Daily Technical Outlook

[katetrades]

EURJPY Countertrend Setup (Feb 12, 2016)

EURJPY has been trending lower on its longer-term time frames but the opportunity for a countertrend setup is emerging. Price is currently testing the bottom of its descending channel visible on the 4-hour and daily charts and might be due for a bounce.

If support at the 127.00 handle holds, a rally to the channel resistance around 129.50 to 130.00 might take place. This is also in line with the 100 SMA, which has served as a dynamic resistance level in the past. This moving average is still below the longer-term 200 SMA, confirming that the downtrend is likely to carry on and that the path of least resistance is to the downside.

Stochastic and RSI are still moving lower but both oscillators are already nearing oversold levels. This suggests that selling pressure could fade soon and euro bulls could take over, especially with profit-taking activity likely to take place before the trading week closes.

Event risks for this setup include the preliminary GDP releases from the euro zone and its top economies such as Germany and Italy. A 0.3% growth figure is eyed for the region, although a weaker than expected reading might spur more losses for the shared currency.

Concerns about the banking sector in Europe are currently weighing on euro zone equity markets, along with the resurfacing possibility of a Grexit. IMF officials have noted that the country has yet to come up with an economic reform plan that can effectively trim its deficit.

Also, the threat of intervention from the Bank of Japan or Japanese government officials is keeping the yen's gains in check. Speculations that authorities are already watching forex moves very closely and might be prepared to act if necessary have already triggered a strong bounce for EURJPY in yesterday's late European session.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Downtrend Setup (Feb 15, 2016)

USDJPY has been trending lower in the past few days, moving below a descending trend line on its 1-hour time frame. Price looks ready to test this falling resistance area once more, as this lines up with the 50% Fibonacci retracement level and 100 SMA dynamic resistance.

If this area keeps gains in check, price could head back to the previous lows at 111.00 or perhaps much lower. A higher pullback to the 61.8% Fib at 115.50 could still be possible but this might be the line in the sand when it comes to a correction. A break above this area or the 200 SMA could mean the start of a reversal.

Also, the 100 SMA is safely below the 200 SMA for now so the downtrend is likely to carry on. Stochastic is already indicating overbought conditions and so is RSI, which means that bearish momentum could pick up soon.

Event risks for this setup include BOJ Governor Kuroda's speech in parliament, as he might have some remarks concerning yen strength. Recall that Japanese authorities have recently pointed out that they're watching the yen's FX moves closely and with urgency, leading to speculations of potential currency intervention.

Data from the US came in stronger than expected on Friday, as the headline retail sales figure logged in a 0.2% gain versus the projected 0.1% uptick while the core figure indicated a 0.1% uptick instead of staying flat. Import prices showed a smaller than expected 1.1% decline compared to the estimated 1.4% slide.

US banks are closed for President's Day today so the low liquidity during the US session might spur more volatile price action.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Rising Channel Bounce (Feb 16, 2016)

EURAUD has been trending higher these days and is moving inside a rising channel on its 4-hour time frame. Price is currently testing the bottom of the channel, which might hold as support and trigger a bounce back to the resistance at 1.6300.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance could still be to the upside. In addition, the 200 SMA lines up with the channel support, adding to its strength as an inflection point.

Meanwhile, stochastic and RSI are both indicating oversold conditions, which suggests that buyers could take over. Bullish divergences can also be seen, as price made higher lows while the oscillators made lower lows.

Earlier today, Australia released the RBA meeting minutes which didn't trigger such a bearish reaction from the Aussie, even when policymakers kept the door open for additional rate cuts. However, risk appetite appears to be in play as Chinese investors just returned from their Spring Festival holidays.

Yesterday, ECB head Draghi testified before a parliamentary committee on economic affairs, reiterating that they'd might have to reevaluate their QE program in March. He stressed that the central bank won't hesitate to act if necessary, and that policymakers would base their decision on the impact of falling commodity prices on domestic inflation, as well as the risks from the global financial turmoil.

ZEW economic sentiment figures are due from the euro zone today while Australia has its jobs numbers up for release on Thursday.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Bearish Flag (Feb 17, 2016)

GBPUSD suffered a sharp selloff in recent trading and is currently consolidating. A bearish flag continuation pattern can be seen on the 1-hour time frame, signaling another round of potential losses for the pair.

The mast of the flag is approximately 220 pips in height so the resulting breakdown could be of the same size, taking GBPUSD down to 1.4080-1.4100. A break below the current 1.4300 levels could be enough to signal that more losses are in the cards.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. However, stochastic and RSI are both indicating oversold conditions and are turning higher, suggesting that bearish pressure is fading and that profit-taking might take place.

If so, an upside breakout could lead to a rally to the nearby resistance at the 1.4450 minor psychological mark, which previously served as near-term support.

Catalysts for a breakout include the UK jobs figures, with the claimant count expected to show a 2.9K increase in joblessness compared to the previous 4.3K rise. Of particular importance is the average earnings index, which is slated to fall from 2.0% to 1.9%, underscoring the BOE's view that domestic price pressures are still weak.

Meanwhile, the unemployment rate is expected to fall from 5.1% to 5.0% although this might be spurred by a drop in labor force participation. Stronger than expected data could allow GBPUSD to recover while weak results could spur another leg lower.

As for the US dollar, the FOMC minutes are up for release and these could push the majors in a strong direction. Recall that Fed officials have been wary of falling commodity prices and global financial risks these days so market watchers could be setting up for a downbeat release.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Broken Triangle Pullback (Feb 18, 2016)

NZDUSD had previously been trading inside a symmetrical triangle formation but broke to the downside. Price then dipped to a low of .6550 before showing signs of a pullback.

Using the Fib tool on the breakout move shows that the 50% level lines up with the broken triangle support around the .6650 minor psychological mark. This could keep gains in check and allow price to resume its drop, possibly to the previous lows at .6550 or much lower. A higher retracement could last until the 61.8% Fibonacci retracement level, which might be the line in the sand for any corrections.

The 100 SMA is slightly below the 200 SMA, indicating that the path of least resistance is to the downside and that further losses are possible. Stochastic is already indicating overbought conditions and RSI is approaching the 80.0 level so sellers might take over soon.

Earlier today, New Zealand printed declines in its producer input and output prices, hinting at weaker inflation prospects down the line. The PPI input figure showed a 1.2% drop while the PPI output figure showed a 0.8% decline.

In the US, the FOMC minutes spurred a bit of a selloff for the dollar, as Fed officials highlighted the increased downside risks to growth and inflation. However, data from the US economy such as PPI and industrial production beat expectations, indicating that it is still on solid footing.

Up ahead, the US Philly Fed index and initial jobless claims data are up for release. The former is expected to improve from -3.5 to -2.9 while the latter could come in at 275K, slightly higher than the previous 269K in claimants.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Downtrend Pullback (Feb 19, 2016)

GBPAUD has been trending lower, moving below a descending trend line connecting the latest highs of price action. The pair seems to be in the middle of a pullback and using the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the trend line.

In addition, the highest Fib also coincides with the 100 SMA, which is below the 200 SMA and indicating that the downtrend is set to carry on. The moving averages are edging farther apart, suggesting a pickup in bearish pressure.

If any of the Fib levels hold as resistance, price could head back to the recent lows at the 1.9900 major psychological support. On the other hand, a break above the trend line and Fib resistance around the 2.0400 area could signal a potential reversal.

Data from the UK has been mixed when it comes to jobs and inflation reports. The headline CPI came in line with expectations and rose from 0.2% to 0.3% while the core CPI fell from 1.4% to 1.2%. UK claimant count decreased more than expected but the jobless rate was unchanged at 5.1% and the average earnings index fell from 2.0% to 1.9%.

UK retail sales data is due today and another weak reading could mean more pound losses. Analysts are expecting to see a 0.8% rebound from the previous 1.0% decline, although the weakness in wage growth could weigh on consumer spending.

As for the Australian dollar, commodity prices and overall risk sentiment appear to be the major drivers of price action. Dashed hopes of an oil production freeze agreement weighed on risk appetite recently, dragging the Aussie lower, but continued attempts to reach a deal could renew support for commodity currencies.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Descending Triangle (Feb 22, 2016)

USDCAD has formed lower highs on its 1-hour chart and has been finding support at the 1.3650-1.3700 area, creating a descending triangle chart pattern. Price appears to have found resistance at the top of the formation once more and might be due for another test of support.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. If bearish pressure is strong enough, a downside break of support might even take place, taking USDCAD lower by an additional 400-500 pips, which is roughly the same height as the chart pattern. On the other hand, if the triangle bottom still holds as a floor, another bounce to the resistance at 1.3750-1.3800 might take place.

Stochastic is on the move down, which means that sellers are still in control, but the oscillator is already nearing the oversold area. RSI is also heading south and approaching the 20.0 mark, which suggests that buying pressure might return soon.

Data from the Canadian economy came in mixed last Friday, as CPI readings came in stronger than expected but retail sales reports fell short of estimates. In the US, CPI readings came in higher than projections.

There are no major reports due from the US or Canada today, which suggests that oil headlines could influence price action. In recent reports, Iran has confirmed that they had been able to raise output by 500,000 barrels per day as promised after the Western sanctions were lifted earlier in the year. This makes it more difficult for other oil producers to commit to capping production, as larger nations have specified that they'd only cooperate if other nations do so.

With that, the path of least resistance in terms of fundamentals might be to the upside, especially since oil companies in Canada are starting to feel the pinch of falling prices. Speculations of a March hike could still keep the dollar afloat against its peers.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Triangle Breakout (Feb 23, 2016)

NZDUSD had previously been moving inside a descending triangle pattern, finding support around .6575 then forming lower highs on its 1-hour chart. Price recently broke past the triangle resistance and zoomed up to the .6725 level before showing signs of a pullback.

Applying the Fib tool on the latest swing low and high shows that the 50% retracement level lines up with the broken resistance around .6650. This might hold as support moving forward, with the 61.8% Fib as the line in the sand for any correction, and push price back up to the previous highs and beyond.

The 100 SMA is still below the longer-term 200 SMA for now but an upward crossover appears to be brewing. In that case, more buyers could push the pair higher one RSI and stochastic turn up from the oversold regions. For now, these oscillators are still heading south, which means that sellers are in control.

There are no major events due from both the US and New Zealand for today, leaving market sentiment mostly responsible for price action. So far, it looks like the pickup in commodity prices led by crude oil is keeping risk appetite in play, supporting the higher-yielding Kiwi.

In addition, the recent shift to a less hawkish stance by Fed officials is dampening hopes for March rate hike and is weighing on dollar demand. The US preliminary GDP reading is up for release on Friday and a downgrade from 0.7% to 0.4% is eyed, likely dragging the dollar lower.

Fears of a global economic slowdown stemming from China have also faded recently, although that's probably because other economic concerns like the Brexit are dominating the headlines. For now, it looks like the Kiwi could keep drawing support from the risk-on flows before more top-tier reports are released next week.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Channel Breakout (Feb 24, 2016)

EURAUD had been trending higher on its 4-hour time frame, trading inside an ascending channel connecting the latest highs and lows. However, price made a downside break of support recently, indicating that a reversal might take place.

Price dipped to a low of 1.5160 before showing signs of a pullback. Using the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken trend line around 1.5575. A larger retracement could last until the 50% Fib at the 1.5700 major psychological mark or the 61.8% Fib at 1.5835.

The 100 SMA is still above the 200 SMA for now but a downward crossover appears imminent, signaling that further declines are likely. Stochastic is pointing up, suggesting that buyers are taking control, while RSI is heading north as well. Once these oscillators reach the overbought levels, selling pressure could resume.

Earlier today, Australia printed a couple of weaker than expected quarterly reports. Construction work done for Q4 2015 fell 3.6%, worse than the projected 2.1% drop and the previous 1.8% slump. The wage price index rose 0.5%, short of the projected 0.6% increase.

Yesterday, Germany's Ifo business climate index posted a weaker than expected reading of 105.7 versus the projected fall from 107.3 to 107.0. There are no major reports due from the euro zone today but expectations of additional ECB easing in March could continue to dampen demand for the shared currency.

Private capital expenditure data is due from Australia on Thursday and a 3.1% decline is eyed. Weaker than expected results could mean more losses for the Aussie, especially since risk aversion appears to be back in the markets.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Descending Trend Line (Feb 25, 2016)

USDJPY has been trending lower recently, moving below a descending trend line connecting the latest highs of price action on the 1-hour chart. Price is currently testing this trend line and might be due for another drop.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to carry on. This moving average is also near the trend line, adding to its strength as a resistance area.

Meanwhile stochastic is heading higher but is nearing the overbought region, indicating weaker buying pressure and a possible return in bearish momentum. RSI is also close to the overbought levels.

The US recently released a bunch of downbeat economic reports, starting from its flash services PMI which indicated industry contraction. New home sales also came in weaker than expected.

For today, the durable goods orders data is due, along with the initial jobless claims report. Another round of weak data could mean more losses for the US dollar. Analysts are expecting to see a 3.0% rebound in headline durable goods orders and a 0.2% uptick in core durable goods orders.

As for the yen, Japan's Tokyo core CPI and national core CPI figures are up for release next. Weak readings could revive talks of additional BOJ easing, which might also weigh on the yen. Analysts are expecting to see a flat reading for the Tokyo core CPI and a 0.2% decline for the national core CPI.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Descending Trend Line (Feb 26, 2016)

GBPJPY has been trending lower across multiple time frames, moving below a descending trend line on its 4-hour forex chart. Price is currently pulling up to the resistance area and might be ready to resume its drop to the previous lows at 154.75.

Using the Fib tool on the latest swing low and high shows that the 38.2% level lines up with the 158.25 area and the falling trend line. A larger retracement could last until the area of interest around 160.50, which might be the line in the sand for any short-term retracement. RSI is still on middle ground on its way up, which suggests that there may be some buying pressure left.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. Stochastic is still on the move up but is almost in the overbought region already, suggesting that buying pressure could weaken soon.

Earlier today, CPI readings from Japan came in mixed, with the Tokyo core CPI showing a 0.1% drop instead of staying flat and the national core CPI staying flat instead of posting the projected 0.2% drop.

Data from the UK came in weaker than expected yesterday, although the preliminary GDP reading showed no change from the previous 0.5% estimate. Preliminary business investment showed a sharp 2.1% drop instead of the estimated 0.6% gain.

Brexit fears are also weighing heavily on the pound, as leaving the EU could mean more financial and economic uncertainty. The referendum is scheduled for June, which suggests that traders have enough time to price in this possibility.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Ascending Channel (Feb 29, 2016)

AUDUSD has been trending higher in the past weeks, trading above an ascending channel on its 1-hour time frame. Price is currently testing the trend line support and might be due for a bounce or a break.

A bearish flag appears to have formed right after the sharp selloff, indicating that a continuation of the drop might be seen, likely taking AUDUSD down by an additional 100 pips or the same height as the flag's mast. However, oscillators are indicating oversold conditions so a bounce might still be possible.

In that case, a move up to the channel resistance at the .7250 minor psychological level might take place. The 100 SMA is still above the 200 SMA for now, suggesting that the path of least resistance is to the upside.

Data from the US came in mostly stronger than expected last week, with the US preliminary GDP reading upgraded from 0.7% to 1.0% instead of being downgraded to the estimated 0.4% figure. Personal spending and income reports also beat expectations with gains of 0.5% each.

Earlier today, Australia printed weaker than expected company operating profits data, as the figure fell 2.8% in the last quarter of 2015. The MI inflation gauge fell 0.2% after previously gaining 0.4% while private sector credit showed a 0.5% uptick as expected.

Up ahead, the Chinese PMI releases and RBA statement could serve as strong catalysts for a move tomorrow, as downbeat results could spark a longer-term selloff. Australia's GDP, trade balance, and retail sales data are also up for release later on in the week.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Downtrend Setup (Mar 1, 2016)

GBPAUD has been trending below a descending trend line on its 4-hour time frame and seems to be ready for a pullback. Price bounced off the 1.9300 area and might retrace to an area of interest near the trend line.

Applying the Fib tool on the latest swing high and low shows that the 61.8% level is closest to the trend line and former support around 2.0100. This is also near the 100 SMA dynamic inflection point. If this area holds as resistance, GBPAUD might make its way back to the previous lows or much lower.

The 100 SMA is below the longer-term 200 SMA, confirming that the selloff is likely to carry on. However, stochastic and RSI are still on the move up for now, which means that buyers are in control of price action. Once these oscillators turn down from the overbought levels, more sellers could push price down.

Earlier today, PMI readings from China came in mostly weaker than expected, reviving speculations of additional PBOC easing. The official manufacturing PMI fell from 49.4 to 49.0 while the non-manufacturing PMI dropped from 53.5 to 52.7 to indicate weaker industry expansion. The Caixin version of the manufacturing PMI declined from 48.4 to 48.0 to show a sharper pace of contraction.

Up ahead, the RBA is set to announce their interest rate decision and no actual changes are expected for now. In their previous statements, the RBA kept a steady bias but a shift to a more dovish stance could spur more Aussie losses.

As for the UK, PMI readings from the manufacturing, services, and construction sectors are lined up this week. Both the manufacturing and services industry could report weaker growth, which might feed into Brexit concerns for businessmen.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Reversal Pattern (Mar 2, 2016)

EURJPY has been selling off recently but it seems that a reversal is about to take place. Price formed a double bottom pattern visible on its 1-hour chart, hinting that an uptrend might take place.

Price failed in its last two attempts to break below the 122.00 level and is on its way to test the neckline resistance at 125.00. A break above this level could take price up by an additional 300 pips, which is roughly the same height as the chart pattern.

The 100 SMA is still below the 200 SMA but an upward crossover is brewing, possibly indicating that buyers are about to take over. However, stochastic and RSI are both turning lower from the overbought levels, suggesting that a selloff is due.

Earlier in the week, the euro zone printed weaker than expected CPI estimates, reviving talks of additional ECB easing this month. The headline CPI fell 0.2% instead of staying flat while the core CPI slipped from 1.0% to 0.7%.

Data from Japan has been mixed, with retail sales and household spending printing bleak results and the preliminary industrial production report showing a stronger than expected 3.7% gain.

Risk appetite has favored higher-yielding currencies in the past few days, though, even as data from China has been mostly weaker than expected. Only the Spanish unemployment change report is due from the euro zone today and a 0.2K increase in joblessness is eyed.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Downtrend Retracement (Mar 3, 2016)

GBPUSD has been trending lower on the longer-term time frames and the recent rally offers an opportunity to short on a pullback. A descending trend line can be drawn to connect the latest highs of price action and the Fib tool shows potential resistance levels.

In particular, the 50% Fibonacci retracement level lines up with the descending trend line around 1.4275 and the dynamic inflection points at the moving averages. The 100 SMA just crossed below the longer-term 200 SMA, confirming that the downtrend is likely to carry on. Also, this lines up with an area of interest, right around the previous dip to 1.4200.

Stochastic is already in the overbought area, hinting that buying pressure might fade soon and that sellers might take over. Similarly, RSI is indicating overbought conditions and is starting to turn lower, which means that bearish momentum is building up. A selloff could take GBPUSD back to the previous lows at 1.3850.

Data from the UK has been weaker than expected this week, as the manufacturing and construction PMI readings both fell short. The former fell from 52.9 to 50.8 while the latter dropped from 55.0 to 54.2 instead of improving to the projected 55.5 figure.

On the other hand, data from the US has been stronger than expected, with the ADP non-farm employment change figure hinting at a possible upside surprise in Friday's NFP. Analysts are expecting to see a 195K increase in hiring for February, which might be enough to keep Fed rate hike expectations in play.

For today, the UK services PMI could be a catalyst as this could show a drop from 55.6 to 55.1, reflecting a slower pace of industry growth. Weaker than expected data could allow the selloff to start early, with the 38.2% Fib at 1.4100 holding as resistance.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Countertrend Setup (Mar 4, 2016)

NZDUSD has slowly been trending higher, moving inside an ascending channel visible on its 1-hour time frame. Price just bounced off support and is making its way to the top for a potential test of resistance.

If this ceiling holds, price could make its way back down to the bottom at the .6600 major psychological mark. On the other hand, an upside breakout could pave the way for a sharper rally.

The 100 SMA is below the 200 SMA, signaling that a selloff might take place. RSI is on the move down so price might follow suit while stochastic is also pointing south as well.

Event risks for this setup include the NFP release in the US trading session, as strong data could spur expectations of a Fed rate hike this month and boost the US dollar. On the other hand, disappointing results could lead to an upside breakout.

Analysts are expecting to see a 195K increase in hiring, higher than the previous 151K gain. Leading labor indicators such as the ADP non-farm employment change and the jobs component of the ISM manufacturing survey have hinted at a possible upside surprise, but the employment sub-index of the non-manufacturing survey showed a contraction.

Meanwhile, risk appetite is still supporting the Kiwi but talks of an RBNZ rate cut this month or anytime within the year could keep a lid on the currency's gains. Data from New Zealand has been mixed, although the latest dairy auction showed a decent rebound in prices.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Uptrend Confirmation (Mar 07, 2016)

EURJPY recently formed a reversal pattern on its 1-hour time frame, signaling that an uptrend might take place. Price just broke above the double bottom neckline at 125.00, confirming that further gains are in the cards.

The 100 SMA is crossing above the longer-term 200 SMA,confirming that a reversal from the downtrend is beginning. However, stochastic is heading down from the overbought zone, indicating that selling pressure is still present. RSI is also on the move down so price might follow suit.

A pullback to the broken neckline around the 124.50-125.00 is still possible before price resumes its climb. A break below this area, though, could indicate that sellers are gaining more energy to push price down to the previous lows at 122.00. A return in bullish pressure could lead to a climb of around 300 pips, which is the same height as the chart pattern.

Event risks for this setup include the ECB interest rate statement later on in the week, as an additional round of quantitative easing is expected. However, this scenario has already been priced in for a long while back, as ECB head Draghi has pointed out that they might need to ramp up stimulus.

There are no major reports due from the euro zone and Japan for the rest of the week, leaving traders to position ahead of the ECB statement. A lower than expected level of easing could mean more gains for the euro, similar to the rally seen in their earlier rate decision.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Major Correction (Mar 08, 2016)

EURGBP has been rallying for the past few weeks but it looks like a large correction is underway. Price found resistance around the .7900 mark and is showing signs of a pullback to the area of interest at .7400.

This area is somewhere between the 50% and 61.8% Fibonacci retracement levels and a former resistance level. If this holds as support, EURGBP could bounce back up to the previous highs and beyond. A break below this region, however, could put it on track towards testing the support at .7100.

The 100 SMA is above the 200 SMA, confirming that the path of least resistance is to the upside and that the rally could resume at some point. Stochastic is pointing down but is almost in the oversold area so buyers could regain control soon. RSI, on the other hand, is still on the way down so a large correction could be possible.

Event risks for this setup include the ECB statement, as the central bank is widely expected to ease monetary policy. However, the size and scale of their adjustment could determine how euro pairs might react, as a disappointing expansion could still lead to a euro rally.

As for the pound, Brexit fears are still present but traders seem to be less concerned about this scenario. Data from the UK has been mostly week, based on last week's PMI releases.

BOE Governor Carney has a speech lined up for today and the UK manufacturing production report is due tomorrow, providing additional volatility for pound pairs.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Channel Resistance (Mar 09, 2016)

NZDUSD is trending higher but a countertrend opportunity is presenting itself now that the pair is testing the rising channel resistance. The top of the range at .6800 appears to have held as a ceiling, with a short-term double top pattern, and might put price on track towards testing the channel support at .6600.

RSI is on the move down so there's bearish pressure present. Stochastic is also heading lower but is already near the oversold region so a bounce might take place soon. In addition, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. These moving averages are near the bottom of the channel, which might continue to hold as support.

Risk appetite has weakened in the financial markets, weighing on higher-yielding commodity currencies such as the New Zealand dollar. Reports of another buildup in crude oil stockpiles have been bearish for the comdolls, to the advantage of the safe-haven dollar.

Traders appear to be pricing in expectations for the upcoming RBNZ interest rate decision, as a rate cut might be announced. In their previous rate statement, RBNZ head Wheeler mentioned that they're keeping the door open for further easing and the latest set of reports from New Zealand might warrant more stimulus.

In particular, the GDT auctions have yielded mostly declines in prices since the beginning of the year, leading Fonterra to downgrade milk payout forecasts to farmers. Dovish remarks or actual easing action could mean more losses for NZDUSD or perhaps even a break below the channel support for a longer-term selloff.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Rising Channel Support (Mar 10, 2016)

NZDUSD has been on an uptrend on its 4-hour chart but just recently bounced off the top of the rising channel. Price is now headed towards the bottom of the range at the .6600 major psychological level, which might still hold as support.

This channel support zone lines up with the 200 SMA dynamic inflection point. The 100 SMA is above this longer-term moving average, hinting that the uptrend might still continue. However, a break below the .6600 mark and a downward SMA crossover could confirm that a reversal is about to happen.

Stochastic is heading down and is nearing the oversold area so sellers might need to take a break and allow buyers to take over. RSI is also on the move south so further losses are possible until the oscillator reaches the oversold region.

Earlier today, the RBNZ decided to cut interest rates from 2.50% to 2.25% to the surprise of those who predicted that they would hold. Policymakers cited concerns about a slowdown in China, the emerging markets, and even in Europe as reasons for the commodity price slump, which is making it difficult for their dairy sector to recover. In addition, RBNZ head Wheeler noted that they're open to additional rate cuts in order to bring inflation back to their target levels.

There were no major reports released out of the US, and the medium-tier crude oil inventories report came closely in line with expectations. US initial jobless claims data is due today, along with natural gas storage data and the federal budget balance.

The upcoming ECB statement could affect overall market sentiment, with a strong return in risk aversion likely to push NZDUSD much lower. A break below the channel support could lead to a selloff until the area of interest at .6400. A bounce, on the other hand, could lead to a climb close to the .6600 resistance.

By Kate Curtis from Trader's Way