Daily Technical Outlook

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
AUDNZD Descending Triangle (Dec 26, 2016)

AUDNZD formed lower highs and found support at the 1.0400 major psychological level, creating a descending triangle visible on its 1-hour chart. Price is on its way to test the bottom of the triangle and might be due for a bounce.

However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that a breakdown could happen and take the pair lower by around 300 pips or the same height as the chart formation. In addition, the moving averages line up with the triangle resistance, adding to its strength as a ceiling.

Stochastic is indicating oversold conditions, which means that sellers are already tired and could allow buyers to regain control of price action. A break higher could lead to a 300-pip rally as well.

There were no reports from both Australia and New Zealand last Friday but economic reports have been stronger for the latter earlier in the week. New Zealand printed a stronger than expected GDP reading of 1.1% for Q3 versus the projected 0.8% growth figure.

In addition, RBNZ head Wheeler recently confirmed that they have no plans of lowering rates further anytime soon. He also hinted that they're no longer as concerned about a strong Kiwi as they used to be.

audnzd510.jpg


On the other hand, the RBA minutes still noted that the appreciating AUD could complicate the transition going on in the economy. This suggests that the Australian central bank might continue to jawbone or even consider lowering interest rates in the future. Apart from that, the US-China tensions have been weighing on sentiment for the world's second largest economy and Australia's top trade partner.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
NZDJPY Major Correction (Dec 27, 2016)

NZDJPY broke past the long-term resistance at the 78.00 handle a couple of months back before staging a steady ascent to 83.50. Price seems to be struggling to keep up its climb from here so a pullback might be due.

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the broken range resistance, which might now hold as support. The 100 SMA just crossed above the longer-term 200 SMA to indicate that the path of least resistance is to the upside and that the uptrend could resume at some point.

Stochastic is still heading lower so price could follow suit. However, the oscillator is already dipping into the oversold area so sellers might need to take a break and let buyers take over. Once stochastic turns up from the oversold area, bullish pressure could be revived.

Economic data from Japan all came in weaker than expected, signaling that the BOJ might need to ramp up its stimulus efforts in order to boost growth and inflation. Household spending sank 1.5% on a year-over-year basis instead of posting the projected 0.2% uptick while the unemployment rate rose from 3.0% to 3.1%.

Deflation is still a concern in Japan, with the Tokyo national core CPI printing a 0.6% drop versus the projected 0.4% decline in price levels. National core CPI is down 0.4% versus the estimated 0.3% dip. The BOJ core CPI and Japanese housing starts data are lined up next.

161227_nzdjpy_1.jpg


In contrast, New Zealand recently printed a stronger than expected GDP figure of 1.1% versus the 0.8% consensus. However, tensions in the Asian region between China and Taiwan are currently dampening investor sentiment for commodities.

By Kate Curtis from Trader's Way
 
  • 👍
Reactions: stathis1977

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
USDCAD Countertrend Setup (Dec 28, 2016)

USDCAD is still moving inside an ascending channel on its daily time frame but is closing in on the resistance around the 1.3600 major psychological mark. If this area keeps gains in check, price could head back to the channel support.

Stochastic is already indicating overbought conditions, which suggests that bullish momentum is exhausted and that sellers could take over as buyers book profits. RSI is still heading up so there may be some potential gains left but the oscillator is nearing the overbought region as well.

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 channel support at the 1.3250-1.3300 level, adding to its strength as a floor.

Economic reports from the US came in stronger than expected as markets reopened yesterday. The CB consumer confidence index rose from an upgraded 109.4 reading to 113.7 versus the 108.9 consensus while the Richmond manufacturing index improved from 4 to 8, outpacing the estimate at 5.

161228_usdcad_1.jpg


Canadian banks were still closed for the holiday yesterday and there were no reports to boost the Loonie. There are still no reports due from Canada today while the US has its pending home sales report on tap. Meanwhile, crude oil price action could influence the positively-correlated Loonie for the time being, and a bit of risk aversion in the markets is weighing on the higher-yielding currency.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURCAD Retracement Setup (Dec 29, 2016)

EURCAD recently broke below the support around the 1.4350 minor psychological level and reached a low of 1.3800 before pulling back up. Applying the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken support, which might now hold as resistance.

The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. These moving averages are closer to the 50% Fib, which might also serve as a ceiling.

Stochastic is still on the move up to show that buyers are in control of price action for now. Once the oscillator reaches the overbought zone and turns lower, selling pressure could return and push EURCAD to the previous lows.

There have been no reports from both the euro zone and Canada recently, as price action seems to have taken its cue from the updates in the Italian banking crisis and crude oil movements. However, the Loonie seems to be shrugging off recent gains in the commodity as traders still have doubts that the OPEC deal would be effective.

Only low-tier reports are lined up from the euro zone today, and these are data on private loans, M3 money supply, and the Italian 10-year bond auction which might provide some insight on the country's finances.

161229_eurcad_1.jpg


There are no reports lined up from Canada today so Loonie traders could continue to take their cue from oil prices or risk sentiment. So far, it seems as though higher-yielding currencies have been on the back foot as traders prefer safe-havens.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURJPY Range Setup (Jan 02, 2017)

EURJPY has been trading sideways recently, finding support at the 121.70 area and resistance at 123.75. Price just bounced off the resistance and is on its way towards support or at least until the middle of the range where the moving averages are located.

The 100 SMA seems to be crossing above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This means that EURJPY could bounce off the mid-channel area of interest at 122.50 before heading back up to the resistance.

Stochastic is in the oversold area and is starting to turn higher, possibly indicating a return in bullish pressure. If buyers are strong enough, they could push for a break of the ceiling and a rally of around 200 pips or the same height as the range formation.

Final manufacturing PMI readings are due from the top euro zone economies today and strong improvements could lead to more gains for the shared currency. Not much gains are expected from Germany and France, but Spain and Italy could show increases.

Japanese banks are closed for the holiday so the thin liquidity could limit any moves from yen pairs. Then again, this low liquidity environment could be grounds for volatile action if there are strong catalysts.

170102_eurjpy_1.jpg


Japanese banks will still be closed tomorrow so this situation could persist until then, leaving yen pairs sensitive to market sentiment. Over the weekend, China reported a dip in their manufacturing and non-manufacturing PMIs so risk appetite could be weak.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
NZDUSD Channel Retracement (Jan 03, 2017)

NZDUSD has been trending lower on its 4-hour time frame, moving inside a descending channel connecting its latest highs and lows. Price is currently testing the channel support and could be due for a pullback to the resistance, which lines up with the .7100 major psychological level.

Applying the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the channel resistance. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. These moving averages, which might hold as dynamic resistance, are closer to the 38.2% Fib at the .7000 handle.

Stochastic is on the move up to show that buyers are taking control of price action. This confirms that a pullback from the recent selloff might be due until the oscillator reaches the overbought zone and turns lower.

US banks will reopen after the holiday today so another round of dollar rallies is expected. The US ISM manufacturing PMI is up for release and a climb from 53.2 to 53.7 is eyed, indicating a faster pace of industry expansion. More importantly, traders will look at the jobs component to have an idea of how Friday's NFP release might fare.

The NFP report is expected to show a 175K increase in hiring for December, slower than the earlier 178K gain. Still, this might be enough to assure market watchers that the Fed will be on track towards hiking interest rates a few more times this year. If not, the dollar could retreat against its counterparts unless the FOMC minutes due midweek give the currency a fresh boost.

nzdusd.jpg


New Zealand will hold its bi-weekly GDT auction and a rebound in dairy prices could mean renewed Kiwi strength. Earlier today, the Caixin manufacturing PMI printed a gain from 50.9 to 51.9 for China so this could keep risk-taking in play.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
GBPJPY Reversal Pattern (Jan 04, 2017)

GBPJPY has previously been on an uptrend but it looks like bulls are tired from the climb. A head and shoulders pattern can be seen forming on its 4-hour time frame, although the right shoulder is still being completed. Price seems to have found resistance at an area of interest around the 145.00 major psychological level and could be due to test the neckline at 142.50-143.00.

The 100 SMA is above the 200 SMA on this time frame, though, so the path of least resistance is still to the upside. However, the gap between the moving averages seems to be narrowing so a downward crossover could be due, possibly drawing sellers to the mix.

Stochastic is heading south so price could follow suit as sellers take control of price action while buyers are taking a break. Once the oscillator hits the oversold region, bulls could get back in the game and trigger a bounce off the neckline support. If that area breaks, price could fall by around 500 pips or the same height as the chart formation.

Economic data from Japan was slightly stronger than expected, as the final manufacturing PMI was upgraded from 51.9 to 52.4 instead of being unchanged as expected. Japanese banks are also set to reopen today so higher liquidity could come into play.

As for the UK, the manufacturing PMI also beat expectations by rising from 53.6 to 56.1, higher than the consensus at 53.3. This reflects a stronger pace of industry growth instead of the estimated slowdown.

gbpjpy.jpg


Up ahead, UK construction PMI is due and a dip from 52.8 to 52.6 is expected. A stronger than expected read could result to a few gains for the pound but traders are likely paying closer attention to the services PMI due on Thursday. The FOMC minutes out today could also have an impact on yen pairs' movement.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
GBPUSD Short-Term Reversal (Jan 05, 2017)

GBPUSD has been selling off recently but a reversal pattern has formed on its 1-hour time frame. Price failed in its last two attempts to break below the 1.2200 major psychological level, creating a double bottom with a neckline around 1.2380.

The 100 SMA just crossed above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This suggests that an upside breakout and rally might ensue, taking the pair up by around 200 pips or the same height as the chart formation.

However, stochastic is heading south from the overbought zone to suggest that sellers are taking control of price action. In that case, it's still possible for the neckline to keep gains in check and push for another test of the bottoms.

Economic data from the UK has been upbeat so far, with both manufacturing and construction PMI printing stronger than expected results. The services PMI is due today and analysts are expecting to see a fall from 55.2 to 54.8 to reflect a slower pace of industry expansion.

In the US, the FOMC meeting minutes revealed that policymakers were split in terms of pursuing a faster pace of rate hikes and gradually tightening monetary policy. Among the concerns on the table were Trump's fiscal policies, inflation trends, and the consistent improvements in the labor market.

gbpusd.jpg


Up ahead, the attention turns to the NFP report due on Friday, as traders will see a round of leading jobs indicators from the US today. The ADP non-farm employment change report is expected to post a 171K increase in hiring, down from the earlier 216K gain. Of particular interest will be the jobs component of the ISM non-manufacturing PMI as well.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURGBP Ascending Triangle (Jan 06, 2017)

EURGBP has formed higher lows on its 1-hour chart and is testing resistance at the .8575, creating an ascending triangle formation. Price is approaching the peak of the triangle so a breakout in either direction might be due soon, taking price by around 150-200 pips higher or lower, which is the same height as the chart pattern.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the moving averages still seem to be oscillating so range-bound action could stay in play.

Stochastic is turning higher to show that buyers are trying to regain control of price action. But if the oscillator reaches the overbought region and turns lower, sellers could take over and push for another test of support at .8450.

Economic data from the euro zone has been mostly stronger than expected this week, particularly when it comes to flash CPI readings for the region. Also, manufacturing and services PMI readings from its top economies have surpassed expectations and some were even revised higher.

UK reports have also come in better than consensus, which explains the current consolidation for the pair. Manufacturing, construction, and services PMI readings have printed surprise gains, reflecting the economy's resilience despite Brexit uncertainties.

eurgbp.jpg


German factory orders and retail sales data are lined up today and another batch of strong readings could mean more gains for the shared currency. There are no major reports lined up from the UK today so the pound might be sensitive to country-specific moves.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
USDCAD Channel Support (Jan 09, 2017)

USDCAD has been trending higher on its long-term time frames, moving inside an ascending channel that has held for the most part of 2016. Price is currently testing the channel support and could be due for a bounce as a spinning top candle has formed.

The next daily candle should serve as confirmation for this potential reversal, and the moving averages are hinting that the uptrend could carry on. The 100 SMA is above the longer-term 200 SMA and is in line with the channel support, adding to its strength as a floor.

Stochastic is heading south to suggest that there's a bit of selling pressure left but the oscillator is dipping into the oversold area to show that bearish momentum is exhausted. Once it crosses higher, bulls could get back in the game and allow the next candle to close past the previous candle high around 1.3270.

US NFP data came in below expectations last Friday, with the economy adding only 156K positions versus the projected 175K increase. On a less downbeat note, the previous reading was upgraded to show a 205K gain in hiring for November while average hourly earnings rose by 0.4% versus the 0.3% consensus. The unemployment rate rose to 4.7% as expected on higher labor force participation.

Canada printed a stronger than expected increase in hiring of 53.7K instead of the estimated 5.1K decline while its jobless rate rose to 6.9% as expected. The country's trade balance beat expectations with a surplus of 0.5B CAD versus the estimated deficit of 1.6B CAD.

usdcad.jpg


Only the labor market conditions index is lined up from the US economy today and an improvement could remind traders that the Fed is looking to hike rates thrice this year. Meanwhile, Canada has the BOC Business Outlook Survey due. The Loonie could take its cue from oil price movements as well.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURAUD Resistance Turned Support (Jan 10, 2017)

EURAUD recently broke past resistance at the 1.4400 major psychological level and zoomed up to the 1.4700 area. Price has since pulled back and is currently testing the broken resistance at the 50% Fibonacci retracement level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Price seems to be finding support at the 200 SMA dynamic inflection point as well. Also, a small double bottom formation can be seen with the neckline at 1.4450.

Stochastic is heading up from the oversold region to hint at a return in buying pressure. A break past 1.4450 could be enough to confirm the potential climb, likely taking price back up to the 1.4700 area and beyond. On the other hand, a break below the moving averages and lowest Fib at 1.4350 could lead to a drop back to the swing low at 1.4100.

Economic data from Australia turned out weaker than expected earlier today, with retail sales up by 0.2% versus the estimated 0.4% gain and the earlier 0.5% increase. Chinese CPI missed expectations and printed a 2.1% increase compared to the 2.2% consensus and the earlier 2.3% figure. PPI beat expectations at 5.5% versus 4.6%.

Data from the euro zone has been mostly better than expected so far, with yesterday's German trade balance and Sentix investor confidence figure coming in the green. Prior to this, euro zone flash headline and core CPI have also surpassed expectations. French industrial production data is due today.

euraud510.jpg


There are no other major reports lined up from both Australia and the euro zone for the latter half of the week, although Italy is still set to release its industrial production data. Headlines from China highlighting how monetary authorities are trying to rein in offshore investments could dampen confidence in the world's second largest economy and demand for Australia's commodities.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
GBPJPY Breakdown Pullback (Jan 11, 2017)

GBPJPY recently broke below a head and shoulders reversal formation, signaling that a long-term downtrend is in the cards. Price seems to be pulling up from its slide, though, and applying the Fib tool on the latest swing high and low shows that the 50% retracement level coincides with the broken neckline.

A descending trend line can be drawn to connect the latest highs of price action on the 1-hour time frame. The 100 SMA has crossed below the longer-term 200 SMA to suggest that the path of least resistance is to the downside, with the short-term moving average lining up with the 50% Fib as dynamic resistance.

Stochastic is still on the move up for now so buyers might be in control of price action and allow the pullback to materialize. Once the oscillator hits the overbought region and turns lower, sellers could get back in the game and push for a drop to the swing low at 140.00 or lower.

UK economic data has been mostly stronger than expected so far this week and last week. However, traders are paying closer attention to Brexit related headlines lately, especially since PM May mentioned that they might forego access to the single market in exchange for closing the UK's borders.

As for the yen, the Japanese currency is taking advantage of the slide in dollar demand that followed after the release of downbeat December NFP data. The weaker than expected jobs report led traders to doubt that the FOMC can be able to hike rates thrice this year, especially since the incoming Trump administration could come up with a lot of fiscal policy changes.

gbpjpy510.jpg


The BOJ has also upgraded its GDP outlook, convincing traders that they're not likely to ramp up their stimulus efforts anytime soon. Data from Japan has been mixed, though, and the next BOJ decision is set to take place by the end of the month.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURJPY Range Breakdown (Jan 12, 2017)

EURJPY had been trading between support at the 121.70 area and resistance at 123.75. Price seems to be breaking below support at the moment and could be gearing up for a longer-term selloff. Note that the range is approximately 200 pips in height so the resulting selloff could be of the same size.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the gap between the moving averages seems to be narrowing so a downward crossover may be imminent. If that happens, bearish pressure could pick up and spur stronger downside momentum.

Stochastic is heading up from the oversold region to suggest a return in buying pressure. This could still allow EURJPY to bounce back to the top of the range or just make a quick pullback to the broken range support.

Economic data from the euro zone has been mostly stronger than expected in the past few days, particularly when it comes to inflation estimates. However, risk aversion is weighing on the shared currency as Brexit headlines are dampening the outlook for the region.

As for the yen, the Japanese currency is taking advantage of the weakness in the dollar, spurred by downbeat December NFP data and the sharp selloff during Trump's press conference. Japan's leading indicators showed some signs of improvement and investors are mindful of the BOJ's upgraded GDP forecasts.

eurjpy510.jpg


French final CPI and euro zone industrial production numbers are up for release today and upbeat results could allow the shared currency to recover. ECB minutes are also due. On the other hand, downbeat data and more risk-off factors could allow the breakdown to materialize.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURAUD Range Support (Jan 13, 2017)

EURAUD continues to trade sideways, moving between support at the 1.4150 minor psychological level and resistance at the 1.4500 mark. Price is currently testing the bottom of the range and could be due for a bounce back to the top soon.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. Also, stochastic is indicating oversold conditions, which means that sellers are exhausted and might let buyers take over. However, if selling pressure persists, price could break below the rectangle and go for at least 350 pips in losses, which is the same height as the chart formation.

Commodity currencies have been on strong footing in the past few days, supported by improved sentiment for China. This could shore up demand for commodities, as well as their prices, which is positive for the Australian dollar.

In contrast, European currencies are being weighed down by Brexit concerns, as the idea of a "hard Brexit" or having the UK give up access to the single market could also have negative repercussions on the euro zone. Prime Minister Theresa May has a speech lined up today so this should clear up some of the issues on investors' minds.

euraud510.jpg


Earlier today, though, China reported a smaller than expected trade surplus for January. The reading came in at 275B CNY versus the estimated 345B CNY figure and the earlier 298B surplus. Components of the report indicated a sharper than expected fall in exports, suggesting a slowdown in production and demand for raw materials.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURUSD Ascending Channel (Jan 16, 2017)

EURUSD continues to tread higher, moving inside an ascending channel visible on its 1-hour time frame. Price is just testing the resistance and could be due for a pullback to support before heading further north.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. These moving averages are in line with the mid-channel area of interest, also acting as a potential floor in the event of a pullback.

Stochastic is on the move down to suggest that sellers are trying to take control of price action. This could allow EURUSD to retreat until the 1.0550 minor psychological level or at least until 1.0600 before making another test of the resistance around 1.0700.

Economic data from the euro zone came in better than expected last Friday, as the German WPI printed a 1.2% gain versus the projected 0.3% uptick. This was also stronger than the earlier 0.1% gain, indicating upside pressure on overall inflation.

Meanwhile, US data was mixed as core retail sales and PPI fell short of estimates while the headline figures surpassed expectations. Headline retail sales rose by 0.6% versus the estimated 0.5% gain while headline PPI was up 0.3% versus the projected 0.1% uptick. Preliminary UoM consumer sentiment dipped from 98.2 to 98.1 instead of improving to 98.6.

eurusd510.jpg


Euro zone trade balance is due today but traders might hold out for the ECB statement later on this week or UK PM May's Brexit speech. Any indication that a "hard Brexit" might be underway could also dampen demand for the shared currency. US banks are closed for Martin Luther King Day today.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURJPY Daily Selloff (Jan 17, 2017)

EURJPY has been trending lower on its daily time frame, moving inside a descending channel formation and currently testing the resistance. Applying the Fib tool on the latest swing high and low also shows that the channel resistance lines up with the 61.8% Fibonacci retracement level.

The channel resistance seems to be keeping gains in check for now and might send the pair back down to the channel support at 105.00 or to the previous lows at 109.00. However, the 100 SMA is closing in on the 200 SMA and is attempting to make an upward crossover, possibly drawing more buyers to the mix.

Stochastic is on the move down to indicate that sellers are in control of price action, but the oscillator is approaching the oversold zone so bears might need to take a break and let buyers take over. If so, an upside channel breakout and downtrend reversal could be possible.

The main event risk for the day is UK Prime Minister Theresa May's speech in which she is expected to detail the government's Brexit negotiation plan. In her previous testimonies, she mentioned that they are willing to give up access to the single market in exchange for autonomy when it comes to immigration and European Court of Justice rulings, something that could weigh heavily on UK trade and investment.

Still, May is expected to reassure the public that they will seek trade arrangements with other nations in order to keep the economy afloat. If her words manage to keep confidence supported, EURJPY might be able to push for more gains. On the other hand, fears about a slowdown in the entire region could mean more losses for the pair.

170117_eurjpy_01.jpg


Euro zone data has been mostly stronger than expected lately while Japan's figures have been mixed. Its tertiary industry index came in line with expectations of a 0.2% uptick while its preliminary machine tool orders indicated a 4.4% rebound over the earlier 5.6% decline.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
GBPUSD Reversal Signal? (Jan 18, 2017)

GBPUSD made a strong bounce after PM May's Brexit speech in the latest London trading session, allowing price to recover off the 1.2000 lows and create a reversal formation. A double bottom can be seen on the 4-hour chart with the neckline at 1.2700.

Price still has a long way to go before clearing the neckline and confirming the potential uptrend but if it is able to do so, the pair could head north by as much as 700 pips or the same height as the chart pattern. If the resistance holds, the pair could make another attempt at breaking below the 1.2000 mark.

The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. In addition, the gap between the moving averages is widening, which means that bearish pressure is getting stronger. Stochastic is indicating overbought conditions, which also support the idea of further losses for GBPUSD.

In her speech, UK Prime Minister May confirmed the possibility of a "hard Brexit" in which they could give up access to the single market in exchange for immigration controls and autonomy from the European Court of Justice. She did try to reassure market watchers that the government would pursue trade deals with other nations and stay in good terms with the EU. May also noted that Parliament will be allowed to vote on the Brexit deal before anything is made official.

As for the US, mixed Fed rhetoric and uncertainty ahead of Trump's inauguration dampened the dollar's gains. According to FOMC member Dudley, the Fed is in no rush to tighten since the economy isn't growing at a much faster pace than its sustainable long-term growth. He added that inflation isn't a problem and that dollar appreciation would keep a lid on price levels. The Empire State manufacturing index posted a sharper than expected drop from 9.0 to 6.5.

170118_gbpusd_01.jpg


UK CPI readings came in better than expected and jobs figures are up for release today. Another stronger than expected read could allow the pound to extend its climb while weak results could force it to turn back down. FOMC member Kashkari has a speech lined up today, along with Fed head Yellen.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
GBPJPY Downtrend Retracement (Jan 19, 2017)

GBPJPY has been trending lower since breaking below the head and shoulders neckline recently. Price has reached a low of 136.40 before pulling up and showing signs of a correction. Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the descending trend line connecting the latest highs of price action.

The 100 SMA has crossed below the longer-term 200 SMA to indicate that the selloff is likely to carry on. The 100 SMA lines up with the 61.8% Fibonacci retracement level, which might be the line in the sand for this downtrend.

Stochastic is pointing up but is already in the overbought region, which means that buyers are already exhausted and may let sellers take over. Once the oscillator turns lower, selling pressure could increase and push GBPJPY back down to the previous lows or lower.

Earlier in the week, UK Prime Minister Theresa May outlined her Brexit plans in her latest testimony, explaining that the UK could forego access to the single European market in exchange for immigration controls. She assured that the government would seek trade deals with other nations to ensure that trade activity remains supported.

However, these uncertainties seem to have been outweighed by stronger than expected data from the UK. Headline and core CPI posted strong gains and outpaced estimates while the claimant count change showed a surprise 10.1K reduction in joblessness. UK retail sales are still up for release on Friday.

170119_gbpjpy_01.jpg


In Japan, there have been no major reports recently so the yen may be reacting to country-specific events. Keep in mind, though, that the BOJ statement is coming up soon and that the central bank just upgraded their GDP forecasts. Apart from that, Trump's upcoming inauguration could impact US bond yields and yen demand.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
USDJPY Downtrend Channel (Jan 20, 2017)

USDJPY continues to trend lower on its 1-hour time frame, moving inside a descending channel connecting the latest highs and lows. Price is currently bouncing off the channel resistance at the 115.50 minor psychological level and could be due for a selloff to the support at 112.00 or at least until the swing low at 112.50.

The 61.8% Fib was in line with the channel resistance, which explains why it's currently holding as a ceiling. Also, the 200 SMA lined up with the Fib levels, adding to their strength as resistance. The 100 SMA is safely below this longer-term moving average and is increasing the gap so the path of least resistance is to the downside and bearish pressure is picking up.

Stochastic is heading south to indicate that sellers are in control of price action. However, once the oscillator reaches the oversold region and turns higher, bears could book profits and allow buyers to take over.

US economic data has been mostly stronger than expected, as initial jobless claims, Philly Fed index, and housing starts surpassed estimates. However, dollar traders remain wary of event risks stemming from Trump's inauguration so there might be some profit-taking off long dollar positions before the end of the week.

170120_usdjpy_01.jpg


There have been no major reports out of Japan recently but the currency seems to be taking advantage of the risk-off flows these days. Aside from that, bullish sentiment has been restored after the BOJ recently upgraded their GDP forecasts.

By Kate Curtis from Trader's Way
 

katetrades

Master Trader
Feb 11, 2013
2,554
8
84
Dominica
www.tradersway.com
EURUSD Long-Term Floor (Jan 23, 2017)

The 1.0400 handle seems to be holding as a long-term floor for EURUSD once more, as price bounced off this area and might now be headed back to the top of its range around 1.1500. This range has held since February last year and might continue to do so.

However, the 100 SMA is below the longer-term 200 SMA on the daily chart, signaling that the long-term path of least resistance is to the downside. In that case, a range breakdown is still possible and this could potentially send EURUSD lower by the same height as the rectangle formation of over a thousand pips.

Stochastic is still pointing up on the daily chart to show that buyers are in control of price action. However, the oscillator is already dipping into the overbought zone so profit-taking could happen and allow sellers to regain control.

US President Donald Trump's inauguration speech seems to have kept a lid on dollar gains as investors continue to be nervous about his fiscal policy plans and a potential trade war. After all, Trump's remarks could have repercussions on its trade ties with China, Mexico, Canada, and other big economies.

For the euro zone, the region's consumer confidence index is due today and no change in the -5 reading is eyed. ECB Governor Draghi has a speech lined up but he is expected to simply repeat his remarks during their monetary policy statement's presser, reiterating that the pickup in inflation was just mostly energy-based.

170123_eurusd_01.jpg


There are no major reports due from the US economy today as traders also brace themselves for the advanced GDP release later on in the week. Another potential catalyst for this pair is the UK High Court ruling, which could have an impact on how Brexit negotiations play out, both for the UK and the euro zone.

By Kate Curtis from Trader's Way