Daily Technical Outlook

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AUDNZD Channel Breakdown (Sep 25, 2017)

AUDNZD recently broke below the ascending channel support on its 4-hour time frame to signal that a reversal is underway. Before that happens though, price could still make a pullback to the broken support. However, the 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that there's a chance the uptrend might resume.

Applying the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 61.8% level around the 1.1000 major psychological level. Stochastic is pointing up to show that buyers are in control for now until the oscillator hits overbought levels and turns back down.

The New Zealand elections held over the weekend resulted to a victory for the National Party but not enough for them to take majority. This means that politics will be in limbo for a bit longer as the country waits for a coalition to be formed.

Another potential event risk for the Kiwi is the upcoming RBNZ decision. Even though no actual interest rate changes are expected, traders appear to be pricing in a less upbeat statement from the central bank since jobs growth recently disappointed. Kiwi strength could also be one of the issues pointed out and more jawboning could keep a cap on the currency's gains.

There are no major catalysts lined up for the Aussie, which indicates that it might simply act as a counter currency in the next few days or be more sensitive to price action of gold and iron ore. Market sentiment could also push these higher-yielding currencies around.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Countertrend and Correction Setups (Sep 26, 2017)

GBPUSD is still trending higher on its longer-term charts and is testing the top of its ascending channel visible on the daily time frame. This could mean an opportunity for a countertrend play back to the support at 1.3100 or a correction setup there.

The 61.8% Fibonacci retracement level lines up with the bottom of the channel and a former resistance level. It's also close to the 100 SMA dynamic support, which is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside.

However, stochastic is indicating overbought conditions and could be ready to head south anytime soon, which means GBPUSD might follow suit. If any of the Fib levels keep losses in check, price could head back up to the swing high at the 1.3650 minor psychological resistance again.

Risk aversion seems to be peeking back in the markets early this week as North Korea announced that the US has declared war on the hermit nation. This could mean more jitters in the days ahead and heightened tensions between the two nations that might limit risk-taking.

In the UK, Prime Minister May's Brexit speech failed to revive bullish sentiment for the economy and its negotiating stance. More updates on this issue are set to hit the headlines with meetings between the top officials scheduled in the next few days.

As for the dollar, the Fed's hawkish sentiment gave the currency strong support last week and it remains to be seen whether this could last or not, given the developments from North Korea. FOMC officials have several testimonies scheduled throughout so their policy stance could also push the Greenback around.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDJPY Triangle Pattern (Sep 28, 2017)

NZDJPY seems to be forming a triangle consolidation pattern visible on its daily time frame as it bounced off the 82.00 handle and is heading back to support around 79.00 to 79.50. Stochastic has turned lower from the overbought region to reflect a pickup in bearish pressure.

The 100 SMA has crossed above the longer-term 200 SMA to suggest that the path of least resistance is to the upside or that nearby support areas could hold. However, the moving averages are also oscillating to reflect a continuation of sideways price action.

As expected, the Reserve Bank of New Zealand kept interest rates unchanged at 1.75% and barely made any changes to their official announcement. While they acknowledged that the TWI has eased since their previous statement, they still emphasized that a lower Kiwi would be beneficial for tradeables inflation and balanced growth.

The central bank also acknowledged that growth has been in line with expectations for the June quarter, rebounding off the weak performance in previous quarters. Policymakers noted that inflation has also picked up then but could retreat again in the coming months.

As for the yen, the currency seems to be reacting to currency-specific factors and is also being dragged lower by dollar strength. The next batch of catalysts include the core CPI readings, household spending, retail sales, and preliminary industrial production numbers due on Friday's Asian session.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Support Turned Resistance (Sep 29, 2017)

EURUSD recently broke below support around the 1.1850 minor psychological level then dropped close to the 1.1700 mark. Price appears to be making a correction from here and applying the Fibonacci retracement tool shows that the 50% level lines up with the broken support.

The 100 SMA is still above the longer-term 200 SMA on the 4-hour time frame so the path of least resistance might still be to the upside. The 200 SMA dynamic inflection point is slightly above the area of interest, adding to its strength as a ceiling. The 100 SMA is slightly above the 61.8% Fib, which might be the line in the sand for a correction.

Stochastic is heading north so EURUSD could follow suit. Once the oscillator hits overbought levels and turns lower, selling pressure could return and bring the pair back down to the swing low or lower.

Euro zone economic data turned out weaker than expected yesterday, with the German GfK consumer climate index dipping from 10.9 to 10.8 instead of improving to the consensus at 11. Meanwhile, German preliminary CPI printed another meager 0.1% uptick.

As for the dollar, the focus on tax reform has allowed equities and the currency to regain a lot of ground. To top it off, renewed Fed December hike expectations are also keeping the currency supported, along with upgraded growth forecasts and the start of the balance sheet runoff next month.

However, Fed head Yellen sounded less hawkish in her latest speech, casting doubt on tightening expectations. Traders are likely to keep close tabs on next week's NFP report since Yellen admitted they may have overestimated the strength of the labor market and its impact on inflation.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Resistance Turned Support (Oct 02, 2017)

AUDUSD previously broke past the resistance around the .7750 minor psychological level then zoomed up to the .8100 area. From there, price retreated from the rally and is showing signs of a correction to the broken resistance.

Applying the Fibonacci retracement tool on the latest swing low and high on the daily time frame reveals that the 50% level lines up with the area of interest. This also lines up with the 100 SMA, which is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. The 200 SMA coincides with the 61.8% Fibonacci retracement level, which might be the last line of defense for the uptrend.

Stochastic is already indicating oversold conditions, so sellers are exhausted and ready to let buyers take over. If so, AUDUSD could resume its climb up to the swing high or higher. On the other hand, a move below the Fibs could pave the way for a drop to the swing low.

There are several event risks lined up for the Australian dollar this week, including the RBA interest rate statement and the release of the retail sales and trade balance figures. No actual policy changes are expected from the RBA but any shift in their bias could determine where the Aussie is headed in the longer run.

Meanwhile, the US has its NFP due on Friday and this could generate a lot of attention since Fed head Yellen previously talked about how the Fed might have overestimated the strength of the labor market. Analysts are expecting to see a mere 88K gain in hiring, which might still douse December hike expectations especially if underlying components reflect more weaknesses.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Long-Term Correction (Oct 03, 2017)

Cable has been selling off recently but could be due for a bounce as it tests the support zones visible on its long-term chart. Price is moving inside an ascending channel on its 1-hour time frame and is currently approaching the 50% Fibonacci retracement level at the mid-channel area of interest.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is likely to carry on. The 100 SMA lines up with the channel support at 1.3000, which is also near the 61.8% Fib level.

Stochastic is still heading south on this time frame, so there's enough bearish pressure left for a deeper correction. If any of the support areas keep losses in check, GBPUSD could climb back to the swing high near the 1.3650 minor psychological resistance.

UK economic data turned out weaker than expected as the manufacturing PMI slipped from 56.7 to 55.9, lower than the projected dip to 56.3. At the same time, Brexit-related issues remain and Prime Minister May's speeches seem to be doing very little to shore up confidence in the government's bargaining position.

As for the dollar, the strong ISM manufacturing PMI, which rose from 58.8 to 60.8 versus the consensus at 57.9, led to a boost in NFP expectations. The employment and prices components ticked higher, putting upside pressure on overall employment and inflation. The Markit version of the report saw an upgrade from the initial estimate at 53.0 to 53.1 as well.

Looking ahead, the UK services PMI could be the next big catalyst for the pound, although more headlines pertaining to Brexit could continue to limit its gains. The ISM non-manufacturing PMI and ADP non-farm employment figures could also push the dollar around ahead of the actual NFP release.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Major Correction (Oct 04, 2017)

EURUSD previously broke past the range resistance at the 1.1450 minor psychological level to indicate that bullish momentum has won over. Price stalled in its rally near the 1.2100 major psychological level and showed signs of a correction to the broken ceiling.

Applying the Fibonacci retracement tool on the latest swing high and low on the daily time frame shows that the 38.2% level lines up with the area of interest at which several buyers might be waiting. However, the 100 SMA is still below the longer-term 200 SMA on this chart so the path of least resistance is to the downside.

Stochastic is also just starting to turn down from the overbought zone to reflect a pickup in selling pressure. This could lead to a deeper pullback to the lower Fib levels, namely the 50% level at 1.1200 and the 61.8% level at 1.0500 near the 100 SMA dynamic support.

Euro zone economic reports have been mixed, with the latest flash CPI readings dampening hopes of ECB tapering this month. Leading indicators such as industry PMIs have printed upbeat results, though, while Spain's unemployment change figure released yesterday fell short.

Another factor weighing on the shared currency is the political uncertainty stemming from the Catalan elections. The push for independence could set a precedent for other cities seeking their own government and might put the stability of the union at risk.

As for the dollar, traders are keeping close tabs on leading indicators for employment as this could contain clues on how the official NFP report might turn out. Strong data could bolster Fed rate hike expectations for December and push the dollar higher, along with the increased focus on tax reform.

By Kate Curtis from Trader's Way

 

[katetrades]

EURGBP Area of Interest (Oct 05, 2017)

EURGBP is currently testing a former resistance level around the .8800 major psychological mark, which appears to be holding as support. This lines up with the 50% Fibonacci retracement level on the swing high and low on the daily time frame. Stochastic is also pointing up to reflect the presence of buying pressure.

The 100 SMA is above the longer-term 200 SMA on this chart so the path of least resistance is to the upside, which suggests that the uptrend is more likely to resume than to reverse. The gap between the moving averages is also widening to reflect strengthening bullish momentum that might take price up to the swing high around .9300.

Economic data from the UK didn't turn out so bad yesterday as the services PMI ticked up from 53.2 to 53.6, reflecting a stronger pace of industry expansion versus the consensus of no change. This is also in contrary with the results of other industry PMIs in the manufacturing and construction sectors. There are no major reports due from the UK economy today, so Brexit-related updates might push the pound around.

Meanwhile, data from the euro zone was mixed as final services PMI readings mostly came in line with expectations while Italy's reading surprised to the downside and Spain's figure was better than expected.

The ECB minutes are due next and traders are hopeful to get more clues on tapering plans. Draghi said that they have already started initial discussions and could reach a decision this month, probably agreeing to start tapering by December. However, any signs of strong dissent within the committee could douse expectations for the year.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Head and Shoulders (Oct 06, 2017)

NZDUSD could be in for more losses as price formed a head and shoulders pattern on its daily time frame. Price is also testing the neckline around the .7100 major psychological mark and a breakdown could send it lower by 450 pips or the same height as the chart formation.

However, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that there's still a chance for the long-term uptrend to resume. Stochastic is also dipping into the oversold region, which reflects exhaustion among sellers and a potential return in buying pressure.

Earlier this week, New Zealand's GDT auction yielded a 2.4% slump in dairy prices, erasing the gains chalked up in earlier weeks. The NZIER business confidence index has also taken a hit and fallen from 18 to 5 to reflect much lower optimism among firms.

On the other hand, the dollar has gained strong support from better than expected leading indicators for the NFP. The ISM manufacturing and non-manufacturing PMIs both beat expectations and showed gains in the employment component while the ADP report and Challenger job cuts also reflected positive hiring momentum.

The main catalyst for today is the NFP release, which is expected to show a gain of 88K versus the earlier 156K figure. A higher than expected read could boost December hike expectations, especially since the latest batch of Fed officials to give speeches sounded more upbeat. On the other hand, a huge miss could lead to losses for the dollar if traders think it's bad enough to keep the US central bank on hold for the rest of the year.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Steady Channel (Oct 09, 2017)

USDCAD continues to head north and is trading inside an ascending channel on its 1-hour time frame. This channel has held since the start of September and another test of support is underway.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% level lines up with support around the 1.2500 major psychological level. This lines up with the 100 SMA dynamic support and a former resistance level.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is more likely to continue than to reverse. The 200 SMA is also slightly below the channel support, adding an extra layer of defense to the downside. Stochastic is in the oversold region, which suggests that selling pressure is exhausted and that buyers could take over soon.

Jobs data from both the US and Canada turned out weaker than expected on Friday, with the former shedding 33K jobs and the latter gaining 10K versus the estimated 13.9K increase. However, the US dollar was able to benefit from a stronger than expected 0.5% increase in average earnings and expectations of a positive revision in the September figure later on.

Also in Canada, the Ivey PMI rose from 56.3 to 59.3 to reflect a faster pace of industry growth compared to the estimated drop to 56.0. US and Canadian banks are closed in observance of Columbus Day today so liquidity could be lower than usual.

There's not much in the way of top-tier data from Canada this week while the US has plenty of catalysts on deck. This includes the release of the FOMC minutes, retail sales, PPI, and CPI readings. The oil-related Loonie might simply take its cues from the commodity this week.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Range Resistance (Oct 10, 2017)

USDJPY has been trading sideways on its long-term charts, bouncing off support at the 108.50 minor psychological mark and heading towards the resistance around 114.00 to 114.50. Price is consolidating at the moment, though, and technical indicators are hinting that a selloff could be due.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the ceiling is more likely to hold than to break. Stochastic is also turning lower to indicate the presence of selling pressure that might be enough to take USDJPY back down to support.

US economic data turned out weaker than expected on Friday as the economy shed 33K jobs instead of gaining 88K as expected. However, the previous reading enjoyed an upgrade while average hourly earnings showed stronger than expected wage growth that could fuel inflation down the line.

There were no major reports out of the US economy yesterday as banks were closed in observance of Columbus Day. Japanese banks were also closed then, which explains the consolidation for the pair. Today, the Japanese current account balance is lined up and a smaller surplus of 1.98 trillion JPY is eyed from the previous 2.03 trillion JPY figure.

In the US, FOMC member Kashkari is set to give a speech but traders have already heard his dovish remarks in the past. The next major catalyst for the dollar might be Wednesday's FOMC minutes release or the CPI and retail sales reports due on Friday. Japan has core machinery orders, preliminary machine tool orders, and PPI data due throughout the week.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Support Turned Resistance (Oct 11, 2017)

GBPAUD previously broke through support at the 1.6950 minor psychological level then fell to a low of 1.6785 before making a correction. Applying the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the broken support is close to the 38.2% level.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to resume. The 200 SMA could also hold as a dynamic resistance level, but the gap between the moving averages is narrowing to signal a potential upward crossover. If this materializes, bullish pressure could kick in and trigger a climb past the Fib levels.

Stochastic is on the move down, though, which means that there's some bearish pressure in play. If any of the Fib levels keep gains in check, price could fall back to the swing low or lower.

Data from the UK has been mixed, with manufacturing production beating expectations and the goods trade balance showing a wider than expected deficit due to slower exports. The pound has also been more vulnerable to Brexit-related updates, especially since Prime Minister May appears to be losing support and unable to inspire confidence in the economy.

In Australia, the Westpac consumer sentiment reading improved from 2.5% to 3.6% to reflect stronger optimism. Data, however, wasn't so upbeat last week as retail sales posted a surprise 0.6% drop while trade balance components weren't promising either.

Looking ahead, there are no major reports lined up from the UK and Australia, although China still has its trade balance due. Earlier this week, the Caixin services PMI turned out to be a disappointment and this is keeping a lid on the Aussie's rallies. Another downbeat figure from its top trade partner could mean more Aussie weakness while an upbeat result could spur gains.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Support Turned Resistance (Oct 12, 2017)

AUDUSD recently fell through support at the .7800 level then dipped to .7750 before pulling back up. Applying the Fibonacci retracement tool on the latest swing high and low on the 4-hour time frame shows that the 23.6% level lines up with the broken support that might now hold as resistance.

A larger pullback could last until the 38.2% Fib close to the 100 SMA or the 50% Fib near the 200 SMA. The short-term moving average is below the longer-term moving average to signal that the path of least resistance is to the downside, which means that the selloff is likely to resume.

Stochastic is pointing up to signal that bullish pressure is in play but the oscillator is dipping into overbought territory to suggest rally exhaustion and a return in selling pressure. In that case, AUDUSD could fall back to the swing low or lower.

The FOMC minutes turned out less hawkish than expected as a good number of Fed officials still expressed concerns about another hike. In particular, many policymakers worried that the drop in inflation might not be transitory after all. Still, the committee concluded that a gradual pace of tightening would be appropriate as long as the economy stays at its current pace.

The next event risk for the dollar is the release of the CPI and retail sales reports on Friday. This should give market watchers a better idea of how inflation is actually faring, with a downbeat result likely to dampen December hike forecasts. The upcoming PPI release should have some clues on how the CPI figures might fare.

As for the Australian dollar, the lack of top-tier reports from Australia could keep it sensitive to market sentiment. Data from China hasn't been as impressive so expectations of weaker demand for Australia's products could stay in play.

By Kate Curtis from Trader's Way

 

[katetrades]

EURJPY Short-Term Correction Setup (Oct 13, 2017)

EURJPY previously broke past the resistance at the 132.50 to 133.00 levels then zoomed up to a high of 133.46. Price has since pulled back to the broken resistance and the Fib tool on the latest swing low and high on the 1-hour time frame shows that the 38.2% level lines up with the area of interest.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the rally is more likely to continue than to reverse. The 100 SMA is also close to the 50% Fib, which might also hold as support in a deeper pullback, while the 200 SMA is slightly above the 61.8% Fib at 132.50.

Stochastic is pulling up from oversold levels to indicate a return in bullish momentum that might take EURJPY up to the swing high or higher. However, a break below the Fibs or moving averages could force it down to the swing low near 132.00 or lower.

The euro got a bit of a boost from ECB official Coeure's warning on how prolonging the asset purchase program could pose risks to financial stability. However, the shared currency gave up some of those gains when Governor Draghi lauded the central bank's negative interest rates and QE efforts.

Economic reports from the euro zone turned out mixed as industrial production beat expectations with a 1.4% gain versus the estimated 0..6% increase while the French final CPI was downgraded to show a larger 0.2% downtick from the earlier 0.1% dip.

Data from Japan was also mixed as PPI came in line with expectations of a 0.1% gain while the tertiary industry activity index surprised to the downside with a 0.2% drop versus the estimated 0.1% uptick. There are no reports due from Japan today while the euro zone has the German final CPI lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

NZDUSD Neckline Retest (October 16, 2017)

NZDUSD previously broke below a head and shoulders reversal pattern neckline, indicating that a downtrend is in the cards. The chart pattern is approximately 350 pips tall so the resulting selloff could be of the same size.

However, price is still making a correction to this broken neckline to gather more bearish pressure. Applying the Fib tool on the latest swing high and low shows that this lines up with the 38.2% retracement level and the .7200 major psychological resistance.

The 100 SMA is still above the longer-term 200 SMA, though, so there may be some bullish pressure left. If so, price could still break past the area of interest and resume its uptrend. At the same time, stochastic is pulling up from the oversold region to signal that buyers are regaining the upper hand.

US data came in mostly weaker than expected on Friday, with downbeat CPI readings taking the spotlight and weighing on Fed rate hike expectations for December. Headline inflation came in at 0.5% versus 0.6% while the core reading stood at 0.1% versus 0.2%. Retail sales data turned out mixed, with the headline reading up 1.6% versus 1.7% and the core figure at 1.0% versus 0.9%.

Over the weekend, Yellen gave a testimony which contained upbeat remarks on heir assessment and outlook for the economy. There's not much in the way of top-tier reports from the US today since only the federal budget balance is lined up.

As for the Kiwi, New Zealand's CPI is due next and a 0.4% uptick in price levels is eyed for Q3 after the report printed a flat reading for Q2. Stronger than expected data could keep the currency bid while downbeat results could allow the selloff to resume.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Potential Reversal Formation (Oct 17, 2017)

EURUSD is in the process of forming a head and shoulders pattern on its daily time frame as it completes the right shoulder. The neckline is located at 1.1700 and a break below this support could send price down by around 400 pips or the same height as the reversal formation.

However, the 100 SMA is safely above the longer-term 200 SMA so the path of least resistance is still to the upside. In addition, the gap is widening to signal that bullish pressure is getting stronger. Stochastic is also on the move up so EURUSD might follow suit while bulls remain in control.

Germany reported a stronger than expected increase in WPI of 0.6% versus 0.4% while the region's trade balance also beat expectations with a 21.6 billion EUR surplus versus the consensus at 20.3 billion EUR.

While euro zone economic data has been mostly stronger than expected, the focus has mostly been on political uncertainties, particularly in Spain. The government has given Catalonia eight days to declare independence but Puigdemont has called for talks instead. Meanwhile, the elections in Austria also reflected growing dissatisfaction with the status quo.

As for the US dollar, the currency drew some support on rumors that Trump is also considering John Taylor for the Fed Chairmanship position. He is perceived to be a more hawkish candidate compared to the other contenders in the list, and traders are also looking forward to Trump's meeting with Yellen later this week.

Data from the US also turned out better than expected as the Empire State manufacturing index rose from 24.4 to 30.2. Industrial production data is up for release today and a 0.3% rebound is eyed. Data on import prices and capacity utilization are also lined up.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Reversal Pattern (Oct 18, 2017)

USDCAD previously broke below its ascending channel formation then pulled up for a retest, creating a head and shoulders pattern visible on the 4-hour time frame. Price has yet to complete the right shoulder and test the neckline around the 1.2450 minor psychological level.

A break below this support could lead to a drop of around 150 pips or the same height as the chart pattern. Stochastic is turning lower to signal the presence of bearish momentum, but the 100 SMA is above the longer-term 200 SMA so the path of least resistance might still be to the upside.

Price is also moving close to testing the 100 SMA dynamic support that might keep losses in check. If so, USDCAD could bounce back up to the 1.2600 area and beyond.

The US dollar has gained some support from strong medium-tier reports and rumors that Trump is leaning towards appointing a more hawkish Fed head than previously expected. December rate hike expectations remain in play but market watchers seem to be turning their attention to the odds of more tightening moves next year.

As for the Canadian dollar, the slow progress in NAFTA renegotiations has actually been positive since this might delay scrapping any trade agreements. Mexico and Canada have rejected the latest batch of proposals from the Trump administration and another round of talks is scheduled for next month.

Up ahead, US building permits and housing starts figures are due, but the bigger movers might be speeches from FOMC members Dudley and Kaplan. Canada has its manufacturing sales figure due and analysts are expecting to see a smaller 0.1% dip this time.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Triangle Break and Retest (Oct 19, 2017)

EURAUD recently broke out of its symmetrical triangle formation on the daily time frame to indicate that bullish momentum is getting stronger. Price reached a high of 1.5246 before turning back down for a retest of the broken triangle resistance.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 61.8% level lines up with the broken triangle resistance that might hold as support. The 100 SMA is also close to these Fib levels, acting as an extra layer of defense, and is above the longer-term 200 SMA to signal that the climb is more likely to resume than to reverse.

The gap between the moving averages is getting wider to indicate strengthening bullish momentum. However, stochastic still has room to fall so there may still be some bearish pressure left for a larger correction.

Economic reports from China came in mostly in line with expectations, which appears to have been bullish for the Aussie. Industrial production and retail sales came in slightly better than expected, signaling stronger demand for Australian commodity products.

Meanwhile, the political uncertainties in Europe continue to weigh on the shared currency. Catalonia has said that it will declare independence if Spain takes away its autonomy, but it is not clear how this situation might play out. Meanwhile, the polls in Austria also signal a leaning towards the far-right political leadership.

There hasn't been much in the way of top-tier data from the euro zone yesterday and today so the shared currency could continue to be driven by market sentiment and political developments. As for Australia, its freshly released jobs report printed stronger than expected results of 19.8K in employment gains and a drop in the unemployment rate from 5.6% to 5.5%.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPAUD Broken Triangle Pullback (Oct 20, 2017)

GBPAUD recently dropped below the descending triangle support at 1.6800, signaling that further losses are in the cards. Price bounced off the 1.6700 area and might be due for a correction to the broken support.

Applying the Fibonacci retracement tool on the latest swing high and low shows that the 38.2% level coincides with the broken support, which might hold as resistance moving forward. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to continue.

Stochastic is still pulling up from the oversold region to indicate a return in buying pressure or that the correction could carry on until the oscillator hits overbought levels and turns back down. Price could pull up to the higher Fibs as well, with the longer-term 200 SMA dynamic inflection point serving as the line in the sand for the downtrend.

The pound was weighed down by weaker than expected retail sales data, which indicated that consumer spending fell by 0.8% versus the projected 0.1% dip. Brexit updates also pushed the currency around as German Chancellor Merkel said that there wasn't enough progress made for talks to proceed to the next round of negotiations.

As for the Australian dollar, data from China came in mostly in line with expectations, with retail sales and industrial production reflecting gains. Australia's jobs figures also beat expectations, adding fuel to the Aussie's ascent.

Only the public sector net borrowing report is due from the UK today and there are no reports due from Australia or China. This means that Brexit updates, particularly those coming from the EU summit in Brussels, could continue to drive pound price action while overall market sentiment could drive AUD direction.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Descending Triangle Breakout (October 23 2017)

Yen bears came out in full force after the elections in Japan over the weekend, causing USD/JPY to break past the descending triangle resistance. This chart pattern is approximately a thousand pips tall so the resulting uptrend could last by the same amount.

However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance might still be to the downside. These moving averages are still oscillating to indicate consolidation, so these have yet to catch up to the latest upside break. Stochastic has room to climb, which means that there is some buying pressure left in play.

Elections in Japan yielded strong support for Japanese PM Abe and his political party, giving him scope to implement another tax hike in 2019 and push for constitutional reform. This could also mean more support for the BOJ's ultra easy monetary policy, which is bearish for the yen.

Data from the US economy turned out better than expected on Friday as existing home sales rose from 5.35 million to 5.39 million instead of falling to 5.30 million. The federal budget balance also showed a surplus of 8.0 billion USD instead of the estimated 0.9 billion USD deficit and was a huge improvement over the earlier 107.7 billion USD shortfall.

Up ahead, the reaction to the Japanese elections could go on for a while as there are no major reports lined up from the Japanese economy. There are also no reports due from the US economy today so market sentiment and speculation over Trump's next Fed Chairperson pick could push this pair around.

By Kate Curtis from Trader's Way