Daily Technical Outlook

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AUDUSD Countertrend Play (Mar 19, 2018)

AUDUSD has been trending lower and moving inside a descending channel on its 1-hour time frame. Price bounced off the resistance and is setting its sights on the channel support around the .7650 minor psychological level.

The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. However, the gap has narrowed enough to show that a downward crossover is about to take place, drawing more sellers in.

Stochastic, on the other hand, is signaling weakening selling pressure as the oscillator has reached oversold areas and is turning back up. In that case, support might still hold and lead to a bounce back to the channel resistance.

There were no reports from Australia last Friday and none are due today so market sentiment could push the commodity currency around. Meanwhile, the dollar saw mostly stronger than expected industrial production and consumer sentiment data last week.

Fears of a trade war are still in play and have been positive for the safe-haven dollar while weighing on the higher-yielding Aussie. The FOMC statement is also coming up this week and traders could keep pricing in expectations for an interest rate hike.

By Kate Curtis from Trader's Way

 

[katetrades]

USDCAD Simple Retracement (Mar 20, 2018)

USDCAD is still trending higher, moving above an ascending trend line visible on its 4-hour time frame. Price is stalling around the 1.3100 handle and looks prime for a pullback to the uptrend line.

Using the Fib tool on the latest swing low and high shows that the 38.2% level lines up with the rising support zone around the 1.3000 major psychological mark. 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 resume than to reverse.

Stochastic is indicating overbought conditions and is turning lower to reflect a return in selling pressure. A larger correction could also find support at the 50% Fib, which is close to a former resistance area.

There were no reports out of the US economy on Monday as traders are pricing in expectations for the FOMC decision later this week. A 0.25% interest rate hike is widely expected and even more hawkish hints could lift the US currency.

Meanwhile, the Loonie appears to be taking its cue from NAFTA updates and trade war fears. Oil has been slightly higher but the positively-correlated currency has failed to follow suit. Canadian retail sales and CPI figures are due on Friday.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Short-Term Channel (Mar 21, 2018)

GBPUSD is trending higher on its 1-hour time frame and moving inside an ascending channel pattern. Price is just bouncing off the top and might be due for a dip to the bottom around the 1.3970 level.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, the uptrend is more likely to resume than to reverse. The 200 SMA lines up with the bottom of the channel to add to its strength as a floor in the event of a dip.

Stochastic is pulling up to show that buyers have the upper hand, which suggests that the mid-channel area of interest could be enough to keep gains in check. However, the oscillator is also nearing overbought levels to reflect exhaustion.

UK CPI came in weaker than expected, with the headline figure falling from 3.0% to 2.7% versus the estimated fall to 2.8%. The core reading also missed the mark as it fell from 2.7% to 2.4% versus the 2.5% consensus.

Jobs data is due from the UK today and the claimant count could show a 3.1K drop in joblessness. The average earnings index could rise from 2.5% to 2.6% to signal potentially stronger inflation and consumer spending.

As for the US, the FOMC statement could bring in dollar volatility. A rate hike of 0.25% is widely expected, so traders will be keeping close tabs on the updated economic forecasts and dot plot of rate change projections. It will also be Powell's first post-FOMC presser, so his views could set the tone for policy expectations in the months ahead.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Triangle Support (Mar 22, 2018)

USDJPY is still inside its triangle consolidation pattern and is testing support at the 105.60 level. A bounce from this area could lead to another test of resistance at 106.30 or a break higher.

However, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This suggests that support is likely to break or that resistance would probably hold. The 100 SMA dynamic resistance is also around the top of the triangle.

Stochastic is heading south, also indicating that bearish pressure is present, but the oscillator is nearing oversold conditions and might be ready to turn higher to draw buyers back in.

The Fed hiked interest rates by 0.25% as expected in their latest policy statement but dollar bulls seemed disappointed over the lack of changes in the dot plot. Although GDP forecasts for this year and the next were upgraded and a couple of CPI estimates also revised higher, policymakers are still projecting three hikes this year versus expectations of four.

Economic data from Japan has been weaker than expected today, though. The flash manufacturing PMI fell from 54.1 to 53.2 instead of improving to the estimated 54.3 figure.

Only medium-tier reports are due from the US next, namely the flash manufacturing and services PMIs. Not much change from the earlier reading is eyed, and disappointing reports could cast further doubts on Fed tightening plans.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPUSD Channel Breakout (Mar 23, 2018)

GBPUSD has been trending higher on its short-term time frames inside an ascending channel. Price has surged past the resistance to signal that a steeper climb is underway, but a pullback is currently taking place.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% level lines up with the top of the channel, which is now holding as support. A continuation of the climb could lead to a test of the swing high near the 1.4200 major psychological mark.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside or that the uptrend is more likely to continue than to reverse. Stochastic is also on the move up to confirm that buyers have the upper hand.

UK retail sales came in stronger than expected with a 0.8% gain versus the projected 0.4% increase. The BOE decision was in line with expectations of no changes to interest rates or asset purchases, but the MPC minutes turned out hawkish since a couple of members voted to hike.

However, Cable gains were limited as risk-off vibes spurred a rally for the safe-haven dollar. Trump signed a memorandum to impose higher tariffs on nearly $60 billion worth of Chinese goods from companies involved in U.S. intellectual property theft.

Chinese officials have responded to the announcement by reiterating that the country won't back down from a trade war if it happens. It also urged the U.S. government to rethink its protectionist stance, and further headlines on this issue could continue to impact market sentiment.

By Kate Curtis from Trader's Way

 

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EURAUD Head and Shoulders (Apr 11, 2018)

EURAUD could be due for a downtrend as a head and shoulders pattern has formed on its 4-hour chart. Price has yet to break below the neckline at 1.5900 to confirm the potential drop.

The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This means that the uptrend is more likely to resume than reverse. Also, stochastic is indicating oversold conditions and is pulling up to suggest that buyers could regain control.

Easing trade tensions between the US and China could revive demand for the Aussie as traders are no longer worried about falling commodities and risk-off flows. Data from Australia has been weaker than expected today, though, as the Westpac consumer sentiment index printed a 0.6% drop.

Then again, data from the euro zone hasn't been all that impressive as French and Italian industrial production both missed estimates. ECB head Draghi has a speech coming up today and cautious remarks could continue to weigh on the shared currency.

Later in the week, China will be releasing its trade balance and this would likely impact AUD action. Apart from that, any headlines related to trade talks could also prove positive for the Aussie.

By Kate Curtis from Trader's Way

 

[katetrades]

AUDUSD Descending Channel (Apr 12, 2018)

AUDUSD is trending lower on its 4-hour time frame and is currently on its way to the resistance. Applying the Fib retracement tool on the swing high and low shows that this lines up with the 50% correction level around .7800.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. In other words, the downtrend is more likely to continue than to reverse. Stochastic is also turning down from the overbought zone to indicate that sellers are ready to take control once more, possibly sending price back down to the swing low or the channel bottom.

Cooling tensions between the US and China when it comes to tariffs appears to have led to a relief rally for the Aussie, but fresh geopolitical risks on Syria are in play. This could once again revive demand for the safe-haven dollar, especially as the FOMC minutes were more hawkish than before.

Fed policymakers agreed that gradual rate hikes should be maintained as the economic outlook has improved in recent months and annual inflation could keep rising. However, CPI data hasn't been so impressive as the headline figure posted a 0.1% dip instead of staying flat.

By Kate Curtis from Trader's Way

 

[katetrades]

EURUSD Triangle Pattern (Apr 13, 2018)

EURUSD has formed lower highs and higher lows to create a symmetrical triangle on its 4-hour time frame. Price is approaching the peak of the formation so a breakout could be due soon. Note that the chart pattern spans 1.2150 to 1.2550 so the resulting breakout could lead to either a 400-pip rally or a 400-pip drop.

The moving averages have been oscillating so it's tough to tell which direction it could take at this point. Stochastic is on the move down, though, which suggests that sellers have the upper hand.

Dollar demand has ticked higher in recent sessions thanks to higher US bond yields. Easing geopolitical risks from Syria and China have also contributed to improved investor sentiment, but there has been talk of a potential US military strike on eight areas in Syria.

US preliminary UoM consumer sentiment and inflation expectations are lined up today and these could allow the Greenback to extend its climb if the numbers turn out stronger than expected. As for the euro, German final CPI and the regoin's trade balance are up for release.

By Kate Curtis from Trader's Way

 

[katetrades]

EURAUD Break and Retest (Apr 17, 2018)

EURAUD recently broke below its head and shoulders neckline to confirm that a downtrend is underway. Price is pulling up to this broken resistance for a retest, and holding as resistance could send the pair down to fresh lows.

The 100 SMA is still above the longer-term 200 SMA, though, to indicate that the path of least resistance is to the upside. This suggests that the longer-term uptrend could still resume from here. Stochastic is nearing overbought levels, however, so sellers could return as price finds resistance at this 61.8% Fibonacci retracement level.

Economic data from China came in mostly in line with estimates, with only the industrial production report falling short. The figure slid from 7.2% to 6.0% versus the estimated dip to 6.4% to signal potentially weaker demand for raw material commodities from Australia.

Meanwhile, the quarterly GDP still reflected a 6.8% growth figure as expected. Fixed asset investment fell from 7.9% to 7.5% versus the 7.7% forecast while retail sales jumped from 9.7% to 10.1% instead of holding steady.

There are no major reports from the euro zone but commentary from ECB officials has mostly been hawkish, which could keep the shared currency supported. A return in risk-off flows stemming from geopolitical tensions could also be negative for the Aussie.

By Kate Curtis from Trader's Way

 

[katetrades]

USDJPY Bearish Correction Play (Apr 18, 2018)

USDJPY previously broke below support around the 109.00 major psychological level and has dipped to a low of 105.25 before pulling up. Applying the Fibonacci retracement tool on the swing high and low on the daily time frame shows that the 50% Fib lines up with the broken support.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside or that the selloff is likely to resume. Stochastic is turning lower from the overbought zone to show that selling pressure is picking up.

The US dollar has been able to regain some ground recently thanks to strong medium-tier data and a pickup in bond yields on cooling geopolitical risks. FOMC members have also dropped some optimistic remarks on economic growth and inflation, as well as the labor market.

FOMC members Quarles and Dudley still have speeches lined up in today's US session that could further stoke tightening expectations. Japan has its national core CPI and tertiary industry activity index due before the end of the week, likely adding volatility to this pair as well.

By Kate Curtis from Trader's Way

 

[katetrades]

GBPJPY Channel Pullback (Apr 19, 2018)

GBPJPY continues to trend higher but has bounced off the top of its long-term ascending channel visible on the 4-hour time frame. Price could be gearing up for a pullback to support at the 151.50 minor psychological mark.

Applying the Fibonacci retracement tool on the latest swing low and high shows that the 38.2% level is closest to the channel support and might be enough to keep losses in check. The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside or that the rally could still resume.

In addition, the 100 SMA coincides with the 50% Fibonacci retracement level, adding to its strength as a potential floor in the event of a larger dip. The gap between the moving averages is widening to reflect stronger bullish momentum. Stochastic is moving down but is nearing oversold conditions to show that sellers are feeling exhausted.

UK CPI came in weaker than expected as the headline figure fell from 2.7% to 2.5% instead of holding steady while the core figure dipped from 2.4% to 2.3%. Prior to this, the jobs report came in mostly stronger than expected but traders focused on the miss in the average earnings index, which would dampen inflationary pressures.

There have been no major reports out of Japan but the yen has been weakening on account of improving risk appetite and dollar strength. US bond yields have been on the rise, reviving the appeal of the US currency as a safe-haven. Japan's national core CPI and tertiary activity index are due on Friday.

By Kate Curtis from Trader's Way