Daily Technical Outlook

[katetrades]

AUD/USD: Rate Cut Retracement (August 6, 2013)

The Reserve Bank of Australia cut interest rates by 0.25% during their monetary policy statement today and, judging from AUD/USD’s reaction, this was expected by most market participants.

However, a rate cut is still a rate cut. In comparison to the Fed which is looking to reduce stimulus soon, the RBA is still more dovish, which could mean that AUD/USD could continue to trend lower.

A short trade around the .9000 to .9050 former support area could be a good entry. Aiming for the recent lows or for new lows with a 50-pip stop would yield a high reward-to-risk ratio. Stochastic isn’t in the overbought region yet, which suggests the pair could pull up higher before resuming its drop.

By Kate Curtis from Trader's Way.

 

[katetrades]

USD/JPY: Support Turned Resistance (August 8, 2013)

USD/JPY just broke below a key support level, as dollar weakness continued to dominate price action in yesterday’s trading. After that strong drop though, USD/JPY might retrace for a bit before heading any lower.

The Fibonacci retracement levels on the recent swing high and low on the 1-hour time frame show that the 38.2% level lines up with the broken support at 97.70. Stochastic has already reached the oversold region and moved up, suggesting that dollar bears might need to catch their breath first.

A short trade at 97.70 with a stop above the 61.8% Fib and a target of the previous lows near 96.25 would yield a 1:1 reward to risk ratio.

By Kate Curtis from Trader's Way.

 

[katetrades]

EUR/USD: Short-Term Trend Setup (August 12, 2013)

EUR/USD is still in a strong uptrend on its 1-hour time frame, as seen from the rising trend line that connects the price’s lows. It appears that another test of the trend line could take place within the day, as the pair has retreated upon reaching resistance at 1.3400.

The 1.3300 major psychological level has acted as a resistance area in the past, which means that it could act as support from now on. It is also in line with the rising trend line.

Stochastic is in the oversold region, suggesting that a bounce is in the cards. A long order at 1.3300 with a 50-pip stop and a target at the previous high of 1.3400 would be a 2:1 trade.

By Kate Curtis from Trader's Way.

 

[katetrades]

GBP/USD: Trading the UK CPI Release (August 13, 2013)

The UK is scheduled to release its annual CPI reading today and possibly show bleaker inflation of 2.8% compared to the previous 2.9% reading. However, this is still way above the BOE’s 2% inflation target, which should remind traders that the central bank is still closely monitoring the annual CPI readings. Bear in mind that Carney specified that one of the potential considerations for reducing stimulus later on is if inflation is likely to stay above 2.5% for the next couple of years.

On the 1-hour time frame, GBP/USD looks ready to pull back to the former resistance area around 1.5400. This is in line with the 50% Fibonacci retracement level.

Stochastic is already in the oversold area, hinting that pound bears are tired. This suggests that a bounce could be in the cards, depending on how the CPI figures turn out.

A bounce from the 38.2% or 50% Fib areas could take the pair back up to its recent highs near 1.5600. A stop below the lowest Fib or below 1.5350 would yield a good reward-to-risk for this trade.

By Kate Curtis from Trader's Way.

 

[katetrades]

GBP/JPY: Middle of the Range (August 14, 2013)

The bottom of GBP/JPY’s 4-hour range held as support yesterday as the pair bounced off the 149.00 area and rallied to 152.00. Right now, GBP/JPY is stalling around the middle of the range, still undecided whether to go up or down.

The UK will release its claimant count change report in today’s London session and this could determine where the pair will trade today. Expectations are of a 14.3K drop in joblessness and a larger than expected decline could push GBP/JPY to the top of the range. On the other hand, an increase in unemployment or a lower than expected decline could trigger another test of the range support.

Stochastic is already in the overbought region, which suggests that a selloff could be in the cards. However, the oscillator hasn’t crossed down yet so there might still be room for some rally.

By Kate Curtis from Trader's Way.

 

[katetrades]

AUD/CAD: Long-Term Falling Channel (August 15, 2013)

AUD/CAD’s falling channel on its 4-hour time frame is still holding really well, as the pair is now making another test of the trend line with stochastic in the overbought region.

Sentiment for the Australian dollar remains weak, as the country printed weak jobs growth and a flat retail sales reading last week. Inflation expectations are also down, which suggests that the RBA might hold off any easing for now.

This is mostly a technical trade since sentiment for the Loonie is also on the bearish end. Shorting at market with a stop above .9600 and a target of .9100 would yield a good reward to risk for a swing trade.

By Kate Curtis from Trader's Way.

 

[katetrades]

GBP/USD: Rally to Continue? (August 20, 2013)

GBP/USD has made another new high recently, as it broke slightly above the bullish pennant or flag pattern on its 1-hour time frame. However, it appears that the upward pressure isn’t that strong yet and the pair still has a chance at pulling back to an area of interest before moving further north.

Using the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the 50% Fib level lines up with a resistance turned support level. In addition, it is also around the 1.5550 minor psychological level, which suggests that it’s a good support zone.

Take note though that stochastic is not yet in the oversold region, which means that the pair could still dip a little lower before resuming its climb. Going long at 1.5550 with a stop below the 1.5500 handle or the lowest Fib level would yield a 2:1 trade with a target around 1.5650 to 1.5700.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD: Range Still Intact (August 21, 2013)

NZD/USD is still moving sideways lately, as resistance at the top of the range or at the .8100 major psychological level still held this week. At the same time, stochastic is pointing down, hinting at a potential test of the bottom of the range around the .7700 handle.

Shorting at market, as the pair has already shown downward momentum, with a stop above the .8100 mark would yield a good reward-to-risk ratio if one aims for the bottom of the range, which is still roughly 300 pips away.

Take note though that there are plenty of event risks during this latter half of the trading week, with the FOMC minutes up for release and the Jackson Hole Symposium ready to take place. Traders could start positioning themselves ahead of these events so expect additional volatility before, during, and after these market catalysts.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/JPY: Moving Sideways (August 22, 2013)

GBP/JPY’s longer-term range is still holding for now, as the pair is having trouble breaking past resistance right below the 154.00 major psychological level. Stochastic has shown a bearish divergence, hinting at a move down south.

Shorting at market and aiming for the bottom of the range at the 149.00 area would still yield a decent reward-to-risk, as stochastic is still headed down. Setting a stop above the top of the range or above the 154.00 mark might be enough to weather the volatility of this pair.

However, it might be prudent to risk a smaller amount on this trade as fundamentals are currently in conflict with technical signals. Note that the UK economy has shown several impressive improvements recently and that the revised second quarter GDP is up for release while Japan is dealing with weak data and the possibility of lower spending due to higher tax rates.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CAD: Long-term Ascending Trend Line (August 23, 2013)

Despite the rise in oil prices, the Loonie is having trouble pushing past the rising trend line on its daily time frame. As you can see from the chart, the pair has made several tests of this established rising support zone and might continue to stay above this level.

However, continued downward pressure on oil supply and the corresponding upward pressure on oil prices is expected to build up in the coming days. After all, the tensions in Egypt and surrounding nations appear to be getting worse and could cause disruptions in the operations of oil-producing firms in the region.

If that’s the case, USD/CAD could finally breach the trend line and start a new downtrend. For now, it appears the pair has formed a complex head and shoulders pattern with a rising neckline currently around the 1.0300 handle.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD Uptrend Still Holding (August 27, 2013)

The ascending channel on EUR/USD’s 4-hour time frame is still pretty solid for now, as the pair just bounced off the bottom recently and is trading around the middle.

Judging by that bullish pennant pattern, it appears that EUR/USD is ready to make another test of the top of the rising channel. A strong candle break above the 1.3400 handle could mean that this pair is ready to test the 1.3500 area.

On the other hand, a break below the pennant pattern could mean a test of the bottom of the channel or possibly a break below. Stochastic is pointing down at the moment, suggesting that there is enough bearish momentum.

By Kate Curtis from Trader's Way

 

[katetrades]

Area of Interest on GBP/USD (August 28, 2013)

GBP/USD has sold off in the past few trading days, signaling that a longer-term downtrend is starting to unfold. Before that happens though, GBP/USD could still pull back to an area of interest seen on the 1-hour time frame.

This is located around the 38.2% Fib and 1.5600 major psychological level. Notice how price moved sideways around that area, as buyers and sellers couldn’t decide where to take the pair at that time. This time around, plenty of sell orders are likely to be waiting in that same area, which makes it a good resistance zone.

Stochastic is already in the overbought region, suggesting that pound bears are in control. In fact, a bearish divergence has formed from the previous high around August 21 to the recent high.

Shorting at 1.5600 with a 50-pip stop and a 100-pip target near the previous low at 1.5500 would be a 2:1 trade.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD Channel Breakdown (August 29, 2013)

EUR/USD’s uptrend seems to be exhausted already as the pair broke below the rising channel support on its 4-hour time frame. The strong red candle close below the 1.3300 major psychological level signifies a possible reversal, probably back to 1.3000.

Stochastic is pointing down, hinting that euro selling power is still very strong. The next midterm support seems to be located around the 1.3200 handle though so it might be prudent to adjust stop losses or lock in some profits then.

A stop above the 1.3300 handle and a wide profit target until the 1.3000 level could yield a good reward to risk ratio for a swing trade.

By Kate Curtis from Trader's Way

 

[katetrades]

Symmetrical Triangle on USD/JPY (August 30, 2013)

On longer-term time frames, it is evident that USD/JPY is still undecided which direction to take as it consolidated inside a symmetrical triangle. The pair has made lower highs and higher lows on the 4-hour chart, and is currently moving sideways around the 98.00 level.

With that, a strong break above 99.00 could signify that buyers are stronger and that the pair is headed in an uptrend. On the other hand, a break below the 97.00 handle could be a signal that a downtrend is in the cards.

Stochastic is in the overbought region, suggesting that a downward move might be a stronger possibility. Resistance at the top of the triangle is holding for now, suggesting that there’s a chance the pair could still move back to the bottom around 97.00.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Triangle Breakout (September 2, 2013)

USD/JPY has been consolidating inside a symmetrical triangle for the past few months, as seen on the 4-hour time frame. The pair just made an upside breakout earlier today, as Abe got the approval to increase corporate taxes.

This is weighing on the yen currently because higher taxes could mean less spending, which could weigh on overall economic growth.

The triangle is roughly a thousand pips in height but it would be reasonable to just aim for the recent highs until 103.00. Going long at market, now that price made a new monthly high, and setting a stop below 98.00 would yield a good reward to risk trade.

By Kate Curtis from Trader's Way

 

[katetrades]

USD/CHF Approaching .9400 Resistance (September 3, 2013)

Dollar strength is still dominating price action but the move might be overdone on USD/CHF pretty soon. The 4-hour time frame shows that a resistance level is just around the corner and close to the .9400 major psychological level.

The pair seems to be stalling its recent rally at the moment, hinting that dollar bulls are running out of steam. In fact, stochastic is already in the overbought region, which means that a selloff could take place soon.

If that happens, USD/CHF could fall back to the middle of the range around the .9300 level. A tight stop above .9400 would yield a good reward-to-risk ratio.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/JPY Double Bottom Breakout (September 4, 2013)

AUD/JPY is showing signs of a reversal from its recent downtrend as it made an upside breakout from the neckline of its double bottom pattern on the daily time frame.

The pair busted above the 90.50 handle in today’s Asian session as the Australian economy reported a stronger than expected GDP reading for the second quarter of the year. As for Japan, Abe’s proposed sales tax could undermine spending and growth, and might prompt further easing from the BOJ.

The pattern is roughly 400 pips in height, which suggests that the rally could last for around 400 pips as well. If that’s the case, AUD/JPY could reach the next resistance at 94.00. A stop of 150 to 200 pips would yield a 2:1 reward-to-risk on this trade.

By Kate Curtis from Trader's Way

 

[katetrades]

Has EUR/AUD Topped Out? (September 5, 2013)

A double top chart pattern has formed on EUR/AUD’s daily time frame and it appears the pair is revving up for a reversal from its recent climb. The neckline around the 1.4500 handle seems to be broken already and the selloff is underway.

Stochastic is also pointing down, hinting that sellers are in control at the moment. For now though, the pair is stalling at the former resistance level within the 1.4300 to 1.4400 zone.

The ECB rate decision is scheduled today and a downbeat statement could keep this pair selling off. Earlier today, Australia’s trade balance came in weaker than expected but it didn’t seem to derail the AUD’s rally. It appears that the improvement in Chinese PMI earlier this week is keeping the commodity currency afloat.

Shorting at market and aiming for 400 pips, which is the same as the chart pattern’s height, could yield a reward-to-risk ratio of 2:1 with a wide 200-pip stop.

By Kate Curtis from Trader's Way

 

[katetrades]

Trading the NFP with EUR/USD (September 6, 2013)

EUR/USD made new 4-month lows yesterday, as ECB head Draghi confirmed that policymakers discussed the idea of lower interest rates. Meanwhile, the US printed a strong ISM non-manufacturing PMI reading, which extended the Greenback’s rally.

Today’s release of the non-farm payrolls report could trigger another sharp selloff for this pair, as analysts are expecting to see a rise from 162K in July to 178K in August. A strong figure could confirm the possibility of the Fed’s Septaper, which would be very dollar positive.

A retracement play could be in the works if the pair starts pulling up to the 1.3150-60 levels, which have acted as support in the past. Shorting at this area with a stop above 1.3200 and a target of 1.3000 would yield at least 2:1.

A breakdown could also be possible if the pair simply keeps consolidating for the rest of today’s sessions before the NFP release.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/GBP Support at .8400 (September 9, 2013)

EUR/GBP has sold off strongly in the past few weeks, bringing it down from the .8750 area to the .8400 handle. The 4-hour chart reveals that there’s strong support in this region though.

At the same time, stochastic is in the oversold area, suggesting that euro bulls could push the pair back up. Fundamentals, on the other hand, favor the pound and suggest that further euro weakness could be seen. After all the ECB statement hinted at an easing bias while the UK economy has been showing strong improvements.

A bounce from .8400 could take the pair back to the top of the range or at least the middle, around .8550. A long order with a 50-pip stop and a wide target would yield a decent reward-to-risk ratio.

By Kate Curtis from Trader's Way