are possible. RSI is also on the move down, confirming that a correction is taking place. Once these oscillators reach the oversold area, a bounce could take place.

Event risks for this setup include the BOE events in today's London trading session. The UK central bank will announce its monetary policy decision and no major changes are expected for now. Traders are likely to pay closer attention to the minutes of their meeting, as this would indicate if any member shifted to a more dovish bias.

In addition, the BOE Inflation Report is set to reflect any revisions in growth and inflation forecasts, with downgrades likely to weigh on pound price action. BOE Governor Carney has previously stated that they have no time line for hiking rates just yet, given the external risks from China and falling commodity prices. The possibility of a Brexit is also weighing on their decision.

As for the euro, the ECB is also expected to be more dovish in their next policy statement in March. ECB Governor Draghi has hinted that they might announce an actual expansion of their easing program then, something that might limit the euro's gains.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Long-Term Uptrend (Feb 5, 2016)

USDCAD has been selling off lately but it is closing in on the rising trend line visible on the daily time frame. Price could make a test of the 1.3500-1.3600 support area, which is in line with the 61.8% Fibonacci retracement level based on the latest swing high and low.

In addition, the long-term trend line coincides with the 100 SMA dynamic support. This moving average is above the longer-term 200 SMA, confirming that the climb could carry on.

Stochastic is already indicating oversold conditions so sellers might need to take a break and let buyers take over. Similarly, RSI is nearing the oversold levels also, which suggests a potential return in buying pressure.

Catalysts for a bounce include the upcoming US NFP release, which is expected to show a 189K gain in hiring, lower than the previous 292K increase. Canada is also set to print its jobs report and might show a 5.2K rise in employment, weaker than the previous 22.8K increase.

Other possible risks include the rumored OPEC special meeting this month, as several member nations have been urging for production cuts. Arab states have stubbornly refused to give in to these calls but a possible compromise might still lift crude oil and the correlated Loonie.

The BOC hasn't announced any plans to ease monetary policy just yet but Fed officials have suggested that they might not be able to hike rates so soon again. For now, this is keeping the dollar weak, along with the rebound in risk appetite.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Ascending Channel (Feb 8, 2016)

AUDUSD has been trending higher lately, moving inside an ascending channel on its 1-hour time frame. Price is currently testing support at the .7100 major psychological level and might be due for a bounce to the top.

The 100 SMA is above the longer-term 200 SMA, confirming that the uptrend is likely to carry on. In that case, a test of the channel resistance at the .7300 handle might take place. Stochastic and RSI are both moving out of the oversold regions, indicating that buyers are taking control of price action.

However, a downside break of support might still be possible, taking AUDUSD for a reversal from its previous uptrend. In that case, a drop to the channel lows at .6800 could be seen.
Chinese markets are closed for the holiday today, which suggests that a bit of consolidation might take place. Earlier today, Australia reported a 1.0% gain in ANZ job advertisements, which is a leading indicator for employment.

There are no major reports due from the US. Last Friday, the NFP report chalked up a smaller than expected increase in hiring but the underlying data suggests that the labor market slack is being absorbed. Labor force participation improved while average hourly earnings rose higher than expected.

Market sentiment could determine where price might head next from here, although the path of least resistance might be to the downside due to strong demand for the dollar on upbeat US fundamentals.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Head and Shoulders Breakout (Feb 09, 2016)

USDJPY appears to have a made a convincing break below the head and shoulders neckline on its daily time frame. This suggests that the pair could be in for more longer-term losses, possibly amounting to around 900 pips or the same height as the chart formation.

The 100 SMA crossed below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. Also, stochastic and RSI are both on the way down and still haven't made it to the oversold area, which means that there's more bearish pressure left.

However, a price bounce might still be possible if market conditions shift once more. This could spur a pullback to the broken support around 116.50 to 117.00 before price resumes its drop.

Event risks for this setup include Fed head Yellen's speech tomorrow, as any remarks on policy could push the dollar in a strong direction. Fed officials last week have already pointed out that the inflation outlook is looking grim and that dollar gains might continue to put a lid on price pressures, reducing hopes of a rate in March.

Jobs data came in below expectations on the surface but underlying components such as the participation rate and the average hourly earnings showed that some of the slack is being absorbed.

US retail sales reports are up for release on Friday and strong figures for the month of January could allow the dollar to regain ground while weak data could lead to more losses. Analysts are expecting to see a 0.1% uptick for the headline figure and flat core figure.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Rising Channel (Feb 10, 2016)

GBPUSD has sold off recently but is still gradually trading higher on the 1-hour time frame. A rising channel can be seen connecting the latest lows and highs of price action.

Price is currently testing the channel support and might be due for a bounce back to the top. The 200 SMA lines up with the bottom of the channel at the 1.4400-1.4450 psychological levels, which might keep losses in check. If a rally takes place, a test of the 1.4700 major psychological resistance could happen.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. However, stochastic and RSI are both on the move down, hinting at a buildup in bearish pressure. If sellers take over, a break of the channel support could be seen.

Event risks for this setup include Fed Chairperson Yellen's speech later today, as she might drop more hints on when the next Fed rate hike might take place. Dovish remarks could mean losses for the dollar while upbeat comments could spur gains.

Another potential catalyst is the UK manufacturing production report, which might print a flat reading. Previous reports have come in weaker than expected so there's a good possibility of a downside surprise.

Risk sentiment appears to favor the lower-yielding dollar at the moment as traders are also pricing in lower odds of a BOE rate hike for this year or early next year. Recall that their latest policy meeting minutes showed that officials voted unanimously to keep rates unchanged this time.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Short-Term Pullback (Feb 11, 2016)

EURGBP recently broke past a resistance area at the .7650 minor psychological level then climbed to the .7850 area before showing signs of a pullback. Price is drawing support at the 38.2% Fib based on the latest swing low and high, although a larger pullback to the 61.8% Fib closer to the area of interest might be possible.

The 100 SMA is still above the longer-term 200 SMA, confirming that the path of least resistance is to the upside and that the uptrend could carry on. The 100 SMA appears to have held as a near-term dynamic support while the 200 SMA coincides with the 61.8% Fib.

Stochastic is heading up but is nearing the overbought area so a selloff could still take place. RSI is also heading higher and is currently on middle ground, indicating that buyers are gaining control.

Data from the euro zone has been coming in weaker than expected, as the latest industrial production figures from the top economies all indicated contraction. Preliminary GDP readings from Germany, Italy, and the region are up for release on Friday and another round of weak data could spur more losses for the shared currency.

Analysts are expecting to see a 0.3% growth figure from Germany and also a 0.3% GDP reading from Italy. Overall, the region is also expected to show a 0.3% expansion for the last quarter of 2015.

However, data from the UK has also been mostly weaker than expected, as the latest manufacturing production report also missed expectations. There are no major reports up for release from the UK for the rest of the week, but Brexit talks could also weigh on the pound.

By Kate Curtis from Trader's Way