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Daily Technical Analysis by Kate Curtis from Trader's Way

Forex Analysis by Kate Curtis of Trader's Way . Kate Curtis updates the outlook and analysis daily in this sub-forum.
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NZDJPY Triangle Pattern (Sep 28, 2017)

Postby katetrades » Thu Sep 28, 2017 4:00 am

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.

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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.

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EURUSD Support Turned Resistance (Sep 29, 2017)

Postby katetrades » Fri Sep 29, 2017 4:12 am

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.

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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.

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AUDUSD Resistance Turned Support (Oct 02, 2017)

Postby katetrades » Mon Oct 02, 2017 5:42 am

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.

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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.

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GBPUSD Long-Term Correction (Oct 03, 2017)

Postby katetrades » Tue Oct 03, 2017 3:46 am

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.

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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.

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EURUSD Major Correction (Oct 04, 2017)

Postby katetrades » Wed Oct 04, 2017 4:46 am

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.

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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.

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EURGBP Area of Interest (Oct 05, 2017)

Postby katetrades » Thu Oct 05, 2017 8:48 am

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.

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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.

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NZDUSD Head and Shoulders (Oct 06, 2017)

Postby katetrades » Fri Oct 06, 2017 5:11 am

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.

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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.

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USDCAD Steady Channel (Oct 09, 2017)

Postby katetrades » Mon Oct 09, 2017 2:36 am

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.

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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.

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USDJPY Range Resistance (Oct 10, 2017)

Postby katetrades » Tue Oct 10, 2017 9:13 am

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.

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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.

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GBPAUD Descending Channel (Oct 24, 2017)

Postby katetrades » Tue Oct 24, 2017 2:49 am

GBPAUD has been trending lower, moving inside a descending channel on its 4-hour chart. Price is currently testing the resistance at 1.6900, still deciding whether to make a bounce or a break.

A bounce could take it back down to the bottom of the channel at 1.6600 while an upside breakout could mark the start of a reversal. Stochastic is already indicating overbought conditions and looks ready to turn lower, which could mean that bearish pressure would return. A bearish divergence can also be seen as stochastic made higher highs while price had lower highs.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing and a downward crossover seems imminent, also suggesting a pickup in bearish momentum.

UK data turned out weaker than expected yesterday as the CBI industrial order expectations slipped from 7 to -2 instead of improving to 9. This signals weakening business conditions in the coming months as firms expect lower order volumes. Also, BOE member Cunliffe expressed doubts about a November interest rate hike, citing that the economy has slowed on the squeeze to real incomes and imported inflation from sterling weakness.

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There are no reports due from Australia and the UK today, so market sentiment could be in charge of price action. Brexit updates would likely impact movements as well. On Wednesday, Australia has its quarterly CPI due and the headline figure could show a gain from 0.2% to 0.8%.

By Kate Curtis from Trader's Way
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