Daily Technical Outlook

[katetrades]

EURAUD Correction Setup (Mar 11, 2016)

EURAUD previously broke below a double top pattern, signaling that a downtrend was in order. Price dipped to the 1.4467 low soon after before showing signs of a pullback after the ECB press conference.

Using the Fibonacci retracement tool on the latest swing high and low shows that the 50% level lines up with the broken double top neckline around 1.5200, which might hold as a resistance level on a pullback. This is also near the 200 SMA, which might add to the strength of the resistance zone.

The 100 SMA is below the 200 SMA, indicating that the downtrend could carry on. Also, the 100 SMA is near the 38.2% Fib, which seems to be keeping gains in check for now. Stochastic is on the move down with a slight bearish divergence while RSI is also pointing south, indicating that sellers are regaining control.

The ECB decided to cut several interest rates and announce and expansion of their quantitative easing program from 60 billion EUR monthly asset purchases to 80 billion EUR, driving the euro lower against its forex peers during the actual statement. However, the press conference that followed triggered a sharp rally when ECB head Draghi said that they have no plans of cutting rates further in the near future.

Earlier in the day, data from China came in stronger than expected, giving the Aussie additional support. The Chinese CPI improved from 1.8% to 2.3% while the PPI showed a smaller decline of 4.9% in producer prices compared to the earlier 5.3% slump.

There are no major reports lined up from both Australia and the euro zone today, which suggests that the trends might resume. Still, data due from China over the weekend namely industrial production, retail sales, and fixed asset investment might result to weekend gaps for AUD.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Reversal Pattern (Mar 14, 2016)

EURGBP might be in for a reversal from its previous uptrend, as a head and shoulders pattern can be seen on its 4-hour chart. Price has yet to test the neckline support at the .7700 handle and break lower before confirming the potential downtrend.

The chart pattern is a little over 200 pips tall so the resulting breakdown could last by the same amount, taking EURGBP down to the .7500 handle or lower. However, if support at the .7700 mark holds, price could still form a range.

For now, the 100 SMA is still above the 200 SMA so the path of least resistance might still be to the upside, allowing the pair to resume the climb at some point. However, RSI and stochastic are heading south so price could follow suit.

Last week, the ECB unveiled a large expansion to their quantitative easing program, boosting monthly asset purchases from 60 billion EUR to 80 billion EUR. In addition, they lowered several interest rates but cited that they might not cut again in the near future.

As for the pound, the UK jobs release this week could be a catalyst, as the economy is expected to have added 8.8K jobs in February. This might be enough to keep the jobless rate steady at 5.1%. The average earnings index is expected to improve from 1.9% to 2.0% to show stronger wage growth.

Later on, the BOE will announce its interest rate decision but no actual changes are expected. Instead, traders could focus on the policymakers' biases and whether or not any changes were made recently.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Trend Pullback (Mar 15, 2016)

AUDUSD has been trending higher, thanks to the pickup in risk appetite. Price stalled upon hitting resistance near .7600 and is showing signs of a pullback, possibly to the rising trend line visible on the 4-hour chart.

Using the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level is closest to the trend line around the .7300 support zone. This is also near the 100 SMA, which usually holds as a dynamic inflection point.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside and the uptrend could resume at some point. However, both RSI and stochastic are pointing down so there's room for a correction. Once these oscillators indicate oversold conditions, Aussie bulls could regain control.

Earlier today, the RBA released the minutes of their latest monetary policy meeting, which contained no surprises from their actual statement. Policymakers expressed confidence in the Australian economy while pointing out persistent risks, acknowledging that the current policy is appropriate.

The main event risk for today might be the US retail sales report, which is expected to show a 0.1% drop for the headline figure and a 0.2% dip for the core figure. Later in the week, the FOMC will announce its policy decision and spur more volatility for dollar pairs.

No actual rate changes are expected for now but the Fed will also print its updated forecasts for growth and inflation, giving market watchers clues on when the next rate hike might take place. The updated dot plot forecast for policymakers' tightening expectations is also due

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Testing Channel Support (Mar 16, 2016)

NZDUSD has been trending higher and moving inside a rising channel pattern on its 4-hour time frame. Price is now testing the channel support at .6600 and might be due for a bounce if the trend remains intact.

Technical indicators are suggesting that the uptrend could resume, as the 100 SMA is above the 200 SMA showing that the path of least resistance is to the upside. Meanwhile, RSI is already in the oversold zone and starting to turn higher while stochastic is also indicating oversold conditions.

However, a break below the channel support could be a sign that a reversal is in order. This could take NZDUSD to the next area of interest at .6500 or much lower.

Earlier today, the GDT auction in New Zealand showed a 2.9% drop in dairy prices after the previous 1.4% bounce. This suggests that the slump in the industry is still in place, possibly leading to another cut in payout forecasts for farmers.New Zealand's current account balance reflected the impact of falling dairy prices on the economy, as the deficit was mostly spurred by a 13% decline in dairy prices.

Also, keep in mind that the RBNZ recently cut interest rates so demand for NZD is lower these days. The FOMC statement is coming up and any indication that the Fed can still be able to tighten monetary policy later on in the year could lead to a strong boost for the dollar. However, data from the US economy turned out mixed yesterday, as headline and core retail sales both posted 0.1% declines.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Range Forming (Mar 17, 2016)

EURGBP has found support at the .7700 major psychological level and is making its way up to test the resistance at .7900. If the top of the range holds, another move towards the bottom of the range might be seen.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This suggests that an upward breakout might take place, possibly taking EURGBP up by 200 pips or the same height as the chart formation.

However, RSI is pointing down to show that sellers are taking hold while stochastic is also making its way out of the overbought zone to suggest a return in bearish pressure. If selling momentum strengthens, a break below the range support might take place, pushing EURGBP lower by 200 pips to .7500.

Event risks for this trade today include the BOE statement and euro zone final CPI readings. BOE policymakers are expected to reiterate their downbeat outlook, reminding traders that they're not likely to hike interest rates anytime soon given the weak inflation and slow economic activity in the UK. Brexit fears could also be addressed.

Earlier in the week, the UK printed a stronger than expected jobs report. The number of claimants dropped by 18K versus the projected 8.8K slide while the average earnings index rose from 1.9% to 2.1% to indicate stronger wage growth. The unemployment rate was unchanged at 5.1% as expected.

As for the euro, no revisions are expected for the final CPI readings, although downgrades could spur more euro declines. The ECB already lowered several interest rates and expanded their asset purchase program in order to stimulate growth and inflation, but the shared currency drew support from Draghi's comments saying that they're unlikely to lower rates again in the near-term.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Head and Shoulders Formation (Mar 18, 2016)

A downtrend might be in the cards for GBPJPY, as the pair formed a head and shoulders pattern on its 1-hour time frame. Price is still completing the right shoulder but a test of the neckline near 159.00 to 159.50 might be in order.

A break below the support area could confirm the potential selloff, taking the pair down by an additional 500 pips or the same height as the chart formation. Technical indicators are also supporting this likely drop.

The 100 SMA is starting to cross below the longer-term 200 SMA, indicating that a reversal from the earlier uptrend is about to start. RSI is on its way down without even reaching the overbought zone, which suggests that sellers are eager to hop in. Stochastic is also turning down from the overbought area so bearish pressure is present.

The BOE decided to keep interest rates and monetary policy unchanged in their latest statement as expected. The minutes of their meeting also indicated a unanimous vote to stay on hold, with some policymakers mentioning that Brexit concerns could prevent them from making any changes in the near future.

However, the UK jobs report released earlier in the week came in stronger than expected, as the number of jobless claimants fell by 18.8K versus the projected 8.8K decline. The average earnings index also improved from 1.9% to 2.1% to show faster wage growth.

As for the yen, there were no major reports out of Japan recently and the BOJ minutes didn't contain any surprises. Still, traders are wary of potential intervention from the BOJ as yen pairs have been volatile lately.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Descending Triangle (Mar 30, 2016)

USDJPY has formed lower highs and found support at 111.25, creating a descending triangle pattern on its 4-hour time frame. Price is currently testing the resistance at 113.50 and if this keeps gains in check, the pair could make another test of support.

RSI is on the move lower, confirming that bearish momentum is in play. Stochastic is already in the oversold level so buyers might regain energy and push price back up later on. Meanwhile, the 100 SMA is below the 200 SMA so the path of least resistance is still to the downside.

A break below the triangle support could lead to a selloff of around 400 pips, which is roughly the same height as the chart formation. A move below the 111.00 handle could confirm a downside breakout while a rally past 114.00 could be enough to show an upside break.

Fed Chairperson Janet Yellen reiterated her dovish bias in her latest testimony, citing that caution is warranted for additional tightening measures. She also explained that global economic and financial risks have increased, although employment and domestic spending remain strong.

The CB consumer confidence index rose from 94.0 to 96.2, outpacing the consensus at 93.9 and indicating a pickup in consumer optimism. The US ADP non-farm employment change report is due next and it might show a 195K gain in hiring for the month.

As for Japan, its preliminary industrial production report for March showed a 6.2% decline versus the projected 5.8% fall. Earlier in the week, its household spending report beat expectations while the retail sales reading came up short.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Downtrend Retracement (Mar 31, 2016)

EURJPY has been on a long-term downtrend, moving below a descending trend line on its daily time frame. Price looks ready for another test of the resistance area, which is around the Fib levels based on the latest swing high and low.

In particular, the 61.8% level lines up with the trend line around 129.00 and the 100 SMA. This short-term moving average is below the longer-term 200 SMA, confirming that the downtrend could carry on as the path of least resistance is to the downside.

In addition, stochastic is already indicating overbought conditions, which means that euro bulls are exhausted. RSI is on the move up and hasn't quite reached the overbought level just yet so there may be some buying pressure left before sellers are able to take over. If the trend line keeps gains in check, price could fall back to the previous lows at 122.00.

A number of medium-tier reports are lined up from the euro zone today. These include the German retail sales, French consumer spending, French preliminary CPI and Spanish flash CPI. Strong data could lead to more gains for the euro while weak results could allow the downtrend to resume.

As for Japan, only the housing starts data is due soon while the Tankan survey results are lined up for the next Asian trading session. Data from Japan has been mixed recently, as household spending beat expectations while retail sales and preliminary industrial production have fallen short.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Ascending Triangle (Apr 1, 2016)

EURGBP has formed higher lows and found resistance at the .7900 area, creating an ascending triangle pattern on its 4-hour time frame. Price is currently testing the triangle resistance at the moment and an upside breakout seems imminent.

In that case, price could head north by an additional 400 pips, which is roughly the same height as the chart formation. The 100 SMA is above the 200 SMA, confirming that the path of least resistance is to the upside.

However, stochastic is moving down from the overbought zone, suggesting that a drop back to the triangle support might still be possible. RSI is also in the overbought area so a selloff might take place if sellers take control.

Data from the euro zone came in mixed yesterday, as German retail sales fell short of expectations with a 0.4% decline instead of the projected 0.3% uptick while French consumer spending beat expectations with a 0.6% gain versus the estimated 0.1% uptick. The French preliminary CPI also beat expectations while the Spanish flash CPI and German unemployment change came up short.

As for the UK, the current account balance showed a much larger than expected deficit of 32.7 billion GBP while the previous reading was revised to show a larger shortfall than initially reported. On the upside, its final GDP reading was revised slightly higher from 0.5% to 0.6%. The UK manufacturing PMI is due today and a rise from 50.8 to 51.4 is eyed.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Ascending Channel (Apr 4, 2016)

AUDUSD has been trending higher on its short-term time frames, moving inside an ascending channel visible on the 1-hour and 4-hour charts. Price is currently testing the top of the channel around the .7700 major psychological level and might be due for a drop towards support.

The 100 SMA is right around the channel support at the .7550 minor psychological level and is also above the 200 SMA. This suggests that the path of least resistance is to the upside and that further gains might be in the cards.

Stochastic is on the move down, though, so a short-term selloff to the channel support is possible. If you're hoping to follow the trend, better wait for an actual support test or for the oscillator to indicate oversold conditions.

There are several major events lined up from Australia over the next few days, including the release of retail sales and trade balance data. Also lined up is the RBA interest rate decision during which the central bank might reiterate its upbeat bias and lead to more gains for the Australian currency.

As for the US dollar, it was able to get a boost from the stronger than expected NFP release last Friday. The economy added 215K jobs versus the projected 206K increase but the unemployment rate rose from 4.9% to 5.0%. Average hourly earnings rose 0.3% versus the estimated 0.2% uptick to indicate stronger wage pressures.

The FOMC minutes are up for release midweek and dovish remarks could mean more losses for the US dollar later on. Recall that the Fed reiterated its plan to be cautious about tightening and their focus on inflation.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Ascending Channel (Apr 05, 2016)

NZDUSD has slowly been trending higher, moving inside an ascending channel formation on its 4-hour chart. Price just bounced off the channel resistance at the .6950 minor psychological level and is due to test support at .6700-.6750 soon.

This support area is in line with the moving averages, which could hold as dynamic inflection points. The 100 SMA is above the longer-term 200 SMA, confirming that the uptrend could carry on.

Stochastic and RSI are both on the move down but these oscillators are nearing the oversold levels so a return in bullish momentum could be seen sooner or later. However, if sellers stay in control, a break of the .6700 support zone could be seen.

Earlier today, New Zealand reported a decline in its NZIER business confidence index from 15 to 2 and a fall in ANZ commodity prices. Later on, the GDT auction is scheduled and another sharp fall in dairy prices could mean more declines for the pair.

As for the dollar, it has been acting as a counter currency due to the lack of top-tier data. The US currency has failed to draw a lot of support from its upbeat NFP reading, indicating that traders are focusing on the lower odds of a Fed rate hike this quarter, as hinted in Fed head Yellen's testimony.

The FOMC minutes are up for release later on in the week and more downbeat remarks could spur further declines for the US dollar. On the other hand, indications that the Fed is still considering hiking rates soon could renew demand.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDNZD Retracement Opportunity (Apr 06, 2016)

AUDNZD broke past the resistance around the 1.1000 major psychological level last month then zoomed up to the 1.1300 levels before showing signs of a pullback. Applying the Fib tool on the latest swing high and low on the daily time frame shows that the 38.2% to 50% levels line up with the broken resistance, which might now hold as support.

Stochastic is already indicating overbought conditions, which suggests that sellers are already exhausted and might be ready to let buyers take over. If so, price could bounce off these Fib levels and make its way back to the previous highs or much higher.

However, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. This suggests that price might break below the Fibs and go for the swing low at 1.0600.

The RBA decided to keep interest rates unchanged at 2.00% in yesterday's policy statement. Officials gave a mostly upbeat assessment of the economy and reiterated their positive outlook but included a paragraph warning about the potential negative effect of AUD strength.

Meanwhile, the GDT auction in New Zealand showed a 2.1% bounce in milk prices, erasing part of the previous 2.9% slump. Data from New Zealand has been mostly weaker than expected, as ANZ commodity prices posted a sharp decline while business confidence has tanked.

There are no other event risks for both Australia and New Zealand for the rest of the week, although the upcoming FOMC minutes release could spur additional volatility.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Downtrend Channel (Apr 07, 2016)

USDCAD has been trending lower, thanks to the recent rallies in oil prices. Price has formed lower highs and lower lows, creating a descending channel pattern on its 4-hour chart. The pair just recently tested the resistance and appears ready to head back towards support.

In addition, the 100 SMA is safely below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. This could take USDCAD down to the channel support near the 1.2800 major psychological level.

Stochastic is on the move down, confirming that sellers are taking control of price action. If buyers take over, however, a move past the channel resistance at the 1.3200 could take place and spur a reversal for the pair.

The FOMC minutes revealed that two policymakers voted to hike interest rates but that majority of the committee members thought it would be prudent to wait for more data before tightening again. Policymakers highlighted the pickup in employment and in the housing sector but cited that the pickup in inflation might not be sustained. Fed officials also discussed the global economic slowdown but maintained that the US economy remains resilient.

As for the Canadian dollar, the currency is taking its cue from the rise in crude oil thanks to falling stockpiles and easing fears about a supply glut. Some OPEC member nations are expressing increased willingness to cap production even if Iran does not cooperate.

The OPEC meeting is scheduled for April 17 and positive expectations for the outcome could continue to keep prices afloat. Also due next week is the BOC statement and another optimistic assessment could keep the Loonie supported.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Broken Trend Line Pullback (Apr 08, 2016)

EURJPY previously broke below a rising trend line support on the 4-hour time frame and might be due for a correction soon. Price is already nearing the previous lows at 122.00 and sellers might be waiting for a pullback to enter at a better price before pushing for new lows.

Using the Fib tool on the latest swing high and low shows that the 38.2% level is near 125.00, the 50% level is near 125.50, and the 61.8% level is near 126.00. Any of these psychological levels could hold as near-term resistance, allowing the selloff to resume.

The 100 SMA is still above the 200 SMA so the path of least resistance is to the upside for now. In addition, stochastic is climbing out of the oversold territory so buyers may be taking the upper hand.

Japanese government officials have been reiterating that they're closing watching the yen's forex levels and could intervene in the forex market if necessary. However, traders don't seem to believe these threats and have even pushed the yen higher as risk aversion has been in play.

Meanwhile, the euro got hit by dovish remarks in the ECB minutes, which revealed that policymakers actually discussed a much larger easing expansion in their March statement. ECB Governor Draghi reminded markets that they are ready to do whatever it takes to boost growth and inflation.

Only medium-tier reports are up for release from the euro zone today, leaving market sentiment in play. There are also no major reports from Japan but additional jawboning could spur volatility for yen pairs.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Reversal Pattern (Apr 11, 2016)

GBPUSD has formed a head and shoulders pattern on its 4-hour time frame, suggesting a potential reversal from the previous uptrend. Price is testing the neckline around the 1.4050-1.4100 levels and a break could be enough to confirm that a downtrend is underway.

The chart pattern is approximately 400 pips tall so the resulting breakdown could be of the same size, taking GBPUSD down to the 1.3700 area. However, if the neckline support holds, another bounce to the 1.4500 handle could be seen.

The 100 SMA is still above the 200 SMA for now so the path of least resistance is to the upside. If a downward crossover takes place, sellers could take the upper hand. Stochastic is on the move up so buyers are taking control.

Event risks for this setup include the release of UK CPI tomorrow and the BOE statement later on in the week. Data has taken a turn for the worse in the UK so there's a strong chance that UK central bank officials might sound less upbeat.

As for the US, retail sales and PPI numbers are lined up for Wednesday while Thursday has the CPI due. Headline retail sales could grow by 0.1% while core retail sales are expected to rise by 0.4%. Meanwhile, the headline and core CPI readings could show 0.2% gains.

Risk appetite could still have a significant effect on this dollar pair's price action, as traders have been pricing in Brexit concerns once more. In addition, easing biases among several central banks have increased demand for the safe-haven dollar.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Major Retracement (Apr 12, 2016)

GBPJPY has been trending lower on the longer-term time frames but it looks like a retracement is in order. Price bounced off the 151.50 minor psychological support and might be due for a pullback to the descending trend line connecting the latest highs of price action.

This coincides with the area of interest around the 158.00-159.00 levels, which also line up with the dynamic resistance around the moving averages. The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside and that the selloff could resume soon.

A shallow pullback could last until the 38.2% Fib or the 155.00-155.50 area and reversal candlesticks forming at this level could be an indication that the downtrend is resuming. Stochastic is still on the move up so buyers are still in control, but it is also nearing the overbought area so buying pressure could fade soon.

Event risks for this setup include the UK CPI release today and the BOE statement on Thursday. Headline inflation is expected to hold steady at 0.3% while core inflation could rise from 1.2% to 1.3%. Underlying inflation indicators such as the PPI, RPI, and HPI are also expected to show gains.

Meanwhile, the BOE is expected to keep interest rates on hold while maintaining their pace of asset purchases. Still, dovish remarks from policymakers could keep a lid on the pound's gains while upbeat comments could allow it to rally.

As for the yen, the recent jawboning attempts from Japanese officials seem to have fallen on deaf ears as the currency has still advanced against its rivals and might continue to do so until actual action is seen.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Countertrend Setup (Apr 13, 2016)

USDCAD has been trending lower, moving inside a descending channel pattern on its 4-hour time frame. Price is now making its way close to the channel support near the 1.2700-1.2750 and might be due for a bounce.

If so, USDCAD could climb back up to the channel resistance around 1.3000-1.3050. This is also near the 100 SMA, which might hold as a dynamic resistance level. However, the 100 SMA is below the 200 SMA so the path of least resistance is still to the downside.

Stochastic is already indicating oversold conditions, which suggests that a bounce might be possible. Once this oscillator starts turning higher, bullish momentum could come back in play. On the other hand, if sellers stay in control, a downside break of support and a sharper selloff could take place.

The main catalyst for this trade today is the upcoming BOC statement, during which Canadian central bankers are expected to keep interest rates unchanged. BOC policymakers have sounded optimistic in their previous statements, citing the shift to less dependence on energy exports and a pickup in business sentiment and consumer spending.

Another round of upbeat remarks from BOC officials could drive the Loonie higher against the US dollar while comments against the currency's appreciation could force it to return some of its recent gains. Oil prices could also have a significant impact on this pair's action, as rumors that an oil output freeze agreement has been made between Russia and Saudi have boosted prices yesterday.

As for the US dollar, PPI and retail sales data are up for release today. Headline consumer spending is projected to rise by 0.1% while core retail sales could show 0.4% growth. Headline PPI is slated to rise by 0.3% while core PPI could post a 0.1% uptick.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPNZD Downtrend Pullback (Apr 14, 2016)

GBPNZD has been trending lower on its 1-hour time frame, with a descending trend line connecting the latest highs of price action. The pair bounced off the 2.1000 major psychological mark and might be due for a pullback to the falling resistance area.

Using the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the descending trend line. This also coincides with the 100 SMA and an area of interest. In addition, the 100 SMA is below the 200 SMA, confirming that the path of least resistance is still to the downside.

Meanwhile, stochastic is still on the move up so buyers are in control for now. However, once the oscillator reaches the overbought area and turns lower, sellers could take the upper hand and allow the downtrend to resume.

Event risks for this setup include the BOE interest rate decision today. No actual monetary policy changes are expected, as policymakers could keep asset purchases and interest rates unchanged, but any change in rhetoric could be crucial for pound direction.

Data from the UK has been mostly weaker than expected recently, with the exception of the latest batch of CPI readings. The headline CPI rose from 0.3% to 0.5% while core CPI improved from 1.2% to 1.5%.

As for the New Zealand dollar, the return in risk aversion is currently weighing on the currency, along with downbeat medium-tier reports. Earlier today, the Business NZ manufacturing index fell from 55.9 to 54.7 to indicate weaker growth. However, a deal among OPEC nations to cap oil production could result in commodity gains and a return in risk appetite.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Trend Setup (Apr 18, 2016)

USDCAD has been trading inside a descending channel on its 1-hour time frame and has just bounced off support. Another test of the resistance around the 1.3050-1.3100 levels could take place soon.

The 100 SMA is below the 200 SMA so the path of least resistance is still to the downside. For now, the 200 SMA is already holding as dynamic resistance and might be enough to keep gains in check.

Also, stochastic is indicating overbought conditions and might be ready to head lower. RSI is also in the overbought area and is starting to head south so price might follow suit. If so, a move towards the previous lows near 1.2750 could be seen.

Leaders of oil-producing nations failed to reach an agreement to cap production in their meeting in Doha. Although some nations such as Russia seemed willing to push through with the deal without requiring all nations to participate, Saudi Arabia insisted that Iran should cooperate.

Meanwhile, data from the US came in mostly weaker than expected on Friday, with industrial production and capacity utilization missing expectations. The UoM preliminary consumer sentiment index also showed a decline in optimism. On the other hand, the Empire State manufacturing index rose from 0.6 to 9.6 to reflect stronger industry growth.

For today, only a testimony by FOMC member Dudley is due. US building permits and housing starts are up for release tomorrow. There are no reports lined up from Canada but BOC Governor Poloz has a speech scheduled tomorrow. Dovish remarks or cautious comments regarding crude oil could lead to more losses for the Loonie.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Reversal Pattern (Apr 19, 2016)

USDJPY has bounced off support near the 108.00 major psychological level once more, creating a double bottom formation on the 1-hour time frame. Price is on its way to test the neckline at 109.75 and a break above this level could spur a reversal from the previous downtrend.

The 100 SMA just crossed above the longer-term 200 SMA, suggesting that the path of least resistance is to the upside. However, stochastic and RSI are both indicating overbought conditions. Once these oscillators turn down from the overbought levels, selling pressure could return. If so, USDJPY could make its way back to the previous lows at 108.00.

If bulls are able to put up a strong fight, an upside breakout past the double bottom neckline could lead to a rally of around 175 pips, which is roughly the same height as the chart formation. On the other hand, a surge in bearish momentum might lead to a break below 108.00.

There are no major releases from both the US and Japan this week, which suggests that risk sentiment could push this pair around. Data from the US economy has been mostly weaker than expected last week, lowering the odds of a Fed rate hike this month or in June. Meanwhile, currency jawboning from Japanese officials has failed to produce their desired effect on the yen, although this might force them to take actual action.

Risk aversion was present in the markets at the start of the week after the Doha meeting failed to produce a deal to cap output. This appears to have favored the Japanese yen then, but the return in risk appetite led to a rally for USDJPY later on. Should this sentiment persist, a double bottom breakout could be a possibility.

By Kate Curtis from Trader's Way