Daily Technical Outlook

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AUDJPY Rising Channel (July 11, 2016)

AUDJPY has started to trend higher on its 1-hour time frame, moving inside a rising channel on the short-term chart. Price is currently testing the channel support and might be due for a bounce towards the resistance at the 78.00 major psychological level.

The 100 SMA just crossed below the 200 SMA, signaling that the path of least resistance might be to the downside. This means that AUDJPY can still break below the channel support around the 76.00 area and start a reversal.

Stochastic is indicating overbought conditions, which might also mean that sellers are ready to take control. If so, a break below the channel support could spur a drop to the next floor around 74.50.

Event risks for this setup this week include the Australian jobs release and Chinese data. The Australian economy is expected to have added 10.1K jobs in June, lower than the previous month's 17.9K increase, while the unemployment rate is expected to climb from 5.7% to 5.8%.

Later in the week, China will print its Q2 GDP, June industrial production, fixed asset investment, and retail sales reports. The economy is expected to have grown by 6.6% in the latest quarter, slower than the previous 6.7% figure. Industrial production could slip from 6.0% to 5.9% year-over-year growth while fixed asset investment and retail sales are also expected to slow.

There are no major reports lined up from the Japanese economy but risk sentiment and intervention threats from the BOJ and Japanese government officials could have a strong say in yen price action for the rest of the week.

By Kate Curtis from Trader's Way

 

[katetrades]

EURNZD Descending Channel (July 12, 2016)

EURNZD is in the middle of pulling back up to the descending channel resistance visible on its 4-hour time frame. Using the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with a former support area around the 1.5400 major psychological level and the top of the channel.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside and the selloff is likely to carry on. However, stochastic is on the move up so buyers might still be in control of price action for now. Still, the oscillator is nearing the overbought zone, which might indicate a pause in bullish momentum.

If the top of the channel holds as resistance, price could resume its drop to the swing low at the 1.5100 major psychological mark or all the way down to the channel support closer to 1.4900. A break past the channel resistance and the swing high at 1.5600 could indicate a reversal.

There are no major reports lined up from New Zealand for this week so the Kiwi could move to the tune of risk sentiment. Data from Australia and China are lined up towards the end of the week and the outcome of these releases could also influence Kiwi price action.

There are also no major reports due from the euro zone, as the shared currency appears to be taking its cue from UK events. Political clarity is returning to the UK now that David Cameron will be stepping down from his Prime Minister post to give way to Theresa May.

However, the upcoming BOE statement could contain plenty of dovish remarks and actual easing action from the UK central bank. If so, the euro could also resume its drop on a projected slowdown in the region.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDJPY Retracement Setup (July 13, 2016)

AUDJPY has been on such a strong rally these days but a correction might be due. Price appears to have hit a ceiling at the 80.00 major psychological level and could make a pullback to the Fib levels on the 1-hour time frame.

In particular, the 61.8% Fibonacci retracement level could serve as strong support. This lines up with a former resistance level near the 77.00 major psychological mark and also the dynamic inflection points at the moving averages.

The 100 SMA is crossing above the 200 SMA to indicate that the path of least resistance is to the upside. Stochastic is still on the move down for now so sellers are in control of price action, with the rally set to resume once the oscillator makes it to the oversold region and turns higher.

Event risks for this setup include the Chinese trade balance since the level of imports and exports could be reflective of demand for Australia's raw material commodity shipments to the country. Later on this week, China is set to report its GDP, retail sales, industrial production, and fixed asset investment. Stronger than expected results could allow the Aussie to regain ground.

Also due this week is the Australian jobs report which might show a 10.1K increase in hiring for June. The unemployment rate is expected to rise from 5.7% to 5.8% and weak data could spur further Aussie weakness.

Speculations of additional easing from the BOJ spurred by PM Abe's orders to come up with a new economic stimulus plan earlier this week could keep the yen weak against its forex counterparts. So far not much details have been shared yet and yen traders are on their toes for any major announcements in the next few days.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Descending Channel (July 14, 2016)

EURAUD has been trending lower on its short-term and long-term time frames, but a potential opportunity to catch the downtrend has materialized on the 4-hour chart. Price is bouncing of the descending channel support and might be due for a pullback to the top of the channel around the 1.4700-1.4750 levels. This lines up with the 61.8% Fibonacci retracement level and an area of interest.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic is still on the move up so buyers may be in control for now. If bullish momentum continues to stay in play, EURAUD could go for a break past the channel resistance and head towards the dynamic resistance at the 100 SMA or 200 SMA. On the other hand, if any of the Fib levels or the channel resistance hold as a ceiling, price could resume its drop to the lows at 1.4500 or create new ones.

Earlier today, Australia reported a 7.9K increase in hiring, lower than the estimated 10.1K rise in employment. The jobless rate rose from 5.7% to 5.8% as expected, but this was due to a slight increase in labor force participation.

Data from the US economy was mixed yesterday, as the Fed Beige Book indicated that most districts saw modest economic growth and a pickup in consumer spending. Import prices posted a smaller than expected 0.2% uptick versus the projected 0.6% climb.

For today, the US is set to print its initial jobless claims and PPI. Jobless claims could come in at 263K, higher than the previous 254K figure, while producer prices could see a 0.3% uptick. Tomorrow, US retail sales and CPI are up for release. Headline consumer spending could show a 0.1% uptick while core retail sales could see 0.4% growth. Headline and core CPI are expected to show 0.2% gains.

Chinese top-tier reports are also up for release tomorrow and slightly weaker figures are eyed. GDP could fall from 6.9% to 6.8% while industrial production, retail sales, and fixed asset investment could also slow down, possibly weighing on the Aussie.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCHF Rising Channel (July 15, 2016)

USDCHF has been trending higher recently, moving inside a rising channel visible on its 1-hour and 4-hour charts. Price is currently testing the channel support and could be due for a bounce back to the resistance at the .9950 to 1.0000 area.

The 100 SMA just crossed above the longer-term 200 SMA to indicate that buyers are taking control of price action. In addition, the 100 SMA lines up with the bottom of the channel, adding to its strength as support.

However, stochastic is still on the move down, which suggests that there's some bearish pressure left. In that case, price could make another test of support at .9800 before resuming its climb or possibly push for a downside break. If so, a downtrend might be in the cards.

Data from the US economy came in stronger than expected yesterday, lending more support for the dollar. Initial jobless claims stood at 254K versus the 263K forecast while PPI reports also beat expectations.

Potential catalysts for a bounce include the release of US retail sales and PPI data in today's New York trading session. Headline retail sales is expected to be up by 0.1% while core retail sales could show a 0.4% gain. Headline and core CPI are both expected to show 0.2% gains.

There are no major reports out from Switzerland but the franc could be in for more declines if uncertainty in the European region lingers. In addition, the threat of SNB intervention could continue to keep a lid on the Swiss currency's gains.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Range Support (July 18, 2016)

EURUSD has been trading inside a range, moving between support at 1.1035 and resistance at 1.1150. Price is currently testing support at the bottom of the range and seems ready for a bounce back to the top.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, price might still encounter a bit of resistance at the middle of the range around 1.1100, which is around the dynamic inflection points of the moving averages.

Stochastic is on the move up, indicating that buyers are regaining control of price action. But if sellers refuse to give way, a break below the range support could send price lower by around 120 pips, which is approximately the same height as the range.

Data from the US economy came in stronger than expected on Friday. Headline retail sales rose 0.6% versus the projected 0.1% uptick while core retail sales advanced 0.7% versus the estimated 0.4% gain. Headline and core CPI came in line with expectations of 0.2% gains.

As for the euro, tensions in the European region following the attack in Nice and the coup in Turkey could keep weighing on the shared currency. Traders might also be pricing in expectations of additional easing from the ECB in their monetary policy statement later this week.

There are no major reports out of the US and the euro zone today so volatility might be low. Tomorrow has the German ZEW economic sentiment up for release and analysts are expecting to see a drop from 19.2 to 8.2. The US has building permits and housing starts data lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Trend Line Test (July 19, 2016)

AUDUSD has been trending higher on the short-term time frames, moving above a rising trend line connecting the recent lows of price action. The pair is currently testing this support area and could be due for a bounce or a break.

The 100 SMA lines up with this rising trend line and could add to its strength as support. If so, AUDUSD could resume its climb to the previous highs at .7650 and beyond. On the other hand, a break lower could spur a reversal for the pair.

The 100 SMA is above the 200 SMA for now, which means that the path of least resistance is to the upside.In addition, stochastic is indicating oversold conditions so a return in buying pressure could be imminent once the oscillator turns higher.

Earlier today, the RBA released the minutes of its latest policy meeting, which indicated that the central bank was more worried about inflation than they sounded during their actual statement. This could keep the door open for interest rate cuts and these speculations are currently weighing on the currency.

Building permits and housing starts are up for release from the US economy and stronger than expected figures could renew demand for the Greenback. The US stock market has been performing really well, thanks to upbeat earnings figures from top companies in the tech and banking sectors.

Later on in the week, Australia will print its NAB quarterly business confidence index while the US is set to print its Empire State manufacturing index. Downbeat figures from Australia and strong data from the US could reinforce a potential selloff.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Reversal Pattern (July 20, 2016)

GBPUSD seems ready to resume its drop, as a head and shoulders pattern can be seen on its 1-hour time frame. This is a classic uptrend reversal signal, with selling pressure likely to increase once price has broken below the neckline at the 1.3100 major psychological level.

The chart pattern is approximately 350 pips tall so the resulting breakdown could last by the same amount, taking GBPUSD down to 1.2750 or its record lows. However, the 100 SMA is still above the 200 SMA so the path of least resistance might still be to the upside. In addition, stochastic is indicating oversold conditions so buyers might be ready to take control of price action.

In that case, GBPUSD could still bounce up to the resistance around the 1.3300 handle or the tops at 1.3450. A break past that area could signal that pound bulls could continue to gain traction.

Data from the UK came in stronger than expected yesterday. Headline CPI rose from 0.3% to 0.5%, outpacing the estimate at 0.4%, while core CPI rose from 1.2% to 1.4% versus the consensus at 1.3%. However, the pound failed to make a strong rally after the IMF downgraded growth forecasts for the UK economy for this year and the next due to the Brexit.

For today, the jobs figures are up for release. Claimant count could increase by 4.1K versus the previous 0.4K drop while the unemployment rate is expected to hold steady at 5.0%. The average earnings index might rise from 2.0% to 2.3% to show faster wage growth.

Weaker than expected data could trigger a sharp drop for the pound since this would reveal that the employment situation is already weak ahead of further downside pressure from the Brexit. As for the US, building permits and housing starts came in line with estimates yesterday. There are no reports due from the US today but earnings releases could dictate dollar action.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Triangle Bounce (July 21, 2016)

EURAUD has formed lower highs and found support at the 1.4500 major psychological level, creating an ascending triangle pattern on its daily time frame. Price appears to be bouncing off the support zone and could carry on with its climb depending on today's top-tier events.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that a break of support could take place, possibly taking the pair lower by around 1700 pips or the same height as the chart formation. Rallies could also find resistance at the dynamic inflection points around the moving averages.

Stochastic is on the move up, suggesting that buyers are in control for now. If they continue to keep bullish pressure in play, EURAUD could make it all the way up to the triangle resistance at 1.5250-1.5300 or at least until the middle of the triangle around 1.5000 where an area of interest is located.

The main event for this pair is the ECB interest rate decision, as analysts are divided on whether the central bank would announce additional stimulus measures or not. Governor Draghi seemed more dovish in the aftermath of the EU referendum but now that the political uncertainty has subsided, policymakers seem less worried about economic repercussions.

Data from the euro zone has been mostly weaker than expected as the ZEW economic sentiment indices from Germany and the region fell sharply to negative territory. Consumer confidence also weakened to show a larger degree of pessimism.

As for the Australian dollar, the downbeat RBA minutes are weighing on the currency since policymakers expressed some concern about their inflation outlook. The Aussie has also given up ground on risk aversion for the past few days.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Countertrend Setup (July 22, 2016)

USDCAD has been trading in an ascending channel on its 4-hour time frame but might encounter resistance on this uptrend soon. Price is making its way towards the top of the channel at the 1.3200 major psychological level, which might hold as a short-term ceiling.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside and the pair could have enough momentum for a test of the channel resistance. However, stochastic is nearing the overbought zone, suggesting that buyers might need to take a break soon and let sellers take over.

If so, USDCAD could head back to the bottom of the channel around the 1.3000 major psychological level. This is also near the 200 SMA, which might hold as dynamic support for this uptrend. But if bullish momentum is very strong, price could even go for an upside break from the channel resistance.

Event risks for this setup include the release of Canada's CPI and retail sales reports in today's US session. Headline CPI is expected to show a 0.2% gain compared to the previous 0.4% uptick while core CPI could print a flat reading versus the previous 0.3% increase. Headline retail sales could show a flat reading versus the previous 0.9% gain while core retail sales could show a 0.3% increase compared to the previous 1.3% rise.

Only the flash manufacturing PMI report is due from the US economy today and a rise from 51.3 to 51.9 is eyed. Stronger than expected data could lead to more gains for the dollar, especially since earnings reports from top US companies have been churning out upbeat results.

Aside from that, a continued decline in crude oil prices could keep weighing on the positively-correlated Canadian dollar. Fears of a supply glut are back now that production has resumed in Alberta and inventories are rising once more.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Descending Channel (July 25, 2016)

USDJPY has been trending lower on its longer-term time frames, moving inside a descending channel on its daily time frame. Price is currently testing the channel resistance at the 106.50-107.00 area, which lines up with a former support level. This also coincides with the 61.8% Fibonacci retracement level based on the latest swing high and low.

The top of the channel is close to the 100 SMA, which could act as a dynamic resistance zone. This is below the longer-term 200 SMA, confirming that the downtrend could carry on and that the path of least resistance is to the downside. The gap between the moving averages is widening, reflecting stronger bearish momentum.

Stochastic is indicating overbought conditions and is turning lower, indicating a return in selling pressure. In that case, USDJPY could resume its drop to the channel support around 98.50 or at least until the 100.00 major psychological support level.

The main event risk for this setup is the BOJ decision towards the end of the week, as market participants still have mixed expectations for the outcome. Earlier in the month, PM Abe ordered the preparation of an economic stimulus package, leading traders to expect that the central bank would be ready to dole out more easing as well. However, BOJ Governor Kuroda suggested that "helicopter money" might not be the case.

Still, in the G20 meeting, Kuroda mentioned that ruling out "helicopter money" doesn't necessary mean that additional stimulus would be improbable. With that, market watchers are back to pricing in additional easing from the central bank, probably somewhere between 10-30 trillion JPY.

As for the US dollar, the advanced GDP reading is up for release this week and a stronger figure for Q2 is eyed. The FOMC is also scheduled to announce its policy decision this week but no actual changes in interest rates are expected, although any indication that the Fed could still tighten this year might drive dollar gains.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Triangle Breakout (July 26, 2016)

USDCAD formed lower highs and higher lows in the past few weeks since late May, creating a symmetrical triangle pattern on its 4-hour time frame. Price has broken above the triangle resistance, indicating that buyers are gaining the upper hand in price action.

The chart pattern is approximately 500 pips tall so the resulting breakout could last by the same amount, taking the pair up to the 1.3500 major psychological resistance. The 100 SMA is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside, and the gap between the moving averages is widening to show a pickup in bullish pressure.

However, stochastic is already indicating overbought conditions so buyers might need to take a break and let sellers take over from here. If so, a pullback to the broken triangle resistance at the 1.3050-1.3100 levels could take place before the climb resumes.

Falling crude oil prices have been mostly responsible for driving Loonie movement these days, as the commodity has slumped to its April lows. Data from the Canadian economy has come in mostly stronger than expected last week but traders appear to be reacting to risk aversion instead.

US CB consumer confidence and new home sales data are due today, along with the Richmond manufacturing index. The consumer confidence index is expected to fall from 98.0 to 95.6 to indicate weaker optimism while new home sales could rise from 551K to 560K.

There are no major data points from Canada for the next couple of days, although the US crude oil inventories report due tomorrow could push this pair around. Apart from that, the FOMC statement could also have a strong say in USD price action, as cautious remarks could spark weakness while upbeat comments could allow the rallies to carry on.

Canada is set to print its GDP on Friday and a 0.5% monthly contraction is eyed, likely putting additional drag on the Canadian dollar. Also due then is the US advanced GDP reading for Q2, which might show a stronger pace of growth at 2.6% compared to the earlier 1.1% expansion in Q1.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Breakout Correction (July 27, 2016)

USDCAD recently made an upside breakout from its symmetrical triangle pattern, signaling that buyers have taken control of price action. However, the rally was cut short at the 1.3200 area and a correction seems to be taking place.

Applying the Fib tool on the latest swing high and low on the 4-hour time frame shows that the 50% level lines up with the broken triangle resistance at the 1.3050 minor psychological mark, which might now hold as support. A larger correction could last until the 61.8% Fib or the 1.3000 level, which is closer to the dynamic support at the 100 SMA.

The 100 SMA is above the 200 SMA so the uptrend could carry on. In addition, the gap between the moving averages is widening so bullish momentum is strengthening. However, stochastic is pointing down, hinting that sellers are on top of their game for now and that buyers might wait until the oscillator reaches the oversold area.

Event risks for this setup include the FOMC statement, during which policymakers are expected to keep interest rates unchanged. There is no scheduled press conference after this announcement so traders will be taking a closer look at the official statement to see if any shift in bias was made. Cautious remarks could dash hopes of a rate hike for the year while hawkish comments could mean another round of gains for the US dollar.

Data from the US economy has been mostly upbeat, with the CB consumer confidence, Richmond manufacturing index, and new home sales figures beating expectations. US durable goods orders data are also due today, with the headline figure expected to show a 1.1% decline and the core figure estimated to print a 0.3% uptick.

As for the Canadian dollar, weak crude oil prices have weighed on its price action recently while traders price in expectations of a buildup in stockpiles. US crude oil inventories data is due today and a reduction of 2.1 million barrels could be reported, likely easing fears of an oversupply and providing support for the oil-related Loonie.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Support Turned Resistance (July 28, 2016)

GBPJPY recently broke below support at the 139.00 major psychological level then dipped to the 136.00 area before pulling up. Applying the Fib tool on the latest swing high and low on the 4-hour time frame shows that the 50% level lines up with the broken support, which might now hold as resistance.

This area also lines up with the moving averages, which usually hold as dynamic inflection points. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Stochastic is heading south so GBPJPY could follow suit.

In that case, GBPJPY could eventually hit the lows at the 136.00 area or even go for new lows. A higher pullback could still find resistance at the 61.8% Fibonacci retracement level closer to the 140.00 handle.

Data from the UK was stronger than expected yesterday, as the GDP showed a 0.6% economic expansion versus the projected 0.5% growth figure and the previous period's 0.4% reading. However, reports from Japan suggesting that the government is ready to dole out a larger economic stimulus package than initially expected drove the yen lower.

Price could continue to consolidate ahead of the BOJ interest rate decision, as traders refrain from taking any large positions ahead of the actual announcement. A conservative increase in stimulus could still lead to yen gains while an aggressive easing program could lead to sharp losses.

Prior to the actual BOJ statement, Japan is set to release its latest batch of inflation readings, along with retail sales and industrial production data. The outcome of these reports could set the tone for the central bank decision. There are no major reports lined up from the UK for the rest of the week.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Symmetrical Triangle (July 29, 2016)

GBPUSD has been forming higher lows and lower highs, creating a symmetrical triangle pattern on its 1-hour time frame. Price recently bounced off the triangle support and looks ready to make another test of resistance.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which suggests that the triangle resistance around 1.3200 could keep gains in check. Stocahstic is almost in the overbought region but seems to be turning lower, indicating that sellers are ready to push price back down again.

Increased selling pressure could lead to a downside breakout, possibly pushing GBPUSD lower by 700 pips or the same height as the triangle formation. However, if buyers take over, price could push past the triangle resistance and rally by 700 pips as well.

Event risks for this setup include the release of the US advanced GDP reading for Q2. A growth figure of 2.6% is eyed, nearly thrice as much as the 1.1% growth seen for the first quarter of the year. Stronger than expected data could keep expectations of a Fed rate hike in play, pushing the dollar higher against its counterparts.

Earlier in the week, the UK printed a stronger than expected Q2 GDP reading of 0.6% versus the projected 0.5% expansion and the previous 0.4% reading. However, this failed to spur a strong pound rally since it reflects economic performance prior to the EU referendum. Traders paid closer attention to sharp fall in CBI realized sales from 4 to -14 instead.

The FOMC statement came in line with expectations since Fed officials kept policy unchanged but highlighted the progress in the US economy. This spurred risk appetite after the announcement, weighing on the safe-haven dollar, but demand for the Greenback soon resumed in the later sessions.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Countertrend Setup (Aug 01, 2016)

GBPJPY has been trending lower on its 1-hour time frame, moving inside a descending channel. Price is testing support at the 135.00 major psychological level, which could keep losses in check for now. If so, the pair could climb back up to the channel resistance at 137.00, which lines up with the 200 SMA dynamic inflection point.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. In addition, the gap between the moving averages is widening so bearish pressure is getting stronger. In that case, price could even break below the channel support and go for a sharper drop.

However, stochastic is heading north for now so price could follow suit while buyers take over. Stronger bullish momentum could lead to an upside break from the top of the channel and a reversal from the downtrend.

The UK manufacturing PMI is up for release today and a 49.1 reading is eyed, indicating industry contraction. Also due today is Japan's final manufacturing PMI but no revision from the earlier 49.0 reading is eyed.

Last week, the BOJ decided to increase their ETF buying program, but this seemed to be a disappointment to market participants who were counting on a more aggressive stimulus expansion. Later on in the week, it will be the BOE's turn to make their policy decision but no actual rate changes might be announced.

If so, the pound could make a strong rally against the Japanese yen, especially if risk appetite picks up later on in the week. UK construction and services PMI readings are also due, but their initial estimates have already been released so market watchers already know what to expect.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Channel Pullback (Aug 02, 2016)

EURJPY has been trending lower on its 1-hour time frame, moving inside a descending channel formation. Price seems to be finding support at the bottom of the channel and could be due for another test of resistance.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the channel resistance around 115.75. This is also near the moving averages, which could hold as dynamic resistance levels. Speaking of moving averages, the 100 SMA is still below the 200 SMA so the path of least resistance is to the downside.

Stochastic is still on the move up and hasn't reached the overbought zone so there might be some buying pressure left to push for a correction. Once the oscillator reaches the overbought zone and turns lower, sellers could push price back down to the previous lows at 114.00 or until the channel support around 113.50.

Event risks for this setup are limited as only medium-tier euro zone reports are up for release. Data from the euro zone has been somewhat weaker than expected recently as a number of manufacturing PMI readings from some top economies missed forecasts. Spain's unemployment change report is due today while services PMIs are up for release tomorrow.

As for the yen, the Japanese currency has drawn support from the smaller than expected BOJ stimulus. The central bank merely increased ETF purchases instead of pumping up JGB buying and lowering interest rates further.

Apart from that, risk-off moves appear to be influencing yen action recently, propping up the lower-yielding currency against its riskier counterparts. Falling crude oil prices have been partly responsible for the return in risk aversion, along with the weaker than expected US GDP report released last Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Triangle Breakout (Aug 03, 2016)

GBPUSD was previously consolidating inside a symmetrical triangle pattern on its 1-hour time frame before price decided to go for an upside breakout. This signals that buyers are taking control of price action and are ready to push for more gains. The chart pattern is approximately 700 pips tall so the resulting breakout could last by the same number of pips.

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, which suggests that buying pressure is getting stronger. However, stochastic is on the move down, indicating that bearish momentum could return.

In that case, a pullback to the broken triangle resistance around the 1.3200-1.3250 area could take place before GBPUSD resumes its climb. A larger correction could last until the dynamic support around the moving averages closer to 1.3150.

Data from the UK economy has been mixed recently, as the manufacturing PMI was downgraded to show a sharper contraction in the industry while the construction PMI enjoyed a small upgrade. The services PMI is due today and no change from the initial 47.4 estimate is eyed, although a downgrade could mean sharp declines for the pound ahead of tomorrow's BOE decision.

The UK central bank is widely expected to cut interest rates by 0.25% and issue downgrades on their growth and inflation estimates. In their previous policy statement, only one MPC member voted to cut while the rest preferred to wait for more information before adjusting policy. PMI readings after the Brexit vote fell to record lows, supporting the case for additional easing.

As for the US dollar, data came in mixed yesterday as personal spending beat expectations while personal income fell short. The core PCE price index came in line with expectations of a 0.1% uptick. US ADP non-farm employment change and ISM non-manufacturing PMI are up for release today, possibly setting the tone for Friday's NFP release.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Descending Channel (Aug 04, 2016)

EURUSD has been trending lower on its 4-hour time frame, moving inside a descending channel and currently testing the resistance. If this area keeps gains in check, price could head back to the channel support at the 1.0850 minor psychological level.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff could resume. However, the gap between the moving averages is narrowing so an upward crossover could take place and start an uptrend.

Stochastic is heading lower so price could follow suit but the oscillator is already near the oversold region, indicating that sellers are getting exhausted. Once the indicator turns higher, buyers could get back in the game and push for EURUSD gains.

There are no major reports out of the US or the euro zone today but the upcoming BOE rate statement could spur volatility. The UK central bank is widely expected to cut interest rates by 25 basis points but might also give more dovish remarks or even leave room for increasing bond purchases. US initial jobless claims and factory orders data are due today.

On Friday, Germany will print its factory orders report while France is scheduled to release its trade balance. The bigger catalyst for market action might be the NFP release, which is expected to show a 180K increase in hiring for July. This would be weaker compared to the 271K increase in June, although revisions to previous reports are expected as well.

Leading jobs indicators seem to be pointing at a slowdown in hiring for the month, as the jobs components of the ISM manufacturing and non-manufacturing reports both indicated declines. However, the ADP non-farm employment change beat expectations with a 179K rise in employment versus the projected 171K figure.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Bullish Flag Pattern (Aug 05, 2016)

EURGBP is trending higher on its 1-hour time frame, moving inside an ascending channel and signaling a possible upside break. Price has formed a bullish flag on the channel resistance at the .8475 area, with an upside breakout likely to start a sharper climb.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside and the rally could carry on. However, stochastic is on the move down so price could still follow suit and make a test of the channel support at .8375 before resuming its climb.

A smaller pullback could last until the mid-channel area of interest, which lines up with the dynamic inflection points around the moving averages. Price could draw support from the .8400-.8450 psychological levels, at which several buyers could be waiting with their long orders.

The BOE cut interest rates by 0.25% in their latest policy statement as expected, but the central bank surprised with an increase in their bond purchase program from 375 billion GBP to 435 billion GBP. This additional stimulus could weigh on the pound in the near term due to the large increase in money supply.

Meanwhile, data from the euro zone has been mostly in line with expectations, suggesting that the ECB probably won't add to their easing efforts anytime soon. German factory orders and French trade balance are up for release today and strong results could spur an upside breakout from the flag formation.

On the other hand, downbeat data from the region could revive talks of additional ECB easing, possibly taking EURGBP to the middle of the channel or towards support. Only the Halifax HPI is due from the UK today.

By Kate Curtis from Trader's Way