Daily Technical Outlook

[katetrades]

USDCAD Downtrend Channel (Nov 24, 2016)

USDCAD appears to be starting a new trend down, creating a downtrend channel on its 1-hour time frame. Price just bounced off the 1.3400 support area and is making its way back up to the resistance at 1.3500.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic is indicating overbought conditions and has crossed lower, also suggesting that price could resume its slide.

However, price is above the moving averages at the moment so the bearish pressure isn't that strong. Also, the gap between the moving averages is pretty narrow so the indicators could merely be oscillating to reflect range-bound action.

The FOMC minutes confirmed that majority of policymakers think it's appropriate to hike interest rates relatively soon. Many cautioned that the economy runs the risk of overheating if they don't tighten monetary policy before reaching full employment, citing that a rate hike would also support the Fed's credibility.

Crude oil still seems to be supported, as Iraq has expressed willingness to cooperate in an OPEC output deal. According to their Prime Minister, they can make up for revenue with higher oil prices even with lower volumes. Also, crude oil inventories indicated a surprise draw of 1.3 million barrels versus the estimated buildup of 0.3 million barrels.

Data from the US economy has been mixed, although durable goods orders posted impressive gains. US banks are closed for the Thanksgiving holiday today so profit-taking could force the dollar to retreat.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Countertrend Setup (Nov 25, 2016)

EURGBP has been trending lower on its short-term time frames, moving inside a descending channel on the 1-hour chart. Price is currently testing the range support and might be due for a bounce back to the resistance around the .8560 levels.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, these moving averages are around the middle of the channel so they might hold as near-term resistance.

Stochastic is heading up to show that buyers are in control of price action for now. Once the oscillator reaches the overbought zone and turns lower, sellers could regain control and push price back down, perhaps even spurring a break below support.

Economic data from the euro zone has been mostly upbeat this week, with majority of the flash manufacturing and services PMIs coming in better than expected. German Ifo business climate data yesterday showed no change at 110.4 versus the estimated rise to 110.6.

As for the UK, the government's Autumn Forecast Statement appears to have reassured businessmen and investors that fiscal support can keep the economy afloat during the Brexit. The Chancellor assured that they won't be cutting pension benefits and that they'll increase spending on infrastructure as well.

The UK second GDP estimate is up for release today and no change from the earlier 0.5% estimate is eyed. Preliminary business investment data is also up for release and a strong increase could boost confidence in the UK economy while a drop sharper than the expected 0.2% decline could mean losses for the pound.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Short-Term Correction (Nov 28, 2016)

USDJPY is trending higher on its 1-hour chart, moving above an ascending trend line connecting the latest lows of price action. Price is currently testing this support area, which lines up with the 61.8% Fibonacci retracement level and the 100 SMA dynamic inflection point.

A bounce off this trend line and area of interest could spur a move back up to the swing high near the 114.00 handle. On the other hand, a break lower could lead to a test of the next area of interest at the 110.00 handle, which lines up with a former resistance and the 200 SMA.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Stochastic is on the move down to show that bears are in control of price action but the oscillator is already dipping into the oversold zone to suggest that selling pressure is about to be exhausted.

US traders are set to return from their Thanksgiving holiday and might be ready to provide a fresh boost for the Greenback. There are no US reports on the docket today, as the main event risks are the US preliminary GDP release on Tuesday and the non-farm payrolls report due on Friday.

Fed rate hike expectations could continue to keep the dollar afloat in the coming weeks, unless economic data severely disappoints. Leading jobs indicators such as the ADP non-farm employment change and ISM manufacturing PMI release could provide clues on how the NFP report might turn out.

As for the yen, Japanese data came in line with expectations last Friday and showed a 0.4% fall in price levels for both Tokyo and the national level. Household spending, retail sales, and unemployment rate figures are lined up today and downbeat results could mean more yen weakness.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Short-Term Range (Nov 29, 2016)

GBPUSD has been moving sideways, finding support around 1.2365 and resistance at the 1.2500 major psychological level. Price is making its way back to support after a recent bounce from the top of the range.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which suggests that the bottom of the range could keep losses in check. Stochastic is also turning up from the oversold area to indicate a return in buying pressure.

However, a surge in bearish momentum could trigger a break below the range support and a 135-pip drop for the pair, which is roughly the same height as the rectangle formation. Similarly, a break past the top of the range could yield at least 135 pips in gains.

Event risks for the day include the US preliminary GDP release, which could see an upward revision from 2.9% to 3.0% for Q3. The CB consumer confidence index is also due and a rise from 98.6 to 101.3 is expected.

Only medium-tier reports are lined up for the pound today, as the main UK event for the week is set for Wednesday when the BOE bank stress test results will be released. BOE Governor Carney will also provide an assessment of financial risks, which would likely include his take on the Brexit.

Keep in mind that Carney has been reiterating his anti-Brexit sentiments recently, holding meetings with top finance and business leaders in the UK to lobby for an extension before PM May invokes Article 50. He would likely use this week's Financial Stability Report as a platform to highlight the Brexit risks to banking and businesses.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Descending Channel (Nov 30, 2016)

USDCAD is still trending lower, moving inside a descending channel on its 1-hour chart and bouncing off resistance. Price is now making its way back down towards support at the 1.3300 to 1.3350 area, although it could encounter a near-term floor at 1.3400.

The moving averages are oscillating so the range-bound action could continue. The 100 SMA is slightly above the longer-term 200 SMA so the path of least resistance is to the upside, suggesting that another test of resistance could be in the cards.

Also, stochastic is heading up from the overbought zone to indicate that buyers are regaining control of price action. Price could move up to the 1.3480 area or the top of the channel and perhaps attempt to break higher, depending on the event risks.

Data from the US came in stronger than expected, as the Q3 GDP reading was upgraded from 2.9% to 3.2% while the CB consumer confidence showed a large jump this month. On the other hand, Canada's current account deficit came in wider than expected.

Canada's monthly GDP reading is due today and a 0.1% uptick is eyed, lower than the earlier 0.2% expansion. However, the bigger driver of price action could be the OPEC meeting, as an output deal could mean strong gains for the oil-related Loonie.

For now, energy ministers don't seem ready to reach a deal yet, as Iran has stated that it won't participate in a production cut. Iraq mentioned that it won't cooperate unless all the other members are on board. The lack of an agreement could mean more losses for oil and the Canadian dollar.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Ascending Trend Line (Dec 01, 2016)

USDJPY continues to trend higher, moving above a rising trend line on its 1-hour time frame. Price recently broke past the resistance around the 113.50 minor psychological level and zoomed up to the 114.50 area before pulling back.

Applying the Fib tool on the latest swing low and high shows that the 61.8% Fib is close to the 113.00 handle while the 38.2% Fib is closer to the previous swing high. If any of these levels hold as support, price could make its way back to the previous highs and beyond.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Also, the 100 SMA is near the rising trend line, adding to its strength as support. Stochastic is turning down from the overbought zone, though, so sellers are taking control while buyers are taking a break.

Economic data from the US was mostly upbeat yesterday, as the ADP non-farm employment change reading hinted at an upside NFP surprise while the Chicago PMI posted a sharp climb. Personal income was higher than expected but personal spending lagged.

Earlier today, Japan reported a small upgrade in its final manufacturing PMI from 51.1 to 51.3 to reflect a slightly faster pace of expansion in the industry. Prior to this, preliminary industrial production missed estimates of a 0.2% increase and posted a 0.1% uptick instead.

US initial jobless claims and ISM manufacturing PMI are up for release, setting the tone for Friday's NFP report. A stronger than expected read could seal the deal for a December Fed rate hike, although this scenario appears to have been well-priced in already.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Ascending Trend Line (Dec 02, 2016)

GBPJPY has been on a steady uptrend, moving above an ascending trend line connecting the latest lows of price action on its 1-hour chart. Price has surged past the 145.00 mark before showing signs of a pullback and applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with an area of interest or former resistance at 141.00.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 200 SMA coincides with the rising trend line, adding to their strength as a floor. The 100 SMA coincides with the 61.8% Fib, although a shallow correction could already see a bounce off the higher Fib levels.

Stochastic is on the move down to show that sellers are in control of price action for now. However, the oscillator is already nearing the oversold level to suggest weakening bearish pressure and a potential return for buyers.

Economic data from the UK was weaker than expected yesterday, as the manufacturing PMI fell from 54.2 to 53.4 to reflect slower industry growth instead of rising to the projected 54.4 figure. UK construction PMI is due today and a drop from 52.6 to 52.3 is eyed.

Data from Japan was mixed, as the final manufacturing PMI saw an upgrade from 51.1 to 51.3 while capital spending sank 1.3% in Q3 versus the projected 0.4% dip. Yen weakness still seems to be a prevailing theme, as it has been for the past few weeks.

There are no major reports lined up from Japan for the rest of the day, although the US NFP release could have an impact on overall market sentiment and yen demand. Significantly strong results could draw more traders to the dollar on rate hike expectations and away from the lower-yielding yen.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Downtrend Pullback (Dec 05, 2016)

USDCAD is trending lower, moving inside a descending channel on its 1-hour time frame. Price just bounced off the channel support and is making its way up to the resistance at the 1.3400 major psychological level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, the 200 SMA lines up with the 61.8% Fib and channel resistance, adding to its strength as a ceiling. The 100 SMA is closer to the 50% Fib, which might keep gains in check as well.

Stochastic is on the way up to show that buyers are still in control of price action for now, but the oscillator is already approaching the overbought zone so a return in selling pressure might be due, possibly leading to another test of channel support at the 1.3250 area.

Last week, the OPEC leaders agreed on their first output deal in nearly a decade, deciding to lower production levels in an effort to keep oil prices supported. This could lead to more gains for Canada's struggling energy sector, supporting spending and employment as well.

The BOC is set to make its monetary policy statement later this week and probably keep interest rates on hold for the time being. Jobs figures came in better than expected on Friday, as the economy added 10.7K positions instead of losing 16.5K workers. The unemployment rate also improved from 7.0% to 6.8%.

As for the US, the NFP reading was in line with expectations of a 177K gain while the unemployment rate fell from 4.9% to 4.6%. However, average hourly earnings slipped by 0.1% instead of posting the estimated 0.2% gain. Still, this might not be enough to dampen Fed rate hike expectations this month.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Short-Term Pullback (Dec 06, 2016)

EURUSD made such a strong rally in recent trading and might be due for a quick pullback ahead of top-tier events. Applying the Fib tool on the latest swing high and low on the 1-hour chart shows that the 50% level lines up with the broken near-term resistance at the 1.0650 minor psychological level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, stochastic is heading south from the overbought zone to show that bears might take control of price action from here.

The moving averages are close to the 61.8% Fib so they might hold as dynamic support as well. A break below the Fibs could lead to a drop to the swing low near 1.0500 while a bounce could spur a test of the swing high near 1.0800 or higher.

The shared currency shrugged off its losses after the Italian referendum as traders' fears were calmed by the idea that PM Renzi could delay his resignation until the budget is passed, easing a few fiscal concerns in the country. Also, reports that Greek's creditors could restructure debt upon evaluating the progress on economic and financial reforms in the country also supported the euro.

The dollar didn't have much of a reaction to mostly stronger than expected US economic data, as traders have already priced in the idea of a Fed rate hike. Bulls could book profits soon in anticipation of Fed remarks emphasizing that they won't be tightening again anytime soon.

The ECB statement is scheduled for later this week so this should add to EURUSD volatility. Traders are expecting the central bank to increase or more likely extend its QE program in order to help the economy achieve its inflation targets sooner.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Uptrend Correction (Dec 07, 2016)

Cable has been trending higher recently, moving inside an uptrend channel visible on its 1-hour chart. Price just hit the top of the channel and is showing signs of a pullback to support at the 1.2500 major psychological support.

Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level is closest to the channel support and lines up with a former resistance area. This could be enough to keep losses in check and allow price to head back to the swing high or until the channel resistance at 1.2800.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 100 SMA lines up with the channel support, adding to its strength as a floor. Stochastic is on the move down to show that bears are in control of price action for now but the oscillator is already nearing the oversold zone.

UK services PMI came in stronger than expected earlier this week, keeping investors confident that the economy is staying afloat even with Brexit uncertainties. Manufacturing and industrial production numbers are due today and 0.2% gains are eyed, with stronger than expected data likely to lift Cable higher.

Only the JOLTS job openings report and consumer credit data are up for release from the US today while initial jobless claims are due on Thursday and preliminary UoM consumer sentiment index is scheduled for Friday.

There are no other top-tier reports set for release from the UK in the next few days so Brexit-related headlines and even euro zone political updates could influence pound price action for the rest of the week.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Ascending Trend Line (Dec 08, 2016)

GBPJPY sold off recently but is still trading above an ascending trend line connecting the latest lows of price action on the 1-hour chart. Price is gearing up for a test of the support level, which lines up with the Fib levels. In particular, the 50% level is close to the 142.50 minor psychological support.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 200 SMA lines up with the rising trend line support, adding to its strength as a potential floor.

Stochastic is pointing down to show that sellers are still in control of price action. Once the oscillator reaches the oversold area and turns higher, buyers could return and push price up to the swing high at 146.00 or higher.

UK Supreme Court hearings are still influencing sterling movements for the time being, as the government might no longer need to get the lawmakers' approval before proceeding with Article 50. Prior to this PM May conceded to publishing their Brexit strategy in order to get the go signal to proceed with their timeline for starting negotiations.

Economic data from the UK has been mostly stronger than expected, as industry PMIs have reported improvements and reflected resilience despite uncertainties. UK manufacturing and industrial production, however, have turned out weaker than expected.

There are no reports due from the UK today while Japan has just printed mixed data. Its current account surplus was larger than expected while the final GDP reading was downgraded from 0.6% to 0.3%. UK goods trade balance and construction output are up for release on Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Setup (Dec 09, 2016)

EURAUD has been moving sideways recently and the latest set of market events have allowed the range to hold. Price just bounced off the resistance at 1.4475 and is now headed back towards support at the 1.4150 minor psychological level.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. This means that EURAUD is likely to head all the way down to test the bottom of the range. If selling pressure is strong enough, a downside break could even be possible, taking the pair lower by more than 300 pips.

Stochastic is already indicating oversold conditions, though, which suggests that sellers are already exhausted from the drop. In that case, a bounce off the range support back to the resistance could also be possible, although the moving averages could hold as near-term resistance around 1.4300.

In their policy statement, the ECB announced an extension of their QE program until December next year. This was accompanied by a reduction in the size of their monthly bond purchases from 80 billion EUR to 60 billion EUR, but analysts predicted that the easing program could go beyond the new end-date as well.

ECB staff forecasts were revised to show upgrades in next year's growth and inflation forecasts but Governor Draghi pointed out that their targets are different from those estimates. This suggests that the central bank could continue taking action to boost growth and inflation much further.

Meanwhile, the Australian dollar sold off earlier in the week on a surprise GDP contraction for Q3. Australia's trade balance also missed forecasts but components indicated that both imports and exports advanced. Chinese inflation figures were mixed but both reflected improvements over their previous readings.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Rising Channel (Dec 12, 2016)

NZDUSD is trending higher on its 1-hour time frame, moving inside a rising channel connecting the latest highs and lows of price action. Price is currently testing the channel support, which lines up with a former short-term resistance.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which suggests that the uptrend is more likely to continue rather than reverse. In addition, the 200 SMA lines up with the channel support at .7115, adding to its strength as a floor.

Price could head back up to the channel resistance at the .7250-.7300 levels from here. Stochastic is turning from the oversold region to indicate a return in buying pressure from here. However, a break below the channel support could still draw sellers to the mix and force a downtrend.

There's not much in terms of top-tier releases from New Zealand this week, although last week's events were mostly bullish for the Kiwi. RBNZ Governor Wheeler remarked that they're not likely to cut rates again anytime soon, adding that the Kiwi's appreciation isn't too much of a problem recently. The GDT auction also yielded yet another gain in dairy prices.

This week, the main event risk might be the FOMC statement. Although most traders already expect the Fed to hike interest rates, market watchers are more interested to find out what policymakers have in mind for next year. Any indication that they're likely to sit on their hands for a long time again could force the dollar to retreat.

Medium-tier risks include New Zealand's manufacturing sales report for Q3, China's industrial production and retail sales figures, US retail sales data, and US CPI readings. Weak US reports could reinforce the view that Fed tightening won't happen again anytime soon, which could be bearish for the dollar.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Long-Term Area of Interest (Dec 13, 2016)

USDJPY appears to be stalling from its recent rallies as price is approaching a long-term area of interest visible on the daily and weekly charts. Price previously broke below support at the 116.00 major psychological level, which might hold as resistance from here.

The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. However, the moving averages appear to be turning higher to indicate a potential upward crossover and a continuation of the climb.

Price is currently testing the 61.8% Fibonacci retracement level near the 115.00 handle and might be ready to turn lower and revisit the swing low at 99.00 from here. Stochastic is indicating overbought conditions and is starting to turn lower to suggest a pickup in bearish pressure.

Economic data from Japan has been slightly lower than expectations this week, with the tertiary industry activity index up by 0.2% versus the projected 0.3% gain while preliminary machine tool orders sank by 5.6%. The Tankan manufacturing and non-manufacturing readings are still up for release later on in the week, providing clues on whether or not the BOJ might need to make policy adjustments for the next week.

As for the dollar, the FOMC statement is the main event risk for the week. An interest rate hike of 0.25% is expected as the US economy is approaching full employment and has shown consistent improvements in growth and inflation. However, policymakers might caution that this would be their last tightening move in a long while and highlight the uncertainties stemming from the new US presidency.

US retail sales and PPI readings are also up for release ahead of the FOMC statement, but the dot plot projection of rate changes could steal the show for the day. Any indication that rate hikes are still possible within the next six months could keep the dollar supported.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Rising Wedge (Dec 14, 2016)

AUDUSD is slowly trending higher, moving inside a rising wedge pattern visible on its 1-hour and 4-hour charts. Price is testing the resistance and could be due for a move back to support at the .7475 level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 200 SMA lines up with the wedge support, adding to its strength as a floor. However, if a breakdown occurs, a longer-term downtrend could be in the cards.

Stochastic is heading south to show that sellers are in control of price action for now. However, the oscillator is already dipping into the oversold region to show that bearish pressure is about to fade and that buyers could regain control.

The main event risk for the day is the FOMC statement, as the Fed is expected to hike interest rates by 0.25% while making adjustments to their dot plot forecasts and economic projections. Fed Chairperson Yellen might give a few cautious remarks to prevent any excessive risk rallies or profit-taking among bonds and equities.

Earlier in the day, Australia reported a 3.9% slump in Westpac consumer sentiment for December, following the earlier 1.1% drop. New motor vehicle sales were down 0.6% compared to the previous 2.4% slide, indicating that financial confidence is still shaky.

US retail sales and PPI figures are also up for release in today's US session. Headline consumer spending could be up 0.3% while core retail sales could show a 0.4% gain, both weaker than their previous readings. Meanwhile, headline PPI is slated to show a 0.1% uptick while core PPI could print a 0.2% gain.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Breakdown and Correction (Dec 15, 2016)

AUDUSD broke down from its wedge formation after the FOMC statement but signs of a correction are materializing. Applying the Fib tool on the breakdown move shows that the 50% level lines up with the broken wedge support at the .7450 minor psychological level.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance might still be to the upside. These moving averages are close to the 61.8% Fibonacci retracement level, which could be the line in the sand for any retracement.

Stochastic is moving up from the oversold zone to suggest a return in buying pressure. This could keep the correction going or draw more buyers to the mix so that the longer-term uptrend resumes. If sellers return, AUDUSD could head back to its previous lows at .7380 or lower.

The FOMC hiked interest rates by 0.25% as expected to a range of 0.50-0.75% and signaled room for three interest rate hikes next year. This reflects a more hawkish stance compared to their September forecast of two interest rate hikes in 2017. Also, Fed officials upgraded their growth and jobs forecasts for next year while maintaining inflation estimates.

According to Fed head Yellen, the US economy is growing at a moderate pace and further improvements are expected in the labor market. Market-based measures of inflation are also higher since the start of the year. She mentioned that the incoming Trump administration's fiscal plans have been incorporated in their economic forecasts but that they can't speculate how these policy changes might affect their outlook and bias.

As for Australia, economic reports have been mixed. Hiring rose by 39.1K versus the projected 17.6K figure but the unemployment rate rose from 5.6% to 5.7% in the same month. MI inflation expectations improved from 3.2% to 3.4% but Westpac consumer sentiment reflected a sharp 3.9% slide for December.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Short-Term Uptrend (Dec 16, 2016)

GBPJPY is still trending higher, moving above a rising trend line on its 1-hour chart and getting ready for another test of support. The trend line coincides with a former resistance at the 146.00 to 146.50 levels, which might hold as support from here.

The 100 SMA lines up with the rising trend line, adding to its strength as a floor. This is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside. The gap between the moving averages is widening so bullish momentum is getting stronger.

Stochastic is indicating oversold conditions, which means that sellers need to take a break and let buyers take over. GBPJPY could move up to the previous highs around the 148.50 minor psychological resistance or higher.

The BOE was less upbeat than expected in their latest policy meeting, citing that price pressures and growth could be subdued in the coming year. They had a unanimous vote to keep interest rates and asset purchases unchanged but warned that adjustments could go either way depending on Brexit risks.

Still, economic data from the UK has been mostly stronger than expected this week. Headline and core CPI came in better than expected and printed faster gains in price levels while the claimant count showed a smaller increase in joblessness. The average earnings index advanced from 2.4% to 2.5% to reflect stronger wage growth while retail sales came in line with expectations of a 0.2% uptick.

As for the yen, the Fed's decision to hike rates and indicate room for three more increases next year could push the currency on another leg lower. The BOJ is scheduled to announce its monetary policy statement early next week and could give more details on their yield-targeting measures.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Setup (Dec 19, 2016)

EURAUD made another bounce off its support at the 1.4125-1.4150 area late last week and looks ready for a test of resistance at the 1.4500 major psychological mark. If this holds as a ceiling, the pair could head back to the bottom of the range once more.

The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside or that the top of the range is more likely to keep gains in check than break. Stochastic is heading lower, also suggesting that sellers are regaining control of price action.

Note, however, that the gap between the moving averages is narrowing so an upward crossover might take place. If this goes on, buyers could gain more traction and push for a break above the range resistance.

Just the other week, the ECB decided to extend its QE program end-date to December 2017 even though they reduced the amount of monthly asset purchases for that extension period. This was viewed as an overall dovish move that would keep a lid on the euro's gains.

However, the RBA could be mulling some additional easing itself since data from the Land Down Under has been disappointing lately. For one, the GDP report for Q3 printed a surprise contraction in growth. On the other hand, jobs data and underlying components of the trade balance indicated improvements.

Also, data from China has been mostly in line with expectations so demand for Australia's raw material exports could be sustained. With that, the euro is still on weaker footing compared to the Aussie so the range could continue to hold.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Ascending Trend Line (Dec 20, 2016)

USDJPY is still trending higher, moving above an ascending trend line on its 1-hour time frame and gearing up for a test of support. Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level lines up with the trend line and 116.00 level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA lines up with the 50% Fib and appears to be holding as dynamic support while the 200 SMA is closer to the trend line and 61.8% Fib level.

Stochastic is heading north so USDJPY could follow suit, possibly making its way up to the swing high at 118.65 from here or all the way up to the 120.00 major psychological resistance.

The BOJ monetary policy statement is coming up and traders are expecting no changes in their quantitative easing program. Back in September, the BOJ already announced its decision to shift from aiming for 2% inflation to targeting the yield curve so any details on how they plan to achieve this could weigh on the yen.

Meanwhile, the FOMC just hiked interest rates by 0.25% and projected three more increases for next year, keeping fundamentals in favor of the US dollar. Data from the US was weaker than expected yesterday, as the flash services PMI posted a surprise decline, but Fed Chairperson Yellen had a few more upbeat remarks on the labor market.

Remaining releases from the US economy this week are the new home sales and final GDP reading for Q3. Another batch of upbeat readings could lead to more gains for the dollar. No other reports are due from Japan for the next few days.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Descending Channel (Dec 21, 2016)

EURAUD has been trending lower on its 1-hour chart, moving inside a descending channel connecting the latest highs and lows. Price just bounced off the channel resistance at the 1.440 major psychological level and could head back to support near 1.4100.

However, the 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This suggests that another test of resistance could be in order or that the pair could push for an upside breakout.

Stochastic is indicating oversold conditions and is turning higher, also suggesting that buyers could take control of price action. A move past the channel resistance could lead to a climb to the next ceiling at the 1.4500-1.4550 area.

Investor confidence in the euro zone has taken a dip after the recent terror attacks in Germany, Turkey and Switzerland. Aside from that, Italy's banking sector troubles are still in the spotlight as the government might need to bail out its largest banks. To top it off, the ECB's decision to extend its QE program to December 2017 could further dampen the euro's gains.

As for the Australian dollar, tensions between China and the US have weighed on the commodity currency, even as the former already returned the latter's drone it seized from the South China Sea. Expectations of weaker commodity prices and business activity down the line, stemming from the Fed's tightening moves, are also dragging the higher-yielding currency down.

Data from Australia has been slightly weaker than expected, as the MI leading index printed a flat reading, down from the earlier 0.1% uptick. The RBA minutes expressed some concern about the currency's gains and its impact on local inflation and export growth.

By Kate Curtis from Trader's Way