Daily Technical Outlook

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NZDUSD Countertrend Play (June 13, 2016)

NZDUSD has been trading inside a long-term rising channel visible on its daily chart. Price is currently testing the resistance and might be due for a selloff towards support.

Stochastic is indicating overbought conditions so buyers might need to take a break and let sellers take over from here. If so, the pair could drop towards the bottom of the range at .6750 or at least until the mid-channel area of interest at .6900. RSI is also showing overbought conditions and is turning lower to indicate a return in selling pressure.

Meanwhile, the 100 SMA is still above the 200 SMA, which means that the path of least resistance is to the upside and that buying momentum could resume at some point. In addition, these moving averages line up with the bottom of the channel and might hold as dynamic support if it's tested.

The main event risk for this trade might be the FOMC statement, as the Fed is set to announce their revised growth and inflation forecasts. No actual interest rate hikes are expected for now but any hawkish remarks could renew speculations for tightening in July, thereby driving dollar demand.

New Zealand is set to print its quarterly GDP report mid-week and might show a 0.5% growth figure, slower than the previous 0.9% expansion. Still, stronger than expected results might drive the Kiwi past the channel resistance and on a sharper climb.

The GDT auction is also scheduled on Wednesday and another gain in dairy prices could be enough to assure market watchers that the industry is already recovering. Other factors that could bring volatility are the US retail sales reports tomorrow and US CPI due on Thursday.

By Kate Curtis from Trader's Way

 

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EURJPY Correction Setup (June 14, 2016)

EURJPY recently made a strong break below support around the 121.50 minor psychological level then dipped close to 119.00. Price seems to be making a pullback from here, offering an opportunity to for sellers to catch the drop at higher levels.

Using the Fib tool on the latest swing high and low shows that the 50% to 61.8% levels are close to the falling trend line connecting the latest highs of price action on the 4-hour time frame. In particular, the 61.8% level lines up with a former support zone which might now hold as resistance.

The 100 SMA is below the 200 SMA, which means that the path of least resistance is to the downside. In addition, the 100 SMA lines up with the falling trend line, adding to its strength as a resistance level. However, stochastic is on the move up, signaling that buyers are regaining control while RSI is also heading higher.

There are no major reports due from the euro zone this week, leaving the euro sensitive to market sentiment. So far, Brexit polls are also influencing the shared currency's movement, with results showing a lead in favor of a Brexit also dragging the euro down. The latest batch of surveys from ICM and YouGov have been showing a widening lead in favor of those voting to exit the EU, adding to potential uncertainty in the region.

As for the yen, the main event risk would be the BOJ decision, even though no actual monetary policy changes are expected. Still, monetary policy authorities might decide to talk the currency down, especially since the yen has been strongly rallying on risk-off flows these days.

By Kate Curtis from Trader's Way

 

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BPAUD Complex Head and Shoulders (June 15, 2016)

GBPAUD recently broke below a long-term rising trend line, indicating that a selloff is about to take place. Price has since pulled up to this broken support area and looks ready to resume its drop. In addition, a complex head and shoulders pattern has formed and a break below the neckline at 1.8250 could confirm that a longer-term downtrend is due.

The chart pattern is approximately 4,000 pips tall so the resulting breakdown could be of the same size. However, the 100 SMA is still above the 200 SMA on this time frame, hinting that the path of least resistance is still to the upside.

Stochastic is pointing down to show that sellers are taking control of price action. RSI is also heading south to show a buildup in bearish pressure. If sellers continue to stay in control, a move towards the 1.5000 area could be seen.

There are plenty of UK reports on this week's schedule and these could serve as strong catalysts for a move. So far, the UK CPI readings have missed expectations, with the headline figure unchanged at 0.3% instead of improving to the estimated 0.4% figure and the core reading also unchanged at 1.2%.

UK jobs data is due today and a 0.1K drop in claimants is eyed. The unemployment rate is expected to hold steady at 5.1% while the average earnings index could sink from 2.0% to 1.7% to show weaker wages. UK retail sales and the BOE statement are lined up tomorrow.

Also, Brexit updates have been bearish for the pound these days as the polls are showing a lead in favor of those voting to leave. Still, remarks from BOE Governor Carney and UK Chancellor Osborne's warning about raising taxes in the event of a Brexit could swing the lead and keep the pound afloat.

As for the Aussie, the Westpac consumer sentiment figure released earlier today showed a 1.0% decline, indicating a downturn in confidence. Australia's jobs report is due tomorrow and an increase of 14.8K in hiring is eyed.

By Kate Curtis from Trader's Way

 

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GBPUSD Short-Term Retracement (June 16, 2016)

GBPUSD recently made a downside break from support around the 1.4450 minor psychological level, indicating that price was in for further declines. The pair appears to be making a correction, though, and applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with this area of interest.

In addition, the 100 SMA is below the 200 SMA and is also right around the broken support zone, adding to its strength as a potential resistance level. If it keeps gains in check, price could resume its drop to the previous lows near 1.4100 or lower.

Stochastic and RSI are on the move up for now, suggesting that buyers are taking control of price action. Once these oscillators reach the overbought zone and turn lower, selling pressure could return. A break past the 1.4450-1.4500 handle, on the other hand, could signal an uptrend for GBPUSD.

Data from the UK has been mixed so far, with the CPI readings failing to show any gains in price levels and the jobs report coming in line with expectations. The average earnings index was better than expected at 2.0% instead of showing the estimated drop to 1.7%.

The BOE is set to make its monetary policy announcement today and no actual policy changes are expected. BOE Governor Carney is expected to have some remarks regarding the upcoming EU referendum and how a potential Brexit could affect the UK economy. Brexit polls will continue to affect GBP price action ahead of the vote on June 23.

As for the US dollar, the FOMC's decision to keep interest rates unchanged in their latest statement has spurred some weakness. After all, the Fed also downgraded growth forecasts for this year and the next, with the dot plot of rate hike projections showing fewer Fed officials expecting at least two rate hikes this year.

By Kate Curtis from Trader's Way

 

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EURJPY Downtrend Correction (June 17, 2016)

EURJPY has been trending lower on its 1-hour time frame, moving under a descending trend line connecting the latest highs of price action. Price appears to have found a bottom and is starting to make a pullback to the falling resistance area.

Drawing the Fib tool on the latest swing high and low shows that the 61.8% Fib is close to the trend line and a former support area, which might hold as resistance. The trend line is also near the 100 SMA which usually holds as a dynamic resistance level.

Speaking of moving averages, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic is already indicating overbought conditions while RSI is in the overbought region as well, suggesting that bueyrs are feeling exhausted and may let sellers take over from here. If so, EURJPY could return to its previous lows near 115.00 or make new ones.

Rumors of FX intervention in Japan are swirling once again, leading traders to dump their long yen holdings. As government officials have mentioned, they would be ready to step in if the yen appreciates too sharply but so far no actual evidence of intervention has been revealed.

As for the euro, data came in line with expectations yesterday, as there were no revisions to the region's final CPI readings. Italy's trade balance and the euro zone current account balance are up for release today, although this might not have much of an impact on the shared currency's direction.

Brexit updates could continue to drive euro price action into the weekend, as the attack on MP Jo Cox yesterday prompted rumors that the EU referendum might be postponed. PM Cameron has suspended campaigning for today, leaving market watchers to speculate on the potential impact of this incident on the Brexit vote.

By Kate Curtis from Trader's Way

 

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GBPJPY Support Turned Resistance (June 20, 2016)

GBPJPY recently broke below support around the 153.50 to 154.00 levels and dipped to a low of 145.50. From there, price showed signs of a correction and applying the Fib tool on the latest swing high and low shows that the 50% level is close to this broken support zone.

In addition, the 100 SMA is near this retracement level. It is also below the longer-term 200 SMA, confirming that the path of least resistance is to the downside and that the downtrend could resume. A higher pullback could last until the 61.8% Fib, which is closer to the 200 SMA and might be the line in the sand for any correction.

Stochastic is still heading north so GBPJPY could follow suit. RSI is also on the move up but is nearing the overbought levels so buying pressure might be exhausted and sellers could take over. If so, price could resume its drop to the previous lows or create new ones.

The main event risk for this setup this week is the EU referendum, as a vote from the UK to leave the EU could mean significant losses for the pound. After all, this would bring a significant amount of economic and financial uncertainty, not to mention likely job losses and a potential recession.

So far, polls are still showing mixed results, although the "stay" camp appears to have gained traction. It's not clear whether the fatal shooting of UK MP Jo Cox has had an impact on sentiment and convinced some of the undecided voters to favor the status quo.

As for the yen, threats of currency intervention are weighing on the currency, which has rallied sharply and significantly last week. Analysts are speculating that the government would not step in unless USDJPY has reached 100.00 but it appears that these fears are keeping yen pairs like GBPJPY propped up at the moment.

By Kate Curtis from Trader's Way

 

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Long-Term Resistance on GBPUSD (June 21, 2016)

GBPUSD gapped up over the weekend and carried on with its bullish run on Monday, bringing price up to the resistance at the 1.4700 major psychological mark. This level has held as a strong area of interest in the past and might continue to do so.

If this area keeps gains in check, price could head back to the support around the 1.4100 major psychological level. The resistance lines up with the 200 SMA dynamic support and a break past this area could spur a longer-term climb. For now, the 100 SMA is safely below the 200 SMA so the path of least resistance is to the downside.

However, stochastic is still on the move up, indicating that buyers might have enough energy to push for an upside breakout. If so, GBPUSD could head to the next area of interest around 1.5200. RSI is also heading north so there's enough bullish momentum until the oscillator hits the overbought zone.

Brexit polls have been mostly responsible for pushing GBPUSD around recently, as more surveys have shown a shifting lead in favor of the remain camp. The actual EU referendum is scheduled on June 23 and profit-taking could force the pound to return its recent wins before that day.

Additional volatility is expected around the time the polls close until the official results are announced, as traders are likely to keep close tabs on any private exit polls or indications of which side might win. Keep in mind that a vote to exit could mean sharp declines for the British currency.

Meanwhile, Fed head Yellen has a speech scheduled in today's US trading session and this could also mean some movement for GBPUSD. Reassuring remarks from the Fed head could prop up the dollar while dovish comments could spur an upside breakout for GBPUSD.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Descending Channel (June 22, 2016)

EURAUD has been trending lower, moving inside a descending channel on its 4-hour time frame. Price is currently testing the channel support and might be due for a bounce back to the resistance at the 1.5200 major psychological level.

The 100 SMA is below the 200 SMA, which suggests that the downtrend is likely to carry on. In addition, the 100 SMA is near the top of the channel, adding to its strength as a potential resistance level.

Stochastic is indicating oversold conditions so sellers might need to take a break and let buyers take over. Similarly, RSI is in the oversold area and is starting to turn higher, possibly drawing buyers back in the game.

Event risks for this setup include the EU referendum, as this could have repercussions on the euro zone economy as well. So far, the latest Brexit polls are showing a slight lead in favor of staying in the EU but the actual results are still too close to call.

The euro is currently being weighed down by ECB Governor Draghi's remarks saying that further stimulus is in the pipeline. This caught many traders by surprise, as many were simply expecting him to say that they have enough monetary policy tools at their disposal if needed.

As for the Aussie, the RBA minutes didn't seem so dovish so the currency managed to advance. Australia's MI leading index is up for release next and a figure higher than the previous 0.2% reading could mean more gains.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Rising Channel (June 23, 2016)

EURUSD seems to have bullish momentum on its side at the moment, as price is moving inside an ascending channel and bouncing off support. A test of the channel resistance at 1.1600 could be underway but there's nearby resistance at the top of a longer-term range around 1.1450.

A break above the range resistance could push price on a stronger climb, especially with the week's top-tier event risk coming up. On the other hand, if the range resistance holds, another test of the channel support at 1.1250 could be in the cards. A break below this level could spur a move towards the bottom of the longer-term range at 1.0500.

The 100 SMA is above the longer-term 200 SMA on the daily time frame, indicating that the path of least resistance is to the upside. In addition, this 100 SMA lines up with the range support, adding to its strength as a floor. Meanwhile, both RSI and stochastic are on middle ground, barely offering any strong directional clues at the moment.

The EU referendum is scheduled to start later today, which might mean some consolidation for this pair. The official results aren't set to be announced until early Friday but private exit polls might give some clues on how the vote might turn out.

If a Brexit does occur, EURUSD could be in for declines due to an increased amount of uncertainty in the European region. In addition, traders might be wary of additional ECB easing if the UK exits the EU. On the other hand, a vote to stay could spur a relief rally for EURUSD as this would keep the status quo in place.

Euro zone PMI readings are also up for release today. Small declines are expected for the manufacturing and services sectors of Germany and France, with weaker than expected readings likely to weigh on the euro. Should the actual results come in better than expected, though, the euro could gain some support.

By Kate Curtis from Trader's Way

 

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NZDUSD Channel Resistance Holding (June 24, 2016)

NZDUSD has been trending higher on its longer-term time frames but it appears to have hit a major road bump at the top of its ascending channel. The resistance around .7300 appears to have held and price is setting its sights back on the support at the .6800 major psychological level.

Stochastic is pointing down and looks ready to head south from the overbought region. RSI appears to be moving lower already, indicating that sellers are taking control of price action. On the other hand, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside and the nearby support levels at the mid-channel of interest or .7000 handle might hold. In addition, the 100 SMA is around the bottom of the channel, adding to its strength as a potential floor.

The main event risk for this might be the official outcome of the EU referendum, as the results would have repercussions for the global economy and risk sentiment. A vote to leave the EU could mean losses for higher-yielding currencies like the Kiwi while a vote to stay could revive risk-taking and lead to gains for the Kiwi.

Data from the US economy came in mostly stronger than expected yesterday, as both initial jobless claims and flash manufacturing PMI beat expectations. This should renew the dollar's strength as a safe-haven currency, leading to gains in times of risk aversion.

Up ahead, durable goods orders data are up for release, with analysts expecting the headline figure to show a 0.5% decline and the core figure likely to show a 0.1% uptick. There are no reports due from New Zealand for the rest of the week, keeping sentiment mostly in play.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Support Turned Resistance (June 27, 2016)

AUDUSD tested the .7650 minor psychological resistance before selling off sharply last week and a look at the daily time frame shows that this resistance is a long-term area of interest. It held as support in the first half of 2015 before the Chinese stock market slump triggered a breakdown in July last year.

Price could be ready to resume its drop, possibly until the previous year lows around the .6900 major psychological mark or at least until the area of interest at .7300 in the near term. However, the 100 SMA is above the 200 SMA for now so the path of least resistance may be to the upside. In addition, the 200 SMA appears to be holding as a dynamic inflection point for now.

Stochastic is pointing down and starting to move out of the overbought region, indicating that bearish momentum is taking hold. Similarly RSI is heading south so AUDUSD might follow suit. If an upside breakout from the .7650 area takes place, however, AUDUSD could move up to the next resistance at .8000.

Last week's EU referendum sparked a sharp selloff for higher-yielding currencies, as the Brexit could put a drag on global growth and therefore demand for commodities. However, the Australian dollar appears to be drawing support from the rally in gold prices, which tend to climb in times of risk aversion.

There are no major events lined up from the Australian economy this week, although the Chinese PMI readings due on Friday could bring some volatility. Small declines are eyed for both manufacturing and non-manufacturing components and weaker than expected results could lead to Aussie losses.

As for the dollar, the US currency is supported by risk-off flows at the moment, although the Fed's likely preference to hold off any rate hikes at this point might dampen further gains. The US final GDP reading for Q1 is up for release tomorrow and the ISM manufacturing PMI is due on Friday.

By Kate Curtis from Trader's Way

 

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EURCAD Descending Channel (June 28, 2016)

EURCAD has been trending lower on its 4-hour time frame, moving inside a descending channel. Price just bounced off support and might be due for a test of resistance at the 1.4500 major psychological level.

The 100 SMA is below the 200 SMA so it's likely that the downtrend would carry on. In addition, the 200 SMA lines up with the channel resistance, adding to its strength as a potential ceiling.

Stochastic is pointing down, indicating that sellers are regaining control of price action. If so, EURCAD could make another test of the channel support at the 1.4150 to 1.4200 area or perhaps even go for a downside break.

The fallout from the Brexit is also affecting the euro since the UK is the EU's top trade partner. With that, any removal of trade agreements could also have repercussions on EU nations, which might weigh on the entire region's economic performance.

So far, Fitch and S&P have downgraded the UK's debt rating, citing the uncertainty from the Brexit as a short-term drag to growth and potential declines in trade, investment, and public finances as threats to longer-term growth. These agencies have also downgraded their GDP forecasts for the UK economy for this year and the next few years.

As for the Canadian dollar, oil prices have also been weighing on the currency these days. A projected slowdown in global growth could derail the commodity's recovery, which would be bearish for the oil-related Loonie. There are no reports from Canada today while the EU has an Economic Summit lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDNZD Double Top (June 29, 2016)

AUDNZD confirmed a long-term reversal pattern, breaking below the neckline of its double top formation on the daily time frame. This signals that price could fall by around 800 pips, which is the same height as the chart pattern.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. However, stochastic is already indicating oversold conditions, which suggests that buyers could take over once sellers take a break. If so, price could still pull back to the broken neckline around 1.0500 to 1.0600.

A move back above the neckline could indicate that the breakdown was a false one, possibly putting AUDNZD back on track towards testing the previous highs at 1.1300.

There are no major reports up for release from both Australia and New Zealand for the rest of the week, as it appears that risk sentiment has been the biggest market-mover these days. The Brexit decision has weighed on risk appetite but it appears that the New Zealand economy is on better footing in this regard.

Just recently, NZ Finance Minister Bill English remarked that the Brexit may increase the attractiveness of the Kiwi, as credit rating agencies have been positive on their economy and government. However, he did mention that the RBNZ has room to cut rates if the Brexit has negative repercussions on the global economy.

Meanwhile, RBA officials haven't commented on whether or not they're considering cutting rates to keep the economy supported after a Brexit. Gold prices have been climbing, supporting the positively correlated Australian dollar as well.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Symmetrical Triangle (June 30, 2016)

USDCAD has formed lower highs and higher lows, creating a symmetrical triangle pattern on its daily time frame. Price is just coming off a test of the triangle resistance and looks ready to make a test of support around the 1.2800 major psychological level.

The 100 SMA is below the 200 SMA on this time frame, signaling that the path of least resistance is to the downside. This suggests that a downside break of the triangle support might be possible, sending USDCAD lower by an additional 700 pips, which is roughly the same height as the chart formation.

In addition stochastic is on the move down from the overbought area, which means that sellers are taking control of price action. RSI is on middle ground, however, barely providing any strong directional clues at the moment.

Data from the US came in line with expectations yesterday. The core PCE price index was up 0.2% as expected while personal spending rose 0.4% even as personal income was slightly weaker than expected at 0.2% versus the consensus at 0.3%.

The Canadian dollar got another boost from a larger than expected draw of 4.1 million barrels in stockpiles compared to the projected reduction of 2.3 million barrels. Apart from that, oil strikes in Norway and Nigeria are also putting downward pressure on supply.

US initial jobless claims and Chicago PMI are up for release today and weaker than expected reports could mean more declines for USDCAD. Meanwhile, Canada has its monthly GDP report up for release and a 0.1% expansion is expected.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDJPY Pullback to Broken Support (July 01, 2016)

NZDJPY has been edging higher recently, pulling up from its sharp dive. Using the Fib tool on the latest swing high and low on the daily time frame shows that price is currently testing the 50% retracement level, which lines up with a broken long-term support area around the 73.00 major psychological mark.

If this level holds as resistance, price could make its way back down to the swing low around the 69.00 handle. The 100 SMA is below the 200 SMA on this time frame so the path of least resistance is to the downside. Also, the gap between the moving averages is widening, indicating strengthening bearish pressure. A larger correction could last until the 61.8% Fib, which is close to the 100 SMA dynamic inflection point.

Stochastic is on middle ground, barely offering any strong directional clues at the moment. Further gains past the 61.8% Fib or 75.00 area could signal that a reversal is starting.

Traders appear to be taking profits off their post-Brexit short trades, especially since central bankers showed signs of dovishness. The RBNZ released a Statement of Intent earlier in the week, mentioning that they are not looking to cut rates for fear of stoking house prices further but warned that it could intervene in the forex market.

As for the yen, BOJ policymakers and government officials also appear to be on intervention watch, as persistent yen strength could be damaging to the Japanese economy. Data from Japan came in mostly in line with expectations today, with the Tokyo core CPI showing a 0.5% drop in price levels and the national core CPI showing a 0.4% decline. Household spending was slightly better than expected with a 1.1% year-over-year drop versus the projected 1.3% reduction.

Japan's final manufacturing PMI and consumer confidence index are still up for release later today. China is set to print its manufacturing and non-manufacturing PMI data as well, likely affecting market sentiment and Kiwi price action.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDJPY Pullback Setup (July 04, 2016)

AUDJPY recently broke below a long-term support area in its sharp dive to a low of 72.40 before pulling back up. Applying the Fib tool on the latest swing high and low shows that this former support level lines up with the 61.8% Fibonacci retracement level, which might now hold as resistance.

If so, AUDJPY could resume its drop to the swing low or even create new lows. At the moment, price is stalling at the 50% Fibonacci retracement level near the other week's lows. This is also close to the 100 SMA, which might hold as dynamic resistance.

Speaking of moving averages, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic has been indicating overbought conditions for quite some time, which means that bearish pressure is building up. Once the oscillator turns down from the overbought area, selling momentum could be seen.

Event risks for this trade this week are the top-tier releases from Australia and the RBA interest rate decision. Australia will print its retail sales and trade balance report tomorrow, with the former expected to show a 0.3% increase in consumer spending and the latter expected to show a wider deficit of 1.72 billion AUD.

The RBA statement could have a stronger impact on Aussie price action as many are expecting the central bank to cut interest rates again, possibly to shield the economy from Brexit repercussions this time around. However, a decision to stay on hold could mean a relief rally for the Aussie.

Earlier today, the Australian building approvals report showed a 5.2% slump, worse than the expected 3.6% decline. There are no major reports lined up from Japan today but BOJ Governor Kuroda has a speech scheduled on Thursday and medium-tier reports such as the current account balance and average cash earnings data are due on Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Broken Trend Line Pullback (July 05, 2016)

EURUSD recently broke below a rising trend line on its daily time frame, signaling that the uptrend is over. Price dipped to a low of 1.0925 then showed signs of a pullback. Applying the Fib tool on the swing high and low shows that the 61.8% retracement level lines up with the broken trend line, which might now hold as resistance.

However, the 100 SMA is still above the 200 SMA so the path of least resistance could be to the upside. If EUR/USD moves back above the trend line, another test of the long-term resistance around 1.1450-1.1500 could take place.

Stochastic is also pointing up so EURUSD might follow suit. However, if sellers take control, price could head to its previous lows or even create new ones closer to the long-term range support at 1.0600.

Event risks for this setup include ECB Governor Draghi's testimony during which he might disclose more details on what the central bank plans to do after the Brexit. Recall that Draghi backed out of the EU Summit, presumably to spend more time figuring out their policy adjustments from here. Draghi also mentioned in a recent testimony that "further stimulus is in the pipeline" which could mean further rate cuts or a larger QE program.

Aside from that, the FOMC minutes are also up for release on Wednesday but these might not contain any surprises since this meeting took place prior to the EU referendum. Fed head Yellen also backed out of the EU Summit, possibly to iron out their game plan after the Brexit as well.

Data from the euro zone has been mostly upbeat, though, as the region's flash CPI estimates were slightly better than expected. Meanwhile, data from the US has also been stable but traders are waiting for Friday's NFP release to see if a rebound in hiring has taken place last month. Traders are expecting to see a 174K increase in employment.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Rising Wedge Breakout (July 06, 2016)

EURGBP was recently consolidating inside a rising wedge formation then recently broke to the upside, indicating that buyers are gaining strength. The chart pattern is approximately 400 pips tall so the resulting rally could last by the same number of pips, taking the pair up to the .8800 level.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. In addition, the gap between the moving averages is widening so bullish momentum is present.

Stochastic recently dropped from the overbought zone to indicate a return in selling pressure, but the oscillator appears to be turning higher once more. If sellers try to regain control, EURGBP could pull back to the broken wedge resistance around .8400 before heading further north. Stronger bearish pressure could lead to a move below the wedge and a corresponding selloff.

The UK property market is showing signs of financial pain, as three of the largest funds announced that they would be preventing clients from making withdrawals. This comes after plenty of property investors started liquidating their property holdings after the Brexit decision as prices have been tanking.

A huge number of banks and small businesses are exposed to the property market with their capital buffers and loans so a great deal of financial stress could cause contagion and panic. However, the BOE assured that they've conducted stress tests and that the UK banking sector can weather these risks.

UK services PMI came in weaker than expected at 52.3 from the previous 53.5 figure, indicating a weaker pace of industry growth. ECB Governor Draghi has a testimony lined up today and any confirmation about increasing their QE program or lowering deposit rates further could weigh on this pair.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Rising Trend Line (July 07, 2016)

EURGBP has gradually been trending higher, moving above a rising trend line visible on its 1-hour time frame. Price might be ready for a pullback towards the support around the .8500 major psychological mark as stochastic is heading south and showing that sellers are in control for now.

The 100 SMA is above the 200 SMA so the path of least resistance is still to the upside. A larger pullback could last until the short-term moving average, which could hold as a dynamic inflection point.

However, a break below the trend line could also be an early signal of a reversal. This could then take price down to the next area of interest around .8400, which is close to the 200 SMA. Still, a bounce could ensue once the oscillator turns from the oversold region.

ECB head Mario Draghi refrained from disclosing more details on the central bank's monetary policy plans in his testimony yesterday, which was probably why the shared currency advanced. Meanwhile, more restrictions from UK property funds fueled speculations of additional financial market stress in the economy.

For today, German industrial production and French trade balance numbers are up for release. Yesterday's German factory orders report was weaker than expected since it showed a flat reading instead of rising 1.0%.

UK manufacturing production data is due today and a 1.2% decline is eyed, erasing part of the 2.3% gain in the previous month. The ECB meeting minutes are also up for release later today and any clues on what the central bank might do in the event of a Brexit could spur volatility for this pair.

By Kate Curtis from Trader's Way

 

[katetrades]

EURCAD Descending Channel (July 08, 2016)

EURCAD is still moving inside its descending channel visible on the pair's 4-hour time frame. Price is moving closer to the channel resistance around the 1.4450 minor psychological mark and 200 SMA.

The 100 SMA appears to be holding as near-term resistance for the time being but stochastic is still pointing up, hinting that a larger rally could be in the cards. In that case, the pair has enough bullish momentum to make a test of the channel resistance.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. If the resistance levels hold, price could hit the channel support at the 1.4100-1.4150 area.

Data from Canada came in mixed yesterday, with building permits showing a surprise 1.9% drop and the Ivey PMI showing a strong return to industry growth. However, the Loonie took its cue from the drop in oil prices even as the US crude oil inventories showed a draw of 2.2 million barrels.

Still, improving oil market fundamentals could keep the Loonie supported against its counterparts. Aside from that, the upcoming Canadian jobs release could print an upside surprise, based on the employment component of the Ivey PMI. Analysts are expecting to see a gain of 5.5K in hiring but the jobless rate could rise from 6.9% to 7.0%.

There are no major reports lined up from the euro zone today, although the German trade balance and French industrial production could provide some volatility. The possibility of additional ECB easing due to a Brexit might also keep weighing on the shared currency.

By Kate Curtis from Trader's Way