Daily Technical Outlook

[katetrades]

AUDUSD Double Bottom (Sept 30, 2015)

AUDUSD might be done from its recent slide, as it formed a double bottom formation on the 1-hour chart and a larger one on the 4-hour time frame. Zooming in to the shorter-term time frame reveals that the pair has yet to break past the neckline around the .7040 level before confirming the potential uptrend.

The pattern is around a hundred pips in height so the resulting rally could be of the same size. If that happens, price could move closer to the neckline of the longer-term double bottom pattern at the .7200 major psychological resistance.

Stochastic is pointing up, which means that buying momentum is in play. RSI is also heading higher, suggesting that an upside break of the neckline is possible. However, the 100 SMA is still below the longer-term 200 SMA, which means that the longer-term selloff might carry on.

Event risks for this setup include the release of the final PMI readings from China, as weak readings could spur another risk-off mood and trigger a sharp selloff for the Australian dollar. The official government manufacturing PMI is expected to hold steady at 49.7 while the Caixin final manufacturing PMI could be upgraded from 47.0 to 47.2.

Earlier this week, the Aussie already suffered a sharp selloff when Asian equities weakened following news that the Chinese government and central bank are making more efforts to shore up their economy and equity market. While the US economy printed a few weak readings itself, upbeat remarks from FOMC officials confirming that a liftoff is set to take place before the end of the year still kept the dollar supported.

Later on, the US NFP is up for release, although this depends on whether or not the US government shuts down this week. Lawmakers are still arguing about funding concerns on the budget and the failure to reach an agreement could lead to a temporary shutdown. Nonetheless, the jobs report is expected to show a slightly stronger pace of hiring in September compared to August, which might fuel Fed rate hike expectations.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Range Setup (Oct 1, 2015)

EURAUD has just gotten rejected on its test of the range resistance at the 1.6200 major psychological level and is now headed towards support at the 1.5600-1.5650 area. This follows the formation of a double top pattern visible on the short-term time frames and a neckline breakdown, indicating that price could fall by an additional 400 pips from its current levels.

Traders hoping to catch the downside momentum could still hop in the ongoing selloff, which has around 200 pips to go until the near-term support. Stochastic and RSI are on the move down, confirming that bearish momentum is still in play. However, the 100 SMA is above the 200 SMA, suggesting that the uptrend might resume at some point.

Those bullish on this pair could wait for an actual test of support before going long and for the oscillators to indicate oversold conditions. A bounce off the range support could mean another move up to the resistance while a breakdown could spur more longer-term losses for the pair.

The euro zone flash CPI readings indicated that deflation has returned to the region, with the annual CPI for September showing a 0.1% decline in price levels versus the projected flat reading. The core CPI held steady at 0.9% as expected. Underlying components of the report show that energy prices were mostly responsible for the negative headline figure, which revived talks of further ECB easing.

Last month, ECB Governor Draghi admitted that inflation could turn negative in the coming months and that policymakers are open to expanding their stimulus program if deflation becomes a huge concern. However, some say that oil prices may have already bottomed out and that the CPI could return to positive territory before the next ECB statement in October 22.

As for the Aussie, the currency is currently drawing support from official PMI readings from China, which came in line with expectations. The government figures indicated small improvements while the Caixin reading was revised slightly higher from the initial estimate. Australian retail sales are up for release tomorrow and a 0.4% rebound is expected, possibly giving more support for AUD.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Descending Triangle (Oct 2, 2015)

GBPAUD formed lower highs and found support at the 2.1425 level, creating a descending triangle pattern on its 4-hour forex chart. Price is currently testing the triangle support, with a potential breakdown likely to indicate the start of a downtrend for the pair.

The chart pattern is around 700 pips in height so a resulting downtrend could be of the same size. The 100 SMA looks ready to make a crossover below the longer-term 200 SMA, adding confirmation that a breakout is possible.

However, both RSI and stochastic are on the move up, indicating that another bounce back to the triangle resistance might take place. If this continues to keep gains in check, price could retest the triangle support.

Earlier this week, data from China came in mostly in line with expectations, allowing the Aussie to bounce on a relief rally. The pound has been on weak footing, despite the lack of data from the UK, as traders are probably reacting to weaker expectations of a rate hike from the BOE.

UK manufacturing PMI came in line with expectations, dipping from 51.6 to 51.5 in September. The construction PMI is up for release today and a climb from 57.3 to 57.5 is eyed, reflecting a faster pace of expansion for the industry. However, traders might hold out for the release of the services PMI next week since this sector makes a larger contribution to overall economic activity.

Earlier today, Australia reported a 0.4% increase in retail sales as expected, enough to recover from the previous 0.1% decline. No other major reports are lined up from Australia for the rest of the week, although gold and commodity prices might still push the currency around. The upcoming NFP release from the US might have a strong impact on overall market sentiment, potentially leading to strong moves among higher-yielding currencies like the Aussie.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Rising Channel (Oct 5, 2015)

AUDUSD seems to have bottomed out from its recent long-term selloff, as the pair is starting to trade inside a rising channel on its 1-hour chart. Price recently broke above the double bottom neckline as well, setting its sights on the next potential resistance areas.

Price just got rejected on a test of the channel resistance at the .7100 area and is on its way to test the channel support at the .7000 major psychological mark, which could be enough to keep losses at bay. Stochastic is starting to move up, suggesting a potential return in buying pressure.

RSI is still pointing down, which means that there is still enough selling momentum left for an actual test of support. The 100 SMA is below the 200 SMA at the moment but the moving averages look ready to make an upward crossover to indicate a pickup in bullish momentum.

Last Friday, the US economy printed a dismal jobs report, enough to dash hopes for a Fed rate hike this year. The report showed a meager 142K increase in hiring versus the projected 201K gain while negative revisions to previous reports amounted to 59K. The jobless rate held steady at 5.1% as expected but wage growth was absent.

Event risks for this trade this week include the RBA statement in tomorrow's Asian trading session and the release of the FOMC minutes towards the end of the week. No actual policy changes are expected from the RBA but dovish remarks could trigger more losses for the Australian dollar, as China and Australia are facing downbeat prospects.

Meanwhile, the FOMC minutes are expected to be a bit more optimistic when it comes to the timing of a liftoff since Fed officials haven't gotten wind of the dismal September NFP report back then. However, any remarks hinting that the rate hike might be pushed back to next year could spur losses for the dollar.

Other potential catalysts include the release of trade balance data from both the US and Australia, as these would reflect whether or not the respective economies are being negatively influenced by the downturn in China. The return of Chinese traders after their week-long holiday could also spur additional volatility mid-week.

By Kate Curtis from Trader's Way

 

[katetrades]

EURCHF Symmetrical Triangle (Oct 6, 2015)
EURCHF has been forming lower highs and higher lows, creating a symmetrical triangle pattern o its 1-hour chart.

Price has been consolidating tightly and moving closer to the end of the triangle, indicating that a breakout might take place soon.

The chart pattern is approximately 150 pips in height so the resulting breakout could be of the same size. A break above the resistance around the 1.0925 level might confirm that an uptrend is bound to take place while a move below the support at 1.0900 could mark the start of a downtrend.

The moving averages aren't providing directional clues since they are moving back and forth for the time being. Stochastic just made it out of the oversold zone, suggesting that the path of least resistance is to the upside. However, RSI is on middle ground and also not giving any strong directional hints.

Event risks for this setup include the release of the ECB minutes later on in the week, as this would indicate whether or not other policymakers also support the idea of further easing. Recall that Governor Mario Draghi admitted that they're willing to add to stimulus if inflationary pressures continue to weaken.

The flash CPI reading for September indicated deflation, reminding euro traders that easing is on the table. However, the SNB might also be keen on stepping up its intervention efforts if ECB is inclined to add stimulus.

Other event risks from the euro region are the release of the industrial production figures from France and Italy, as well as Germany's trade balance report due towards the end of the week. ECB Governor Draghi is set to give a testimony today, possibly dropping some hints on the central bank's current policy bias, and Germany will release data on factory orders. Only the CPI and unemployment rate are up for release from Switzerland this week.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCHF Channel Support (Oct 12, 2015)

USDCHF has been trending lower on its 1-hour chart, moving inside a descending channel and testing support. Price has formed a bearish flag right at the bottom of the channel around the .9600 major psychological support and might be due for a break lower.

In that case, the pair could be in for a steeper selloff, as this would also put it below the neckline of a double top formation on a longer-term time frame. The 100 SMA is below the longer-term 200 SMA, confirming that further losses are possible. Meanwhile, stochastic and RSI are on middle ground and barely offering strong directional clues.

A bounce from the near-term support could lead to another test of the channel resistance at the .9700 major psychological mark. This lines up with the moving averages, which have held as dynamic resistance levels recently.

US traders are off on a Columbus Day holiday today, which suggests lower liquidity among dollar pairs. There are no reports out of the US today, although the ones released recently suggest further dollar downside. The US NFP report for September printed weaker than expected results while the FOMC minutes confirmed that the Fed is waiting for more improvements before tightening.

The upcoming CPI releases this week could make or break the dollar's trends, as these would indicate whether or not significant progress has been made in terms of the pickup in price levels. Recall that policymakers specified that they'd like to be reasonably confident that the US economy is moving closer towards achieving its 2% target in the near-term before deciding to hike rates.

Other event risks include the release of US retail sales data, which could show if there is enough momentum in the economy. As for Switzerland, only the PPI and ZEW economic expectations figures are lined up for the week.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Symmetrical Triangle (Oct 14, 2015)


EURJPY has formed higher lows and lower highs, creating a symmetrical triangle pattern on its 4-hour chart. Price is testing the top of the triangle, still unsure whether to make a bounce or a break. A bullish pennant can be seen, hinting at the possibility of an upside breakout.

Stochastic and RSI are both on the move down, which suggests that bearish momentum is in play and that the top of the triangle might keep holding as resistance. In that case, the pair could move back to the triangle support at the 134.00 major psychological level.

In addition, the 100 SMA s currently below the long-run 200 SMA, suggesting that the path of least resistance is to the downside. However, the moving averages are also moving closer together, indicating that possibility of an upward crossover and a pickup in buying pressure.

Event risks for this setup include the release of euro zone final CPI readings on Friday, as this could confirm whether or not the region is in deflation. Recent reports from the euro zone have been mostly weak, particularly in Germany, suggesting that the recovery has lost its momentum.

Data from Japan has also been mostly disappointing yet the BOJ hasn't shown any indication of being willing to ramp up its stimulus efforts. The consumer confidence index released yesterday showed a drop from 41.7 to 40.6, lower than the projected 41.6 figure, while the preliminary machine tool orders indicated a sharp 19.1% tumble.

Japanese revised industrial production numbers and the tertiary industry activity figure are up for release on Friday, with another round of weak data likely to spur more yen weakness. However, a downward revision in the euro zone final inflation reports might keep euro bears in the lead.


By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Rising Wedge (Oct 15, 2015)

EURGBP has been moving steadily higher but is still inside a rising wedge consolidation pattern. Price just tested the resistance and made a bounce, indicating that a test of support near the .7400 major psychological level might take place soon.

The 100 SMA is still above the longer-term 200 SMA, which suggests that another bounce is possible. Stochastic is moving up from the oversold zone while RSI is also indicating a possible pickup in buying pressure.

However, a break below the wedge support could set off a longer-term downtrend, possibly lasting by around 500 pips or the same size as the chart pattern. If an upside break takes place, price could rally by the same amount as well.

Headline jobs data from the UK was weaker than expected yesterday but components of the employment report showed green shoots. The average earnings index fell short of the expected 3.1% increase but came up close at 3.0%, reflecting a strong pace of growth in real wages accounting for inflation.

As for the euro, analysts are still waiting to see the final CPI readings later this week, as the initial estimates have indicated deflation. Downgrades could mean more euro weakness, as this would revive talks of further easing from the ECB.

The UK CPI also came in negative for September, although traders are more focused on the upward pressures from rising wages. There are no major reports due from both the UK and euro zone today.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Retracement Play (Oct 19, 2015)

EURUSD is in a steady uptrend on its 1-hour time frame and is currently pulling back from the climb. Using the Fibonacci retracement tool on the latest swing high and low reveals that the pair is currently finding support at the 50% level, which is near the 200 SMA.


A bounce off this region could take EURUSD back up to the previous highs around 1.1485 or much higher. After all, the 100 SMA is still moving above the longer-term 200 SMA, suggesting that the uptrend could resume sooner or later. A larger pullback could last until the 61.8% Fibonacci retracement level, which is close to the former resistance at the 1.1300 major psychological level.


On the other hand, a break below the lowest Fib could signal that a downtrend is in order. Stochastic is pointing down, hinting that sellers are taking control, while RSI is on middle ground and barely offering any strong directional clues.


There are no major event risks for both the euro and the US dollar today, as the main catalyst might be the ECB interest rate statement later on in the week. The final inflation reports from the euro zone confirmed that the region has indeed suffered deflation in September, with the headline CPI showing a 0.1% decline in price levels. This might be enough for the ECB to reiterate its dovish bias, pushing EURUSD lower if traders anticipate further easing.


Data from the US came in mostly in line with expectations on Friday, with only the preliminary UoM consumer sentiment index beating expectations. Up ahead, speeches from Fed members Brainard, Dudley, Powell, and Yellen might contain hints on the FOMC's next moves, with emphasis on a liftoff this year still likely to keep the dollar supported.

On the other hand, acknowledgement from Fed head Yellen that they might need to delay their rate hike to next year could force the dollar to give up more of its recent gains. After all, jobs data and retail sales figures have been coming in below expectations recently.


By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Triangle Bounce (Oct 20, 2015)

EURJPY is still moving inside the symmetrical triangle pattern on its 4-hour chart, as price just bounced off the bottom once more. Another test of the triangle resistance near the 136.00 major psychological resistance might take place since stochastic is indicating a return in buying momentum.

In addition, the 100 SMA is above the 200 SMA, suggesting that the path of least resistance is to the upside. Stronger bullish pressure might even lead to an upside break of the triangle resistance and further gains for the pair. On the other hand, a return in selling pressure could spur a downside break of support and spur a long-term downtrend.

The chart pattern is approximately 700 pips tall so the resulting trend from a breakout in either direction could last by the same number of pips. RSI is on middle ground, barely offering any good directional clues at the moment.

The main event risk for this trade is the ECB statement on Thursday, although no actual monetary policy changes are expected for now. ECB Governor Draghi is likely to reiterate their willingness to increase stimulus, especially since the headline CPI for September indicated that deflation was present in the region. In that case, EURJPY could be in for a downside break and further losses.

On the other hand, if ECB head Draghi decides to downplay market expectations of increased QE, this pair might have a chance at a rally and possibly even an upside triangle breakout. Data from Japan hasn't been particularly upbeat as well, with forex market watchers also anticipating more easing from the BOJ at some point.

Risk sentiment might also play a role in this yen pair's price action, as recent data appears to have kept risk-taking in play. Should this market behavior carry on for the rest of the week, EURJPY could be facing more upside in the next few days.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Long-Term Triangle (Oct 21, 2015)

EURUSD has been trending higher on its short-term time frames but a look at the daily chart reveals that the pair is still consolidating inside an ascending triangle pattern. The resistance around the 1.1500 major psychological held on the latest test, possibly sending price back towards support near the 1.1200 major psychological level.

The 100 SMA is above the longer-term 200 SMA, indicating that a bounce is possible. If so, another test of the triangle resistance or perhaps an upside breakout might take place. Stochastic and RSI are both on the move down for now, which suggests that price could head back towards the bottom of the triangle.

If selling pressure is strong enough, a downside breakout might take place and put EURUSD on a downtrend of close to a thousand pips or the same height as the triangle pattern. On the other hand, a strong surge in buying momentum could lead to an upside break of the resistance and a long-term uptrend.

The biggest catalyst for this setup is the ECB interest rate decision this week, as traders are awaiting dovish remarks from the central bank. In their previous rate statement, Governor Draghi shared that they're open to increasing their stimulus program if inflationary pressures keep weakening. This was followed by a downbeat inflation report, as the headline CPI showed a 0.1% decline in price levels.

Any indication that the ECB is moving closer towards boosting its quantitative easing efforts could mean significant declines for the euro, especially since the region has suffered deflation in September. On the other hand, reassuring remarks from Draghi saying that the dip in price levels is just temporary could allow the shared currency to stay afloat.

As for the US dollar, speeches from the Fed officials have suggested that a liftoff is still possible before the end of the year. Fed head Yellen didn't provide any strong clues or changes in her monetary policy bias for the time being, even as data from the US have been somewhat subpar.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Range Resistance Ahead of ECB (Oct 22, 2015)

EURGBP is still trading around the top of its range on the 4-hour time frame, as traders are waiting for the upcoming ECB statement. Price has been testing the resistance at the .7400 major psychological level for quite some time and has indicated a bit of downside momentum on a break below a short-term consolidation pattern.

However, traders still seem to be hesitating to take the pair any lower ahead of a top-tier event. Stochastic is indicating oversold conditions, which means that an upside break might be possible. In that case, price could head up by at least 350 pips or roughly the same size as the range formation.

The 100 SMA is below the 200 SMA for now, suggesting that the path of least resistance is to the downside. If so, price could head back towards the range support at the .7050 minor psychological level.

The main catalyst for a move might be the ECB statement, although the central bank is still widely expected to keep monetary policy unchanged for the time being. In their previous announcement, Draghi said that they're keeping the door open for further easing should inflationary pressures keep weakening. The final CPI for the euro zone indicated a 0.1% drop in price levels, which meant that deflation is in play.

Furthermore, data from the top economies such as Germany suggests more downside in the region's economic data. Producer prices have also been on the decline, indicating increased downside pressure on overall inflation. With that, the ECB might give a dovish statement and additional easing hints, potentially leading to more euro losses.

Take note, though that, traders may have already priced in downbeat expectations for the event so any upside surprise might spur a relief rally.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Long-Term Selloff (Oct 23, 2015)

EURUSD had been trading inside an ascending triangle chart pattern since the start of the year, as price formed higher lows and found resistance near the 1.1500 major psychological level. However, the latest ECB statement triggered a sharp downside break of support, indicating that a long-term selloff is taking place.

The chart pattern is approximately 900-1000 pips in height so the resulting downtrend could last by the same number of pips, possibly taking EURUSD to the previous lows around 1.0500 or much lower. Stochastic and RSI are both pointing down, which means that there's more selling pressure left to push for more declines.

However, the 100 SMA is above the 200 SMA, suggesting that the path of least resistance is still to the upside. A bounce back inside the triangle might be possible in case the breakdown was a false one, but the triangle resistance is still likely to hold as a ceiling.

ECB Governor Draghi said that the central bank is considering adding to their quantitative easing program, depending on how upcoming data turns out. Analysts expect ECB policymakers to announce additional bond purchases and/or lower deposit rates much deeper into the negative territory. Draghi also noted that the euro's appreciation has posed downside risks to growth and inflation, hinting that he'd like to see more declines.

Meanwhile, the US Fed remains on track to hike interest rates soon, although some speculate that they'd wait until next year instead of acting this year as initially anticipated. Data from the US has failed to impress but there are still a few more reports lined up before the next Fed meeting takes place.

Event risks for the euro today include the release of euro zone PMI readings from the top economies, as more signs of a slowdown could push the euro much lower against the dollar. Only the low-tier flash manufacturing PMI is due from the US today.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Long-Term Triangle (Oct 26, 2015)

EURJPY made a break below its symmetrical triangle last week but is still stuck in consolidation. Price is now stalling around the bottom of the descending triangle on its daily time frame.

Support is located at the 133.50 minor psychological level, with a break below this area likely to push EURJPY lower by an additional 800 pips or so. On the other hand, a bounce off the triangle bottom could lead to a climb back to the resistance near 136.00.

Stochastic and RSI are both pointing down, which means that sellers have enough momentum to push for a downside triangle break and a stronger selloff. However, the 100 SMA is still above the 200 SMA so the path of least resistance is to the upside.

Event risks for this trade include the release of several economic reports from Japan later on in the week, along with the BOJ decision. Data from the Japanese economy has been mostly disappointing recently, prompting speculations of additional stimulus from the central bank.

However, the ECB just recently shared their dovish bias, with Governor Draghi reiterating that they are looking at a range of monetary policy tools to implement if necessary. Data from the euro zone has been disappointing as well, especially when it comes to inflation and industrial production.

Any decisive action from either central bank could be crucial in determining the long-term direction of this pair. Both the ECB and BOJ are dovish but it remains to be seen which one is keen to act. Meanwhile, the latest set of interest rate cuts from the Chinese central bank appears to be keeping risk appetite supported for the time being, keeping the yen's gains in check.

By Kate Curtis from Trader's Way

 

[TradersWay]

EURCHF Falling Trend Line (Oct 27, 2015)


EURCHF has been trading steadily lower on its 1-hour chart, as the recent highs of price action can be connected by a falling trend line. Price is currently testing the trend line resistance, which might still keep further gains in check.


If so, a move back towards the previous lows near the 1.0750 minor psychological support might be in order. Stronger selling pressure could spur a break below this lows onto the next potential floor around the 1.0600 levels.


On the other hand, an upside break past the trend line resistance around the 1.0850 mark could lead to an uptrend. The 100 SMA looks ready to cross above the longer-term 200 SMA but both RSI and stochastic are headed south, indicating that the downtrend is likely to carry on.


Event risks for this setup include the preliminary CPI releases from Germany and Spain later on this week. Deflation has been a huge concern in the euro zone, as declines in price levels in the top economies could mean downside pressure on the rest of the region. Analysts are expecting to see a 0.1% drop in Germany's preliminary CPI while Spain could show a 0.6% decline in price levels.


The KOF economic barometer is the only report scheduled for release from Switzerland this week, with analysts expecting to see a drop from 100.4 to 100.1. For now, the downbeat ECB statement might be enough to limit the euro's gains but any indication that the central bank might need to ease would also increase the odds of SNB intervention.

Recall that ECB Governor Draghi said that they are already looking into a range of policy measures that can be applied in case inflationary pressures continue to weaken. Earlier in the week, preliminary PMI readings from France and Germany have mostly surprised to the upside, keeping the shared currency supported for the time being.


By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Trend Retracement (Oct 28, 2015)

EURAUD has been trending lower on its 1-hour chart, moving below a falling trend line connecting the latest highs of price action. The pair just recently sold off upon hitting the trend line resistance then dipped to the 1.5150 minor psychological support before pulling back up.

Using the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the falling trend line and might hold as resistance. This also coincides with a broken short-term support level at 1.5550 that could act as an area of interest.

Stochastic and RSI are both heading up, which means that buyers are in control of price action for now and that the correction is still taking place. Once the technical indicators turn from the overbought zone, euro bears might take over and push price back down to the previous lows or much lower.

Earlier today, Australia printed a weaker than expected CPI reading of 0.5% for Q3 2015 versus the projected 0.7% figure. While the RBA seems to have shifted to a less dovish stance based on their latest policy meeting minutes, the downbeat inflation figures could lead them to revert to a downbeat bias.

However, the euro might be in for more downside since the ECB has already explicitly stated that they are looking into a range of policy tools in case further easing is warranted. A few data points from the region have surprised to the upside but those might not be enough to prevent the ECB from ramping up their stimulus in case the inflation estimates come in negative.

German import prices and their GfK consumer climate index are up for release today, although this might just have a minimal effect on the euro. Australian import prices due on Thursday and flash CPI readings from Germany and Spain also up for release then might have a larger directional impact.

By Kate Curtis from Trader's Way

 

[TradersWay]

GBPJPY Trend Setup (Oct 29, 2015)

GBPJPY has started to trend higher on the short-term time frames, with a rising channel just forming on the 4-hour and 1-hour charts. Price got rejected on its latest test of the resistance and may be ready to head back towards support.

For now, the mid-channel area of interest is keeping losses in check and might actually be able to send the pair back up to the top. Still, a larger pullback could last until the bottom of the channel at the 182.50 minor psychological support.

The 100 SMA is above the 200 SMA so the uptrend might continue but the short-term moving average appears ready to make a downward crossover to indicate a potential selloff. If so, a break below the channel might occur. Stochastic and RSI are both pointing down so bears are in control.

Event risks for this trade setup include the BOJ statement later on this week, as traders are anticipating dovish remarks or actual easing announcements from the central bank. Data from the UK has surprised to the downside since its GDP reading missed expectations, but the BOE remains on track to tighten monetary policy sometime next year.



In terms of economic releases, only medium-tier reports are lined up from the UK today. These are the net lending to individuals, mortgage approvals, and CBI realized sales data. Japan is set to print its household spending and CPI readings before the BOJ statement tomorrow.

By Kate Curtis from Trader's Way

 

[TradersWay]

EURJPY Retracement Play (Oct 30, 2015)


EURJPY recently broke below support at the 133.50 minor psychological mark then dipped to a low of 131.50 before pulling back up. Applying the Fibonacci retracement tool on the latest swing high and low reveals that the 38.2% level lines up with the broken support, which might hold as resistance.


If so, price could drop back to the previous lows or even make new ones until the 130.00 major psychological level. The 100 SMA is crossing below the 200 SMA to confirm that the downtrend is set to carry on.


However, both stochastic and RSI are on the move up, which suggests the possibility of a larger correction. In that case, EURJPY could still pull up to the 50%-61.8% Fib levels, which might be enough to keep gains in check. A break above the highest Fib at the 134.50 mark might signal the start of an uptrend.


Event risks for this trade setup include the BOJ interest rate statement, as several analysts are expecting the central bank to announce additional easing measures. Economic data from Japan has been mostly disappointing, particularly when it comes to industrial production and consumer spending. Inflationary pressures have also been very weak, putting the country farther away from reaching its 2% inflation target.


More easing from the BOJ could spur a huge yen selloff and trigger a break of the Fib levels. On the other hand, words of reassurance could keep the yen supported as traders reduce expectations of additional bond purchases.

The ECB has already expressed its dovish bias in their rate statement during the previous week, putting the euro on a path of least resistance to the downside. Yesterday's economic releases from the euro zone came in mixed, with Germany printing a better than expected preliminary CPI and showing a flat reading. Spain printed a 0.7% decline in price levels, worse than the projected 0.6% drop and keeping a lid on inflationary pressures in the region. German retail sales and euro zone CPI estimates are due today with another set of negative readings likely to spur more losses for the shared currency.


By Kate Curtis from Trader's Way

 

[katetrades]

NZDCAD Rising Channel (Nov 2, 2015)

NZDCAD has recently broken above a long-term double bottom formation, indicating that an uptrend is underway. Price is currently moving inside a rising channel on its 1-hour chart and is testing the support near the .8900 major psychological level.

A bounce off this area could spur a move until the top of the channel at the .9100-.9150 levels. Stochastic is pointing up, hinting that buyers are still in control of price action, while RSI is on middle ground and barely offering any strong directional clues at the moment.

A break below the channel support could mark the start of a downtrend, possibly taking price down to the next visible floor around the .8700 major psychological mark. Increased selling pressure could spur a move to the yearly lows at .8300.

Event risks for this trade setup include the quarterly jobs release from New Zealand, which is expected to show a 0.4% increase in hiring and a climb in the jobless rate from 5.9% to 6.0% for Q3.

Canada is also set to release its monthly employment report by the end of the week and might show another downbeat jobs figure. If so, NZDCAD might be able to keep up its rally for much longer.

Other potential risks include the RBA statement on Tuesday, with some analysts expecting to see an interest rate cut weigh on the Aussie and Kiwi. Inflationary pressures have weakened in Australia while the top banks have already adjusted mortgage rates to give the central bank room for potential easing.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Descending Triangle (Nov 3, 2015)

USDJPY has been forming lower highs and testing support at the 120.50 minor psychological level, creating a descending triangle pattern visible on the short-term time frames. Price is on its way up to test the resistance again and might make an attempt at breaking out.

The moving averages are crossing back and forth, indicating that the consolidation pattern might hold up. Stochastic is pointing up, suggesting that an upside breakout is possible, potentially taking USDJPY up by at least a hundred pips, while RSI is on the move higher as well.

On the other hand, a downside break below the 120.50 level could spur a 100-pip drop or an even stronger selloff until the next visible floor at the 118.50 level.

Event risks for this trade setup include the NFP release on Friday, although the leading jobs indicators could provide an indication of how the actual jobs data might turn out. The ISM manufacturing PMI released yesterday indicated a contraction in the employment component, suggesting a possible downside surprise.

Analysts are expecting to see a 179K increase in hiring for October, stronger than the previous 142K gain and enough to keep the unemployment rate steady at 5.1%. Average hourly earnings could show a 0.2% uptick after staying flat in the previous month, reflecting a stronger pace of wage growth and potential upside pressure on overall price levels.

As for Japan, economic data has been mostly disappointing but the BOJ hasn't wavered from its policy stance instead of sounding more dovish. Consumer spending reports have been weaker than expected but inflation readings have been closely in line with consensus. With that, the path of least resistance is to the upside, as an upbeat NFP reading could support Fed rate hike expectations for December.

By Kate Curtis from Trader's Way