Daily Technical Outlook

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GBP/USD Short-term Falling Channel (March 12, 2013)

Cable has been on a downtrend for the past few weeks and has recently made a strong break below the 1.5000 major psychological support level. This confirms that the selloff is really strong and that the pair could be on its way to test the 2010 lows around 1.4300.

At the moment, the pair is trading inside a falling channel on the 1-hour time frame so there could be an opportunity to catch a quick pullback when joining the overall downtrend. The 1.4950 minor psychological level is located at the middle of the range while the 1.5000 handle is at the top of the range, both of which could act as solid resistance levels for the week.

Only medium-tier reports are due from the U.K. today and these could push GBP/USD to pull back a little before resuming its drop in case the actual figures come in better than expected. U.K. manufacturing production is expected to stay flat in January after rising by 1.6% in December while U.K. trade balance is estimated to show a smaller deficit of 8.8 billion GBP from 8.9 billion GBP.

Shorting around 1.4950 with a stop above 1.5000 would yield more than a 2:1 reward to risk ratio if you’d aim for the previous lows around 1.4850.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD: Break and Retest of 1.5000? (March 13, 2013)

GBP/USD has just broken below the 1.5000 major psychological level in the past week but the pair appears prime for a retest within the day. Using the Fibonacci retracement tool on the recent swing high and swing low to the 1.4820 area reveals that the 1.4975-1.5000 levels are in line with Fibs.

In addition, stochastic has made a bearish divergence on the 1-hour time frame as the oscillator made higher highs while price made lower highs. Stochastic is still in the overbought region and hasn’t crossed down yet, which suggests pound bulls could still be in control at the moment. A cross down from the overbought region will show that sellers have gathered enough momentum to keep the downtrend going.

Yesterday, the U.K. printed a very weak manufacturing production report which showed a 1.5% decline for February. This was way below the consensus of a flat reading for the month. However, the trade balance came in stronger than expected as it showed a deficit of 8.2 billion GBP, smaller than the estimated 8.8 billion GBP shortfall.

No reports are due from the U.K. today but the U.S. retail sales due 1:30 pm GMT could provide enough volatility for this pair. The headline figure is expected to rebound by 0.5% in February while the core version of the report could print a 0.5% uptick as well.

Take note that the recent NFP report printed a strong upside surprise for the same month and that improvements in the jobs sector usually result in a surge for consumer spending. Positive data from the U.S. has been lifting the Greenback so far, which suggests that a potential cable selloff could take place if the report meets or beats expectations.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD Breaks Below .8200 Level (March 14, 2013)

NZD/USD got sold off strongly after the RBNZ announced its interest rate decision during today’s Asian session. Even though the central bank kept rates on hold at 2.50% as expected, RBNZ head Graeme Wheeler commented that domestic economic activity is weak. A couple of reasons that he mentioned for this slowdown were the worsening drought conditions and the strength of the New Zealand dollar.

In fact, he pointed out in his speech a few hours later that he thinks the New Zealand dollar is overvalued by 10-15%, prompting traders to speculate that the RBNZ will engage in currency intervention if the Kiwi doesn’t return to their desired levels.

If you missed the initial reaction to the report, there’s still a chance to catch the rest of the move as European traders and U.S. session traders have yet to react to the news. Based on past price action following the RBNZ statement, NZD/USD typically makes a strong reaction right after the event then consolidates at the start of the London session, after which it makes a breakout in the same direction.

At the moment, NZD/USD is moving below the .8200 major psychological level and is consolidating around .8175, suggesting a potential breakdown later on. The selloff could last until the next minor psychological level of .8150 or possibly until the .8100 major psychological support. Take note that the U.S. is set to release its PPI and initial jobless claims later and that stronger than expected results typically boost the U.S. dollar.

Shorting at the break of .8175 with a stop above .8200 and a profit target around .8100 would yield a good reward-to-risk ratio for a day trade.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD: 4-hour Falling Channel Holding? (March 15, 2013)

After yesterday’s short squeeze on EUR/USD, which pushed the pair back above the 1.3000 major psychological support level, many are wondering if the rally of this pair would actually last. It seems that it could find resistance at the top of the falling channel drawn on the 4-hour time frame at least for the end of this week.

Take note that the top of the channel is close to the 1.3050 minor psychological level, which could act as resistance for EUR/USD. This area also acted as an area of interest in the past, and the lack of good news from the euro zone or any major market catalyst for today could keep the pair’s rallies at bay.

Of course, don’t forget that the European Union Economic Summit is going on today until the start of the weekend, which suggests that there is still some event risk. Also, the U.S. is set to release a bunch of reports, namely the CPI, Empire State manufacturing index, and University of Michigan preliminary consumer sentiment report during today’s New York session.

Shorting at the top of the channel with a stop above the 1.3050 line in the sand could provide a decent 2:1 reward-to-risk ratio for a day trade if you’re aiming for the bottom of the channel or just the 1.3000 major psychological level.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD Weekend Gap Play (March 18, 2013)

EUR/USD made a huge gap down from the 1.3100 area to below 1.3000 over the weekend. The sudden rally that took place during the last two trading days of the previous week can be explained by a quick short squeeze as traders decided to book profits around the pair’s previous lows.

However, sentiment for the euro zone remains negative as the pair opened this week right where it was prior to the short squeeze. Before the pair trades any lower though, traders could take advantage of this potential gap close back to the 1.3050 minor psychological resistance.

There’s a falling channel on the 4-hour time frame, right where the pair closed last week. A short trade on a pullback to the 1.3000 or 1.3050 area with a stop above 1.3100 and a target around the pair’s previous lows could work for today as the euro zone has no major catalysts on schedule.

By Kate Curtis from Trader's Way

 

[katetrades]

Pennant on GBP/USD (March 19, 2013)

After its strong rally towards the end of last week, GBP/USD consolidated tightly in a pennant formation during yesterday’s trading. This is most likely because traders are awaiting the release of top-tier British data within the week.

For today, the U.K. is set to release its CPI figures and possibly report a 2.8% annual increase in consumer price levels for February. The BOE is also set to release its Inflation Report in case the actual CPI data doesn’t stay within the government’s inflation target.

This report could provide a catalyst for a breakout in either direction. Recall that the BOE has committed to looser monetary policy if necessary even at the expense of stronger inflation and the risk of stagflation.

Higher than expected CPI could increase the odds of stagflation in the U.K. which might be more negative for the pound. However, weaker than expected CPI would also imply that the BOE has enough room to implement further easing, therefore the path of least resistance is down.

Stochastic is currently pointing downwards as it moved out of the overbought region. This suggests that selling pressure is still strong as pound bears might take the pair back to its recent lows around 1.4900. Shorting at a break below 1.5075 with a tight stop above 1.5100 and a target around 1.4875 would yield a 4:1 reward-to-risk ratio.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD: Potential Retracement (March 20, 2013)

After Cypriot officials and the Troika unveiled a bailout proposal to save Cyprus’ troubled banks, the parliament rejected the plan since it involved a one-time tax levy on deposits. This prompted fears of a bank run in the country, which might do more damage than good to its finances.

However, the lack of a concrete bailout plan at the moment increases the odds of Cyprus defaulting on its financial obligations. This explains why EUR/USD sold off strongly recently.

If you missed this sharp drop, there could be an opportunity to catch the move on a retracement. Using the Fibonacci tool on the swing high and low on the 1-hour time frame shows that the 38.2% Fib level is in line with the 1.2900 major psychological level while the 50% and 61.8% Fibs are close to the former support area.

Stochastic is in the oversold region, reflecting the lack of selling pressure at the moment. Shorting when the pair pulls back to any of the Fibs with a stop above the 1.2950 minor psychological resistance could be a good day trade, especially since the FOMC monetary policy decision could spark volatility in the markets during the New York session.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CAD: Trading the Canadian Retail Sales Report (March 21, 2013)

The falling trend line on USD/CAD’s 1-hour time frame is holding for now but the pair is consolidating into what appears to be a symmetrical triangle. Traders are awaiting the results of the Canadian retail sales report, which is set for release during today’s New York session.

Headline retail sales are projected to rebound by 0.6% from the 2.1% slide seen last December. Meanwhile, core retail sales are estimated to recover by 0.4% for January from the 0.9% drop recorded in December.

Stronger than expected figures could result in a Loonie rally, which might push USD/CAD to break below the triangle and head for the recent lows near 1.0200. On the other hand, weaker than expected retail sales figures could trigger a sharp Loonie selloff, which could force USD/CAD to break above consolidation and the trend line.

Bear in mind that USD/CAD is also finding support at an established area of interest near the 1.0250 minor psychological level. A break below this mark could confirm that the downtrend is still intact but another strong bounce could signal a reversal.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CAD: Trading the Monthly GDP Report (March 28, 2013)

USD/CAD is currently consolidating above the 1.0150 minor psychological support level as traders await the release of the monthly GDP reading for January. The figure is expected to rebound by 0.1% from the -0.2% reading seen last December.

A stronger than expected reading could trigger a downside breakout to the next support level around 1.0115 or possibly until the 1.0100 major psychological level, depending on how positive the actual reading is.

On the other hand, a weaker than expected figure could trigger an upside breakout by USD/CAD. This could push the pair back to the 1.0200 major psychological level, which has acted as support in the past.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD: Will 1.5200 Hold Again? (March 29, 2013)

The pair is once more testing the 1.5200 major psychological resistance for today. The level has held earlier this week as price dipped back to the 1.5100 major psychological support afterwards.

There’s a bearish divergence that formed on the hourly time frame as the price made lower highs while the oscillator drew higher highs. Stochastic is already moving down from the overbought region, suggesting that pound bears have already found momentum to push the pair down.

The pair could once more find support at the 1.5100 area, which has been holding for the past couple of weeks. Stronger profit-taking moves could push the pair even lower to the 1.5000 mark.

By Kate Curtis from Trader's Way

 

[autotrader1]

USD/JPY DAILY as of Sunday, 31 March, 2013
A Daily black body has formed (because prices closed lower than they opened).
For the past 10 Daily candlestick bars as of 29/03/2013, there are 3 white candles versus 7 black candles with a net of 4 black candles.
For the past 50 Daily candlestick bars as of 29/03/2013, there are 23 white candles versus 27 black candles with a net of 4 black candles.
A Daily hammer formed (a hammer has a long lower shadow and closes near the high). Hammers must appear after a significant decline or when prices are oversold(which appears to be the case with US Dollar / Japanese Yen) to be valid. When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.A Daily hanging man has formed (a hanging man has a very long lower shadow and a small real body). This pattern can be bullish or bearish, depending on the trend. If it occurs during an uptrend it is called a hanging man line and signifies a reversal top. If it occurs during a downtrend(which appears to be the case with US Dollar / Japanese Yen) it is called a bullish hammer.A Daily long lower shadow has formed. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).A Daily spinning top has formed (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action as defined by the difference between the open and the close. During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.Three Daily black candles has formed during the last three Daily bars. Although these candles were not big enough to create three Daily black crows, the steady downward pattern is bearish.

 

[katetrades]

USD/JPY: Resistance Turned Support at 94.00 (April 1, 2013)

USD/JPY sold off for the past couple of weeks and is now testing the former resistance at the 94.00 major psychological level. The pair seems to be finding support around this area, which is also in line with the 50% Fibonacci retracement level on the 4-hour time frame.

Take note that the BOJ is set to make its interest rate decision later this week but traders could start pricing their expectations way ahead of the actual event. In his previous speech, Kuroda noted that the central bank is ready to implement the necessary quantitative and qualitative measures, the details of which haven’t been disclosed yet. Kuroda might’ve simply been waiting for BOJ policymakers to convene first before announcing concrete steps, but additional asset purchases are eyed.

The yen could sell off as the event draws nearer and nearer. In the meantime, the U.S. is set to print its ISM manufacturing PMI during today’s U.S. session. An improvement over the previous month’s figure could boost the U.S. dollar against the yen.

Stochastic is making its way out of the oversold region, which suggests that dollar bulls currently have the upper hand. If you plan to buy this pair, make sure you set your stop below the 61.8% Fib level.


By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD: Retest of Former Support (April 2, 2013)

Thanks to its recent rallies for the first few trading sessions this week, EUR/USD was able to pull up to the former support level around the 1.2850 minor psychological handle. This is closely in line with the 38.2% Fibonacci retracement level on the 1-hour time frame.

In addition, stochastic appears ready to drop down form the overbought region, suggesting that euro bears are about to have the upper hand soon. If that’s the case, EUR/USD could head back south until its previous lows around 1.2775.

There are a few minor market catalysts on tap from the euro zone for today. The German preliminary CPI, Spanish employment data, and Italian manufacturing PMI are all on tap and these could provide some volatility for euro pairs. Weaker than expected figure from these top economies in the region could weigh on the euro.

Shorting at the 1.2850 area and aiming for 1.2775 with a 25-pip stop could be a 3:1 trade. Aiming lower could yield a better reward-to-risk ratio but this might require you to hold on to the trade until after the U.S. session. There are no top-tier reports on tap from the U.S. today, which suggests quiet trading during the New York market hours.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD: Trading the Construction PMI Release (April 3, 2013)

The recently released manufacturing PMI for the United Kingdom sparked a massive selloff for the pound as the actual figure missed expectations. Take note that the BOE is currently watching business surveys very closely before they make their interest rate decision.

For today, the UK still has the construction PMI on tap and another disappointment could trigger another round of pound selling. The figure is expected to improve from 46.8 to 47.7, still indicating a contraction in the industry.

On the shorter-term time frames, GBP/USD shows tight consolidation around the 1.5100 handle as traders await the release of today’s set of data. A short below the Asian box around 1.5075 and aiming for the 1.5000 handle will be a good day trade if the construction PMI misses expectations.
On the other hand, going long above 1.5100 if the actual report comes in strong could also be a good day trade if price rallies back to 1.5150 or 1.5200 afterwards.

By Kate Curtis from Trader's Way

 

[katetrades]

Ahead of the BOE Decision: GBP/USD Double Top (April 4, 2013)

After making a strong selloff from the 1.5250 minor psychological resistance and previous week highs, GBP/USD found support around the 1.5100 major psychological level. The pair appears to be retracing, thanks to the recent disappointments in U.S. economic data.

The pair seems to be encountering short-term resistance at the 38.2% Fibonacci retracement level, which is close to the 1.5150 minor psychological mark. However, stochastic is in moving out of the oversold region, suggesting a potential move up.

Take note though that the BOE is scheduled to make its interest rate decision during today’s London session and possibly highlight the weaknesses in the British economy. If that’s the case or if they hint at further asset purchases later on, GBP/USD could stage another strong selloff, possibly below the previous lows.

Note that there’s a double top formation on the 1-hour time frame, which suggests a reversal of the recent uptrend. The neckline is located around 1.5100 and a strong break below this area would confirm the start of a downtrend. This could carry on until the previous lows near 1.4850.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD Double Top: NFP Bounce or Break? (April 5, 2013)

On its 4-hour time frame, AUD/USD has formed a double top formation as it failed to break past the 1.0500 major psychological resistance over the past few weeks. The neckline of the pattern is at the 1.0400 major psychological support, which could hold or break depending on the outcome of the NFP report.

Weaker U.S. jobs growth is eyed for March as the ADP non-farm employment change figure and Challenger job cuts data both posted bleak results. Sequestration efforts may have also started to kick in during the month, which might mean more government layoffs for the period. The NFP report is expected to show a 198K reading.

A stronger than expected figure could provide a boost for the U.S. dollar, which could trigger a downside break for AUD/USD. Take note that the pattern is 100 pips in height, which suggests that the breakdown could last until 1.0300.

On the other hand, a weak figure could lead to a dollar selloff, which might push AUD/USD back to the 1.0500 area or to the top of the longer-term range at 1.0600.

A 100-pip stop should provide enough leeway for the trade as volatility could spike during the actual release. If you’re not comfortable setting positions ahead of the event, wait for momentum to dictate price action before entering orders.

By Kate Curtis from Trader's Way

 

[katetrades]

Forex Major Currencies Outlook (April 8, 2013)

USD

The U.S. economy showed weaker than expected jobs growth for March as the NFP report printed an 88K figure instead of the projected 198K increase. The previous figure was revised up from 236K to 268K while the jobless rate ticked down from 7.7% to 7.6%, mostly because of a result of a drop in participation rate. This jobs report resulted in a sharp dollar selloff as this emphasized the Fed’s decision to keep monetary policy unchanged and refrain from withdrawing asset purchases. There are no reports due from the U.S. today as the dollar could recover from its losses last Friday.

EUR

Despite the drop in euro zone retail sales, the euro was able to rally against the U.S. dollar and the Japanese yen on Friday as the U.S. posted weak NFP data while the yen continued to weaken after the recent BOJ decision. Only the euro zone Sentix investor confidence and German industrial production data are on today’s schedule, which suggests quiet trade for the euro. Take note that EUR/USD has reached the 1.3000 major psychological level and this week’s market sentiment and euro zone events could determine if this resistance mark will hold or not.

GBP

The pound staged a strong rally on Friday as it took advantage of yen and dollar weaknesses. The U.K. Halifax HPI came in line with consensus as it clocked in a 0.2% increase in house prices, lower than the previous month’s 0.5% growth. There are no reports due from the U.K. today, which suggests that GBP/USD’s and GBP/JPY’s rally could continue.

CHF

USD/CHF broke below the key .9400 major psychological support level on Friday when the U.S. printed a weak NFP figure. A potential retest could be in the cards for today as there are no major reports due from the U.S. or Switzerland.

JPY

The Japanese yen continued its losing streak on the heels of the BOJ’s aggressive easing announcement on Thursday. USD/JPY is currently trading above the 98.00 handle, despite the weak U.S. NFP figure, and could be headed for the 100.00 mark this week. There are no major releases from Japan for today, but the BOJ minutes are set for release during tomorrow’s early Asian session.

Commodity Currencies (AUD, NZD, CAD)

The Loonie suffered a sharp selloff against the Greenback on Friday when Canada showed a weak jobs report. Joblessness increased by 54.5K in March, pushing the unemployment rate up from 7.0% to 7.2% during the month. Trade balance also missed expectations as it showed a 1.0 billion CAD deficit instead of the expected 0.2 billion CAD surplus. However, the Ivey PMI beat expectations as the figure jumped from 51.1 to 61.6, outpacing the estimate at 52.4. There are no reports due from the comdoll economies for today, which suggests that the trends from Friday could continue.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD: Break and Retest Scenario (April 9, 2013)

Thanks to weaker than expected U.S. jobs data, GBP/USD breached the 1.5250 minor psychological resistance on Friday and climbed all the way up to the 1.5350 mark. However, price action on Monday reveals that the rally ran out of steam as the pair pulled back during the day.

Currently, GBP/USD seems to be finding support at the former 1.5250 resistance, which is in line with the 38.2% Fibonacci retracement level. At the same time, stochastic has reached the oversold region and is starting to move back up, hinting at a possible rally for today.

U.K. data such as the manufacturing production report and the trade balance could be a catalyst for a rally if the actual figures come in stronger than expected. This would support the BOE’s decision to stay put with monetary policy and would put the U.K. in a better fundamental position compared to the U.S., which has just suffered a slowdown in hiring for March.

If you’re planning to catch the bounce, which has now shown a bit of momentum, make sure to place your stop below the 1.5200 major psychological level as volatility could still spike during the later sessions. Aiming for the 1.5350 previous highs would be good enough for a day trade.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD to Test 1.0600? (April 10, 2013)

AUD/USD seems to have breached the 1.0500 major psychological level already and appears poised to test the next resistance at 1.0600. Take note that this is in line with the top of the long-term range visible on the 4-hour or daily time frames.

Stochastic has already made its way into the overbought region, suggesting that a move down is possible later on. However, the oscillator has yet to turn from the overdone area and show momentum going south, so AUD/USD might still have a bit of room to climb.

Chinese data has been weak so far this week as the CPI failed to meet expectations. The inflation figure clocked in an annual 2.1% reading, lower than the estimate at 2.5% and the previous month’s reading of 3.2%. Chinese PPI also came in worse than expected at -1.9%, hinting at lower inflationary pressures in the coming months. Their trade balance also disappointed as the figure showed a 0.9 billion USD deficit instead of the projected 15.2 billion USD surplus.

If the 1.0600 level holds as resistance, AUD/USD might be on its way back to 1.0200 for the near term. Take note though that U.S. data, such as the FOMC minutes and the retail sales reports, could keep dollar buying at bay.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD Potential Retracement to 1.0500 (April 11, 2013)

AUD/USD suffered a quick selloff during today’s early Asian session when Australia printed weaker than expected jobs data. The actual report showed a 36.1K drop in hiring, worse than the estimated 6.1K decrease, bringing the jobless rate up from 5.4% to 5.6% for March. The previous month’s figure was revised upwards from 71.5K to 74.0K though.

With that, AUD/USD might have a chance at testing the former resistance level around 1.0475 to 1.0500. This is in line with the 38.2% Fibonacci retracement level on the 1-hour time frame. Stochastic is pointing higher at the moment, suggesting a potential move up.

Take note though that, should the pair rally, the next area of resistance is located at the 1.0600 major psychological level. However, if weak Australian data continue to weigh the pair down for the rest of the trading sessions, a break below the Fib levels could mean AUD/USD is headed back for 1.0200.

By Kate Curtis from Trader's Way