Daily Technical Outlook

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EUR/JPY Symmetrical Triangle Breakdown (May 12, 2014)

After months of consolidating inside a symmetrical triangle pattern on its 4-hour time frame, EUR/JPY finally picked a direction when the ECB hinted that it could ease in June. The pair fell below the triangle support and is indicating that further losses could be in the cards.

However, stochastic has already reached the oversold region, which means that the pair could be due for a quick bounce before heading lower. A retracement to the triangle support could take place before the downtrend resumes. The chart pattern is roughly 800 pips in height, which means that the resulting selloff could be of the same size.

Shorting at market or at the pullback to the broken triangle support are possible entry options. Having a wide stop is reasonable since this could be a long-term trade and the profit target is huge.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CHF Range Setup (May 13, 2014)

USD/CHF has made a strong rally after bouncing off support on its 4-hour range. The pair has been moving sideways between the .8750 minor psychological level and the resistance around .8925.

The rally could be cut short once the pair tests the top of the range with stochastic already deep in the overbought zone. A selloff from .8925 could last until the bottom of the range or until the middle at .8825 to .8850.

Shorting at .8925 with a tight 50-pip stop and a 175-pip target to the range support could yield a 3.5-to-1 return on risk. Adding another position at the middle of the range and trailing the stop could improve the reward ratio.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD Reversal Signals (May 14, 2014)

Ahead of today’s UK major economic events, GBP/USD has formed a head and shoulders pattern on its 1-hour time frame. The pair has also recently broken below an ascending trend line connecting the price lows then pulled up for a retest before heading back down.

For now, the pair is still stalling around the neckline of the chart formation, indicating indecision when it comes to establishing a new downtrend or resuming the climb. A break below the 1.6800 major psychological support could confirm the longer-term selloff. This could last by as much as 200 pips, which is the same height as the chart pattern.

Setting a sell stop below 1.6800 to catch the momentum in case the UK events turn out bearish for the pound and aiming for the 1.6600 level with a 100-pip stop could yield a 2:1 return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/JPY Rising Wedge Pattern (May 15, 2014)

NZD/JPY is currently finding resistance at the top of a rising wedge pattern visible on the pair’s daily time frame. A shorter-term head and shoulders pattern can be seen, with a breakdown from the neckline still pending.

A break below the consolidation pattern could lead to more losses for the pair, perhaps a selloff until the bottom of the wedge near the 84.50 minor psychological support. For now though, the 88.00 major psychological level is holding as a floor. Stochastic is still moving down, indicating that Kiwi bears are in control.

Shorting below 88.00 with a stop above the top of the wedge and a target of 84.50 could yield roughly a 2:1 return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

Head and Shoulders on AUD/CAD (May 16, 2014)

A reversal chart pattern can be seen on the 4-hour time frame of AUD/CAD, indicating that the pair’s climb may be cut short and may soon reverse. The heand and shoulders formation has a neckline around the 1.0150 minor psychological support, which the pair is testing at the moment.

Stochastic is moving up from the oversold area, indicating a potential bounce. However, a strong break below the neckline could mean a 200-pip selloff, which is the same height as the chart pattern.

Shorting below the 1.0150 handle and aiming for roughly 150 pips, which would be until parity, could yield a 3:1 return on risk with a 50-pip stop.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/JPY Long-Term Triangle Pattern (May 19, 2014)

USD/JPY has been consolidating tighter and tighter inside a descending triangle chart pattern on its daily time frame. This suggests that sellers are trying to push the pair lower but that buyers just won’t let up.

A break in either direction could last by as much as 400 pips, as the chart pattern spans from the peak around 105.00 to the support just above the 101.00 major psychological level.

The pair is just testing the bottom of the triangle and might be due for a quick bounce back to the top around the 102.50 minor psychological resistance. This pair could be in for more volatility or a clearer direction as the BOJ is set to make its monetary policy decision this week while the FOMC will release the minutes of its latest policy meeting.

Using a straddle setup for this swing trade idea might work, with a buy order above the 102.50 handle and a sell order below 101.00.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD Ready for Trend Line Break? (May 20, 2014)

AUD/USD has been on a steady uptrend, as seen on the 4-hour time frame, but it appears that the rally is slowing down. The pair has formed lower highs from April to May, indicating that sellers are becoming more aggressive.

The pair is still finding support at the .9300 major psychological level and the rising trend line. However, stochastic is indicating selling pressure and a breakdown might still be possible. After all, the recently announced budget cuts and downbeat RBA minutes might be a reason for the Aussie to sell off.

Shorting below .9300 with a stop above the .9400 mark and a target of new lows near .9000 could yield a 3:1 return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/AUD Double Bottom (May 21, 2014)

GBP/AUD’s downtrend might soon reverse, as the pair has formed a double bottom pattern on its 4-hour time frame. The pair has bounced off the 1.7850 minor psychological level a couple of times then found resistance at the pattern’s neckline around 1.8250.

An upside break from the neckline could lead to roughly 400 pips in gains, which is the same height as the chart pattern. This could take the pair up to the 1.8650 levels. On the other hand, if the neckline continues to hold as resistance, GBP/AUD might move back to the bottom of the range and form another low at 1.7850.

Stochastic is already in the overbought zone, hinting that buying pressure might wind down. A quick pullback might take place before buyers push the pair higher. Going long above the 1.8250 mark and setting a stop below 1.8150 could yield a 4:1 return on risk with a 400-pip target.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD Support at .8550 (May 22, 2014)

After that strong selloff in the past few trading days, NZD/USD is now finding support at the .8550 minor psychological level. This has acted as a floor for price drops in the past and might hold again.

Stochastic just moved out of the oversold region and is indicating buying momentum. This suggests that further gains could be in the cards for NZD/USD, at least until the next resistance area at .8650. Stronger rallies for the pair could take it up to the previous highs near the .8750 minor psychological level.

Going long at the current level until the .8650 to .8750 resistance zones could work for a countertrend or range play, with a tight 50-pip stop loss potentially yielding at least a 2:1 return on risk. Adjusting the stop to entry once price tests .8650 could protect profits and yield a risk-free trade. Switching to a short bias on a strong break of .8550 could be an opportunity to ride the longer-term downtrend.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/JPY Uptrend to Resume? (May 23, 2014)

AUD/JPY has been forming a rising channel on its daily time frame, indicating that the longer-term uptrend is still valid. The pair is even finding support at the middle of the channel and might be headed back for the top around the 97.00 levels.

Stochastic has made lower lows while price made higher lows recently, forming a bullish divergence. Reversal candlesticks can also be seen around the 94.00 major psychological support and area of interest.

Going long at 94.00 with a 150-pip stop and a target of 97.00 could yield a 2:1 return on risk. Take note that the middle of the channel is also the 50% retracement from the latest swing high and low, making it a solid support area in case the fundamental bias for the pair is still to the upside.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD: Bounce or Break? (May 26, 2014)

NZD/USD is currently testing a major support level, visible on the 4-hour forex time frame. Stochastic is already moving in the oversold area but has yet to cross higher and indicate a potential return of bullish momentum.

Over the weekend, New Zealand reported a weaker than expected trade balance reading and led the Kiwi to start the week on a weak note. Take note though that other economic reports from the country released earlier in the month showed signs of resilience in hiring and consumer spending.

If the support area holds, NZD/USD could make its way back to the middle of the range or the next resistance area near the .8650 minor psychological level. A downside break could be indicative of a longer-term selloff, perhaps until the .8000 major psychological support.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/JPY Retracement Setup (May 27, 2014)

AUD/JPY recently made a strong break below a support level and may be ready for a quick retracement before resuming its drop. The pair previously found support at the 94.50 minor psychological level and the break took it down to the 93.00 level.

A pullback to the 50% Fibonacci level, which is in line with the former support at 94.50, could put the pair back in selloff mode. Take note though that a spike higher earlier this week lasted past the 61.8% Fib, which might be a good area to set a stop loss.

Shorting at 94.50 with a stop at 95.50 and a target of 93.00 could yield a 1.5-to-1 return on risk. Stochastic is already in the overbought zone, indicating that a selloff might take place sooner or later.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD Shallow Bullish Divergence (May 28, 2014)

NZD/USD might be due for a bounce this week, as the US gears up to release a downward revision in its Q1 GDP reading. The figure was initially reported at 0.1% but analysts predict that the second version could show a downgrade to -0.6%, effectively showing an economic contraction for the period.

This could trigger a rally for NZD/USD back to the previous highs around the .8700 levels. Stochastic is showing a shallow bullish divergence, as the oscillator made higher lows while price made lower lows.

On the other hand, a break could lead to a sharper selloff if the GDP reading comes in strong. There are no reports due from New Zealand this week but data from the economy has been relatively strong.

Going long at the current levels and aiming for .8700 with a 50-pip stop could yield at least a 3:1 return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD Break and Retest (May 29, 2014)

GBP/USD has been finding support around the 1.6750 minor psychological level, which coincides with a longer-term rising trend line, for quite some time now. However, the pair just made a strong downside break, indicating that a deeper selloff could be the in the cards.

Before that happens though, GBP/USD might still make a short-term pullback to the broken support area. The Fibonacci retracement tool shows that this lines up with the 38.2% level. Stochastic is still climbing, which suggests that there is a bit of buying momentum left to trigger a retracement.

Shorting at the 1.6775 area with a stop above the 61.8% Fib and a target of new lows around 1.6600 could yield at least a 3:1 return on risk. Adjusting the stop to entry once price tests the previous lows at 1.6700 could be a good way to reduce risk.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/GBP Strong Downtrend – May 30, 2014

EUR/GBP is currently testing the falling trend line on the 4-hour time frame, suggesting that another sharp drop might take place sooner or later. In terms of economic data, the euro zone is definitely doing worse than the U.K. so it’s reasonable to take a bearish fundamental bias on this pair.

Stochastic is also heading lower, indicating that selling pressure is still strong. Further declines for the pair could push it down to the previous lows near .8075 or lower to .8000.

Shorting at market with a tight stop above the trend line and a target of .8000 could yield a decent return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD Testing Major Support (June 2, 2014)

EUR/USD is currently finding support at the bottom of the rising channel on the daily time frame while stochastic is indicating deeply oversold conditions. If the support area holds this week, EUR/USD might make its way to the middle of the channel or the nearby resistance at 1.3750.

On the other hand, a strong downside break might mean further losses for the pair. The ECB is scheduled to make its rate statement this week and possibly announce further easing measures in order to combat weak inflation and the rising euro. A downgrade in euro zone CPI forecasts might lead to pricing in for further ECB stimulus, which might lead to a downside break even before the actual statement is made.

Shorting on a break of 1.3600 and aiming for the 1.3000 levels if the CPI comes in weak could yield a high return on risk with a 150-pip stop. On the other hand, the potential for disappointment and profit-taking with no ECB easing could lead to a bounce up to the top of the channel.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CAD Short-term Range Play (June 3, 2014)

USD/CAD has been moving sideways for almost a month already, which is not at all surprising for this pair that usually ranges. The pair has found support near the 1.0830 level and resistance at 1.0920, creating a 90-pip range.

Price is ready to test the range resistance with stochastic indicating overbought conditions and heading lower. A bounce from the ceiling could lead to a move back down to the bottom for a 90-pip trade. Using a 30-pip stop right around the previous spike higher around May 21 could yield a 3:1 return on risk.

There are no major economic events due from both the US and Canada today, which suggests that there’s a good chance the pair could stay inside this range.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD Resistance Turned Support (June 4, 2014)

NZD/USD selloff might soon hit a floor, as the pair is approaching the .8400 major psychological support level. This is in line with a former resistance level and the 50% Fibonacci retracement.

Stochastic has been indicating oversold conditions for quite some time, suggesting that buyers are ready to jump in anytime soon. A rally from .8400 could last until the broken support area at .8550 or until the previous highs around .8750.

On the other hand, a break below the 50% Fib could still lead to a bounce off the 61.8% Fib. If this fails to hold as support, NZD/USD might make its way back down to the former lows around .8100.

Going long at .8400 with a stop below the 61.8% Fib and a target of .8550 could yield a 2:1 return on risk.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/CAD Break and Retest Play (June 5, 2014)

EUR/CAD might be in for a retest of the broken neckline and support at the 1.5000 major psychological level, with the ECB set to ease in today’s rate statement. Stochastic is already pointing down, which means that bears are in control at the moment.

The 38.2% Fibonacci retracement level already appears to be holding as resistance but the extra volatility in today’s economic event might still lead to at test of the falling trend line.

Shorting at the 1.5000 mark with a stop above the 61.8% Fibonacci retracement level and a target of new lows around the 1.4400 area could lead to a good return on risk for this trade.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CHF Channel Break and Retest? (June 9, 2014)

USD/CHF has been trading inside a rising channel for nearly a month before the ECB rate decision last week triggered a sharp break lower. Since then price has made a decent correction close to the bottom of the channel.

Stochastic is moving down from the overbought area, indicating that a selloff may be in the cards. This could be enough to push the pair to new lows, possibly until the .8800 major psychological support if the downtrend persists.

Shorting on a pullback to the .8950 broken channel support with a stop inside the channel and a target of .8850 could yield a 3:1 return on risk for a short-term trade.

By Kate Curtis from Trader's Way