Daily Technical Outlook

[katetrades]

NZDUSD Descending Triangle (Oct 03, 2016)

NZDUSD has formed lower highs and found support at the .7240 area, creating a descending triangle on its 4-hour time frame. Price seems to have bounced off the triangle resistance and is making a move towards support.

A breakout in either direction could lead to a rally or selloff of around 250 pips, which is the same height as the chart formation. The 100 SMA is above the longer-term 200 SMA for now, but a downward crossover seems imminent so sellers could take control of price action and trigger a break of support.

Stochastic is on middle ground but also appears to be turning lower, confirming that bearish pressure might return and push NZDUSD lower. So far, the moving averages also appear to have held as dynamic resistance as well.

Economic data from the US came in mixed last Friday, as Chicago PMI and the revised consumer sentiment index from the UoM beat expectations. The core PCE price index and personal income reading came in line with expectations while personal spending fell short.

The US ISM manufacturing PMI is due today and this could provide a preview of how Friday's much-anticipated NFP reading might turn out. Analysts are expecting to see a rise from 49.4 to 50.4 and are likely to pay close attention to the jobs component.

As for New Zealand, the GDT auction might be the main event this week, as gains in the dairy index have been slowing and might slump back to negative territory this week. Over the weekend, Chinese PMI readings came in line with expectations, keeping comdolls supported for now.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Triangle Support (Oct 04, 2016)

GBPJPY has been selling off recently but is currently testing support at the descending triangle pattern visible on its 4-hour chart. Price seems to have found a floor at the 130.00 major psychological level and could be due for a move up to the resistance at the 134.50 minor psychological level.

However, the 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. If so, a break below the descending triangle support could be seen, taking the pair lower by around a thousand pips or the same height as the chart formation.

Stochastic is on the move up to show that bullish momentum is in play. If the rally is weak, price could encounter resistance around the middle of the pattern or the dynamic inflection points around the moving averages.

Economic data from the UK was stronger than expected yesterday, with the manufacturing PMI up from 53.4 to 55.4 to show a stronger pace of industry expansion. This was higher than the consensus at 52.1. UK construction PMI data is due today and a dip from 49.2 to 49.1 is eyed while Wednesday's services PMI release could see a fall from 52.9 to 52.1.

It appears, however, that the confirmation that Article 50 would be invoked by the British government by the first quarter of next year has resulted to a fresh wave of uncertainty for the British economy. Prime Minister Theresa May has mentioned that the UK could leave the single market and pursue trade ties with other nations instead.

As for the Japanese yen, data has also been mostly weaker than expected, with the Tankan figures released over the weekend reflecting declines in both manufacturing and non-manufacturing sectors. Japan's consumer confidence index is due today and a drop from 42.0 to 41.8 is eyed.

By Kate Curtis from [URL deleted]

 

[katetrades]

USDJPY Triangle Breakout (Oct 05, 2016)

USDJPY seems to be establishing bullish momentum as price started to break above the descending triangle resistance visible on its 4-hour chart. The chart pattern is approximately 700 pips tall so the resulting breakout could be of the same size.

The 100 SMA is still below the longer-term 200 SMA on this time frame, suggesting that the path of least resistance could be to the downside. This could lead to a quick pullback to the broken triangle resistance at 101.50 before price resumes its climb. This broken resistance lines up with the dynamic support around the moving averages also.

Stochastic is on the move down from the overbought zone, also signaling that bears are set to take control of price action from here. If the triangle resistance holds as a floor, USDJPY could carry on with its climb up to 108.00. On the other hand, a sharp selloff below the 100.00 mark could send the pair lower by 700 pips instead.

Earlier in the week, economic data from the US has been stronger than expected. The ISM manufacturing PMI was up from 49.4 to 51.5, reflecting a return to industry growth and outpacing the consensus at 50.4. The jobs component was still below 50.0 but it showed a slower pace of contraction, supporting positive expectations for the NFP release later in the week.

For today, the US ADP non-farm employment change report is due and a weaker gain of 166K compared to the earlier 177K reading is eyed. Also lined up today is the ISM non-manufacturing PMI, which might show a climb from 51.4 to 53.1. Traders are likely to pay close attention to the jobs component once more, with a strong read yielding more gains for the dollar.

As for the Japanese yen, there have been no major reports recently but it appears as though bulls are unwinding their positions. Stronger expectations of a Fed rate hike for the year could draw more funds away from the lower-yielding currency and onto the dollar instead.

By Kate Curtis from [URL deleted]

 

[katetrades]

GBPAUD Countertrend Setup (Oct 06, 2016)

GBPAUD has been selling off but is currently finding support at the bottom of its descending channel on the 4-hour time frame. The 1.6700 handle seems to be keeping losses in check and if it continues to do so, price could bounce back to the top of the channel at 1.7400 or at least until the middle at 1.7100.

The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside. Also, the gap between the moving averages is widening, which means that bearish momentum is getting stronger.

However, stochastic is on the move up to show that buyers are taking control of price action. In that case, price could make a quick pullback from its dive as sellers book profits. Any large pullback could encounter resistance around the dynamic inflection points at these moving averages.

Economic data from the UK has actually been stronger than expected, with the latest services PMI release showing a drop from 52.9 to 52.6 instead of 52.1. Manufacturing and construction PMI have posted stronger than expected gains, signaling that the economy could stay afloat even with the looming Brexit.

However, it seems as though the idea of leaving the single EU market is taking a huge toll on the pound since investors believe that this could severely dampen demand and business activity. Over the weekend, UK PM May confirmed that they would trigger Article 50 by the first quarter of next year, causing a sharp selloff for the currency since then.

Meanwhile, the RBA refrained from cutting rates in their statement this week, leading many to predict that they would sit on their hands for the rest of the year. Australian retail sales and trade balance have both come in better than expected, confirming that there's no need for additional easing.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Triangle Pullback (Oct 07, 2016)

USDJPY recently broke outside its descending triangle pattern visible on the 4-hour time frame. Price found resistance around the 104.00 handle and might be ready for a pullback to the broken triangle resistance at the 101.50 minor psychological level.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with this broken triangle resistance and area of interest. This is also near the moving averages, which could hold as dynamic support levels.

However, the 100 SMA is below the longer-term 200 SMA, signaling that the path of least resistance is to the downside. The gap between these moving averages is narrow so a crossover could be possible. Stochastic is heading south from the overbought zone to show that bearish pressure is picking up and that a correction is due.

The main catalyst for this pair today would be the NFP release, which might show a 171K increase in hiring versus the previous 151K figure. Leading jobs indicators have been printing improvements so traders have set their expectations up for an upside surprise, which could support Fed rate hike expectations for December or even November.

A downside surprise, however, could spark a sharp dollar selloff as this would douse hopes for Fed tightening. Still, analysts believe that any reading over 100K could keep tightening expectations in play keep the dollar afloat.

Data from Japan has been mostly weaker than expected, ramping up speculations that the BOJ would have to increase stimulus at some point. Apart from that, bulls appear to be booking profits off their long positions and have run out of steam in pushing yen pairs down.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Short-Term Reversal (Oct 10, 2016)

EURAUD was recently in a downtrend before price formed an inverse head and shoulders pattern on its 1-hour time frame. Price has yet to break past the formation's neckline around the 1.4775 level before confirming the potential reversal.

The 100 SMA is above the longer-term 200 SMA on the 1-hour time frame, confirming that the path of least resistance is to the upside. Also, the gap between the moving averages is widening to reflect a buildup in bullish momentum. The 100 SMA appears to have held as near-term dynamic support as well.

Stochastic is pointing down to show that selling pressure is in play. If the 1.4775 area continues to keep gains in check, price could still sink to the lows near the 1.4600 handle.

There were no major reports out of Australia and the euro zone last Friday and no major ones are due today. However, central bank biases from both economies could keep the pair afloat. The RBA monetary policy statement kept its neutral tone, reflecting a smooth transition to the new leadership under Governor Philip Lowe.

Earlier last week, rumors swirled that the ECB was considering tapering its bond purchases even before the conclusion of its QE program, leading to a strong boost for the shared currency. However, Governor Draghi mentioned that no such discussions have taken place.

German trade balance, Italian industrial production, and euro zone Sentix investor confidence data are lined up for today, likely adding volatility to euro pairs. Japanese, US, and Canadian banks are closed for the holiday so the low liquidity environment could set the stage for another round of volatile moves.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Rising Wedge (Oct 11, 2016)

USDCAD has formed higher lows and higher highs, creating a rising wedge formation visible on its 4-hour chart. Price is currently testing the wedge support at 1.3185 and could be due for a breakout soon. If support holds, price could head back to the resistance at 1.3315.

The 100 SMA is above the longer-term 200 SMA, suggesting that the path of least resistance is to the upside. Also, the short-term moving average lines up with the wedge support, adding to its strength as a floor.

Stochastic is on the move down to show that sellers are in control of price action for now but the oscillator is nearing the oversold region. Once it turns from that area and moves higher, price could follow suit. A break in either direction could result to a move of at least 300 pips, which is roughly the same height as the chart formation.

US and Canadian banks were closed for their respective holiday yesterday, keeping liquidity thin for the pair. However, price was pushed around by movements in crude oil prices, as the commodity got a boost from Russian President Vladimir Putin's comments on cooperating with the OPEC should they decide to impose a production freeze or cut.

Another informal OPEC meeting is scheduled for the week but Iran and Iraq won't be attending, which suggests that no major decisions are likely to come from this gathering. Still, a stronger resolve to stabilize prices could lead to another boost for the commodity on this data-light week.

Jobs data from Canada came in better than expected for September, and so did the Ivey PMI reading. There's not much in the way of top-tier data from Canada this week while the US has the FOMC minutes and retail sales data due later on.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Support (Oct 12, 2016)

EURAUD has been selling off recently but could be due for a bounce as price is nearing the bottom of the range on its 1-hour time frame. If the bottom of the range at the 1.4550 minor psychological support keeps losses in check, the pair could head back up to the top of the range at 1.4750 or at least until the middle around 1.4650.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing so a downward crossover might be due, drawing more sellers to the mix and possibly triggering a downside break of support. If that happens, the pair could fall by an additional 200 pips or the same height as the rectangle formation.

Stochastic is already indicating oversold conditions so a bounce could be in order. The oscillator has yet to move out of the oversold region before indicating a return in buying momentum.

Economic data from the euro zone was stronger than expected in recent sessions. The region's ZEW economic sentiment index rose from 5.4 to 12.3 this month while the German ZEW index was up from 0.5 to 6.2, outpacing the consensus at 4.2.

As for Australia, its Westpac consumer sentiment index posted a strong 1.1% increase, a stronger pace of improvement compared to the earlier 0.3% uptick. An upbeat report from Moody's on the strength of the Australian economy is keeping the Aussie supported during the Asian session.

There are no other reports due from Australia for the rest of the day while the euro zone has its industrial production report and the French final CPI reading lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Descending Channel (Oct 13, 2016)

EURJPY is trending lower on its 4-hour time frame, moving inside a descending channel formation. Price is currently testing the resistance around 116.00 and might be due for a selloff back to support at the 111.00 major psychological level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, price is already trading above both moving averages so an upward crossover could be possible. Price also seems to be finding support at these dynamic inflection points.

Stochastic is on the move up from the oversold region, also suggesting a return in buying pressure. In that case, price could attempt to break past the channel resistance and start a reversal.

European markets closed in the red yesterday even though medium-tier reports from the region came in line with expectations. This was likely due to resurfacing Greek debt concerns raised by ECB member Coeure. Apart from that, widening yield spreads between Germany and the US also spurred euro weakness.

Economic data from Japan has been mixed, with core machinery orders posting a smaller than expected 2.2% drop and preliminary machine tool orders showing a 6.3% slide, following the earlier 8.4% drop. The tertiary industry activity index is up for release today and a 0.2% decline is eyed.

There are no major reports due from the euro zone today, with only the German final CPI reading on the docket. Any headlines on the Brexit, yield spreads, or Greek debt could influence euro price action on a data-light day.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Correction Setup (Oct 14, 2016)

EURUSD recently broke below its descending triangle support at 1.1130 and has dipped to a low of 1.0988 before showing signs of a pullback. Applying the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level lines up with the broken support, which might now hold as resistance.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic is heading up, which means that buyers are in control of price action for now. In that case, a higher pullback could be possible and the line in the sand might be the top of the triangle around 1.1175-1.1200.

If any of these resistance levels hold, EURUSD could make its way back to the previous lows or lower. On the other hand, a move past the 1.1200 resistance could put the pair back on an uptrend.

Medium-tier economic reports from the US came in stronger than expected yesterday. Initial jobless claims stood at 254K, same as in the earlier week, and lower than the estimated 252K figure. Meanwhile, import prices posted the estimated 0.1% increase as expected, chalking up a rebound from the previous 0.2% dip.

Euro zone data has also been mostly in line with expectations for the week, with the ZEW economic sentiment readings released earlier on indicating a notable pickup in optimism. However, widening bond yield spreads between Germany and the US has highlighted the surge in demand for US assets, leading to a sharp drop for the shared currency midweek.

Up ahead, US retail sales and PPI numbers are due. Analysts are expecting to see a 0.6% gain in headline retail sales and a 0.4% uptick in core retail sales, representing rebounds over their previous readings. Producer prices are expected to post a 0.2% uptick for the headline figure and a 0.1% rise for the core figure. The preliminary UoM consumer sentiment for October is also lined up and a rise from 91.2 to 92.1 is expected.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Breakdown Correction (Oct 17, 2016)

EURAUD broke below support at the 1.4550 minor psychological level then dipped to the 1.4400 area before pulling up. Using the Fib tool on the latest swing high and lows shows that the 61.8% retracement level coincides with the broken range support, which might now hold as resistance.

The 100 SMA is below the longer-term 200 SMA on the 4-hour time frame, signaling that the path of least resistance is to the downside. The gap between the moving averages is widening, which means that bearish pressure is getting stronger.

Stochastic is on the move up for now, which means that buyers might be in control of price action, but the oscillator is nearing the overbought region. Once it turns lower from that area, selling momentum could return and allow any of the nearby Fib levels to keep gains in check.

There were no major reports out of the euro zone and Australia last Friday but China's inflation reports came in stronger than expected, providing support for the Australian dollar. Earlier in the week, though, trade data from China showed a sharp decline in both exports and imports so demand for Australia's raw material commodities could weaken.

Euro zone final CPI readings are up for release today, along with a speech from ECB Governor Draghi. This might set the tone for the ECB interest rate statement on Thursday, although no actual changes to monetary policy are expected. Still, policymakers are expected to address rumors that the central bank is considering winding down its asset purchases ahead of the program's end date.

As for Australia, the RBA minutes are up for release and this should provide more insight on whether or not the central bank would still adjust interest rates this year. Later in the week, Australia's job figures are up for release and a 15.2K increase in hiring is eyed.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Long-Term Uptrend (Oct 18, 2016)

NZDUSD has been trending higher on its daily time frame, moving inside an ascending channel and currently testing support. Price seems to have bounced off the bottom of the channel and is headed back to the top at the .7650 minor psychological level.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA is holding as dynamic support for the time being but a larger pullback could find its way to the 200 SMA dynamic support just below the bottom of the channel at .7100.

Stochastic is moving higher, which confirms that buyers are taking control of price action. If sellers take over, however, price could break below the channel support and start a reversal.

Earlier today, the quarterly CPI report from New Zealand printed a stronger than expected 0.2% gain versus the estimated flat reading. This undermined RBNZ official McDermott's remarks on weak inflation for Q3, signaling that the central bank might be in no rush to cut interest rates. Still, the latest reading was lower than the previous 0.4% gain.

Economic data from the US was weaker than expected on Monday, indicating a slowdown in the manufacturing sector. Industrial production was weaker than expected with a meager 0.1% uptick while the Empire State manufacturing index showed a surprise pickup in contraction instead of a return to industry growth.

US CPI reports are up for release today, with the headline figure likely to show a 0.3% increase and the core figure expected to post a 0.2% gain. Keep in mind that PPI readings beat expectations so there's a good chance that the CPI reports could be stronger than expected.

As for the Kiwi, New Zealand has another Global Dairy Trade auction lined up today and it might show a rebound in dairy prices after posting a 3% decline in the previous instance. China has a number of top-tier reports namely its GDP, retail sales, and industrial production figures due in the next Asian session and might also influence demand for the commodity-related NZD.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Downtrend Pullback (Oct 19, 2016)

GBPJPY has been trending lower on its 1-hour time frame, moving below a descending trend line. Price bounced off the 124.75 area and is pulling up to test the trend line once more. Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the falling resistance.

A higher correction could last until the 61.8% Fib or the dynamic resistance at the 100 SMA. This is also close to a broken short-term support zone around the 130.00 major psychological level, which might keep gains in check moving forward.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is widening so bearish pressure is getting stronger. However, stochastic is still on the move up to show that buyers are in control of price action for now until the oscillator reaches the overbought zone and turns lower.

UK economic data came in better than expected, with the headline CPI up from 0.6% to 1.0% and the core CPI up from 1.3% to 1.5%. This was higher than the consensus at 0.9% and 1.4% respectively, as price gains were buoyed by a weaker pound in September.

For today, UK jobs data is due, with the claimant count change expected to show a 3.4K increase in joblessness, higher than the earlier 2.4K rise. The average earnings index is expected to hold steady at 2.3% while the unemployment rate is projected to stay unchanged at 4.9% as well. UK retail sales data is due on Thursday.

As for the yen, only Japan's all industries activity index is due, and it might show a 0.2% gain compared to the earlier 0.3% uptick. Earlier in the week, Japan's industrial production was downgraded from 1.5% to 1.3% to show a weaker pace of growth.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Short-Term Channel Bounce (Oct 20, 2016)

USDCAD is trending higher on its long-term and short-term charts, moving inside an ascending channel on its 1-hour time frame. Price dipped below the channel support but spiked right back up, indicating that buyers are putting up a fight.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In that case, USDCAD could move back up to the channel resistance at the 1.3300 major psychological level or higher. However, the gap between the moving averages is narrowing so a downward crossover might take place.

If that happens, selling pressure could pick up and trigger a break of the support at the 1.3100 major psychological level. Stochastic is on the move up to show that buyers are in control of price action but the oscillator is nearing the overbought region to reflect buyer exhaustion.

The Bank of Canada kept interest rates on hold at 0.50% as expected but Governor Poloz admitted that policymakers have "actively discussed" the idea of additional stimulus. The central bank also lowered its 2016 GDP forecast from 1.3% to 1.1% on weaker export activity.

In crude oil news, the EIA report showed a surprise draw of 5.2 million barrels from stockpiles, easing fears of an oversupply and driving crude oil back up again. Later on in the week, Canada is set to print its retail sales and CPI figures, which might underscore the BOC's dovish tone.

As for the dollar, US reports were mixed, as building permits beat expectations with a gain from 1.15M to 1.23M while housing starts fell from 1.15M to 1.05M instead of rising to 1.18M. US existing home sales are lined up, along with the Philly Fed index and the initial jobless claims.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Countertrend Setup (Oct 21, 2016)

USDCAD bounced off the ascending channel support around the 1.3100 area recently and is on its way to test resistance at 1.3300-1.3350. If this area holds as a ceiling, price could head back down for another test of support.

The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. If so, price could make an attempt to break past the channel resistance and go for a sharper climb. However, stochastic is already indicating overbought conditions so sellers could take over once the oscillator heads south.

Economic data from the US has been mixed yesterday, with initial jobless claims missing expectations and the existing home sales report printing upbeat results. There are no major reports up for release from the US today.

The BOC refrained from cutting interest rates in their latest monetary policy statement but Governor Poloz hinted that officials actively discussed the idea of more stimulus. The central bank also downgraded growth and inflation forecasts for the year, citing a weaker outlook for export activity as well.

In contrast, Fed rate hike expectations for November or December are still in play, supporting the US dollar. With that, this counter trend setup could prove to be risky as an upside breakout seems possible, unless any other catalysts materialize. Canada has its retail sales and CPI figures lined up so strong readings could allow the Loonie to recover.

Crude oil price gains have been supporting the positively correlated Canadian dollar, as inventories data have shown surprise declines in stockpiles, further easing fears of an oversupply. Speculations about an oil output deal for the November OPEC meeting could continue to support the oil-related Loonie.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Channel Pullback (Oct 24, 2016)

EURJPY has been trending lower, moving inside a descending channel visible on its 1-hour time frame. Price is bouncing off the channel support and might be due for a test of resistance around the 113.50 minor psychological level.

Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the channel resistance and is also near the dynamic inflection point at the 100 SMA. This short-term moving average is below the longer-term moving average so the path of least resistance is to the downside.

Stochastic is on its way up but seems to be crossing down, which suggests the presence of weakening bullish pressure. If sellers take over, price could resume its drop to the previous lows near the 112.00 handle or lower until the channel support.

Euro zone flash PMI readings are due today from the manufacturing and services sectors of France and Germany. Small improvements are eyed, with all indices expected to show a slightly faster pace of industry expansion. Weaker than expected results, however, could spur stronger losses for the shared currency.

The ECB refrained from making any monetary policy adjustments last week but this turned out to be a disappointment for bulls who were expecting some confirmation that QE tapering had been discussed. Instead, Draghi suggested that their bond purchase program could even go past the March 2017 end-date.

Earlier today, Japan reported a rise in its flash manufacturing PMI from 50.4 to 51.7, outpacing the consensus at 50.6. Later on in the week, CPI and spending data are lined up from Japan, with another batch of strong readings likely to keep the Japanese currency supported.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Daily Uptrend Pullback (Oct 25, 2016)

EURGBP is still trending higher on its daily time frame, just slightly above the rising trend line connecting the recent lows of price action. Price is making a pullback to this support area, which lines up with the 38.2% to 50% Fibonacci retracement levels around .8800-.8900.

A bounce off this support zone could lead to a climb back to the previous highs at .9200 while a break lower could spark a larger correction. The 61.8% Fibonacci retracement level lines up with a broken resistance area, which might hold as support moving forward.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. However, stochastic is pointing down to show that sellers are in control for the time being and that further losses are possible until the oscillator reaches the oversold area.

Economic data from the euro zone was mostly stronger than expected yesterday. Only the French flash services PMI fell short of estimates as it fell from a downgraded 53.3 figure to 52.1 instead of improving to 54.1. The rest of the manufacturing and services PMIs from Germany, France, and the rest of the region showed stronger improvements.

Germany's IFO business climate index is due today and a rise from 109.5 to 109.6 is eyed. Also on today's schedule is a speech by ECB Governor Draghi who could reiterate that they're not looking to taper asset purchases just yet.

As for the pound, the UK CBI industrial order expectations showed a fall from -5 to -17 versus the projected rise to -2, reflecting weakening demand. BOE Governor Carney has a testimony lined up today and any hints on monetary policy could bring volatility to EURGBP.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Triangle Pullback (Oct 26, 2016)

EURAUD recently broke below the short-term triangle consolidation pattern. Price dipped to a low of 1.4125 before showing signs of pulling up and using the Fib tool on the breakout move shows that the 61.8% level is close to the broken triangle support.

The 100 SMA is below the longer-term 200 SMA, which confirms that the path of least resistance is to the downside. Also, the 100 SMA coincides with the broken symmetrical triangle support, adding to its strength as a potential ceiling.

Stochastic is still pulling up, which means that sellers are exhausted and letting buyers take over at this point. A bit of bullish divergence can be seen as price made lower lows while stochastic had higher lows. Once the oscillator makes it to the overbought level, sellers could get back in the game and push for a drop to the previous lows.

Earlier in the day, Australia printed a much stronger than expected quarterly CPI for Q3. Price levels were up 0.7%, stronger than the earlier 0.4% gain and the estimated 0.5% increase. The trimmed mean CPI came in line with estimates of a 0.4% gain, possibly enough to ensure that the RBA won't need to cut interest rates in the near future.

Data has been strong for the euro as well, with the German Ifo business climate index beating expectations at 110.5 versus 109.6 and the earlier 109.5 figure. On Monday, flash manufacturing and services PMI readings from Germany and France have been mostly stronger than expected.

ECB head Draghi confirmed that stimulus will stay in place until the region hits its inflation targets, mentioning that their easing program has done a fine job of warding off deflation. Up ahead, Australia still has data on import prices and PPI due while the euro zone will have its flash CPI readings from its top economies on Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Inverse Head and Shoulders (Oct 27, 2016)

EURJPY could be in for a reversal from its selloff, as the pair formed an inverse head and shoulders pattern on its 1-hour time frame. Price already broke past the neckline at the 114.00 major psychological mark and might climb by around 150 pips, which is the same height as the chart formation.

The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance is to the downside. An upward crossover, however, could draw more buyers to the mix and allow the climb to gain traction. Note that price is already trading above these moving averages, which might hold as dynamic support levels moving forward.

Stochastic is pointing down to show that sellers are in control of price action for now. Once the oscillator reaches the oversold region and turns higher, buying pressure could return.

Sources have shared that the ECB is mulling some adjustments to their QE program, which is likely to extend past the March 2017 end-date. This could include lightening restrictions on the availability and size of purchases, making it easier to boost liquidity in the region.

Data from the euro zone hasn't been so bad so far this week, as most of the manufacturing and services PMI from Germany and France came in better than expected. German IFO business climate was also better than expected but the GfK consumer climate index fell short of estimates.

There are no reports due from the euro zone and Japan today, as the top-tier reports are all lined up on Friday. From Japan, we've got consumer spending and CPI readings which could set the tone for the BOJ statement next week. Euro zone has its preliminary GDP and CPI reports from Germany, France, and Spain.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Double Top (Oct 28, 2016)

AUDUSD could be in for a quick reversal from its uptrend, as the pair formed a double top on its 1-hour time frame. Price failed in its last two attempts to break past the .7700 major psychological level and is currently testing the neckline support at .7600.

A break below this level could send the pair down by around 100 pips, which is roughly the same height as the chart formation. On the other hand, if support holds, another bounce towards the .7700 resistance could be seen. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.

Stochastic is pulling up, which means that buyers are taking control of price action. Near-term resistance is located around the middle of the formation and the dynamic inflection points or moving averages, which could draw sellers back in the game if the oscillator indicates overbought conditions then.

Australia printed a stronger than expected headline CPI for Q3, indicating a 0.7% increase in price levels versus the projected 0.5% uptick and the previous 0.4% gain. However, other inflation-related reports have missed expectations, which suggests that there's still some downside pressure on price levels. PPI posted a bleak 0.3% gain, half as much as the estimated 0.6% increase, while import prices fell 1.0% versus the estimated 0.7% drop.

As for the US, medium-tier reports have mostly been coming in better than expected, reflecting enough momentum for the US economy. Flash manufacturing and services PMI have printed upbeat readings for October, which suggests that the economy is off to a good start for the quarter.

US advanced GDP data is due today and a 2.5% growth figure is expected for Q3, much faster than the earlier 1.4% expansion. Stronger than expected results could further reinforce rate hike expectations and dollar demand while weak data could lead to a decline for the currency.

By Kate Curtis from Trader's Way