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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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USDJPY Inverse Head and Shoulders (Dec 08, 2017)

Postby katetrades » Fri Dec 08, 2017 9:20 am

USDJPY could be in for more gains from here as price broke past the neckline of its inverse head and shoulders formation. This is considered a classic reversal signal and spans 200 pips, so the uptrend could last by the same height.

However, the 100 SMA is below the longer-term 200 SMA on the 4-hour time frame so the path of least resistance might still be to the downside. Stochastic is also dipping into overbought territory to signal a potential slowdown in the rally.

The US dollar remained supported by positive NFP expectations, even as another report signaled a potential disappointment. Challenger job cuts rose 35K in November, up 30.1% on a year-over-year basis and 17% from the previous month. Still, initial jobless claims indicated good momentum as claimants dropped to 236K versus 239K. Consumer credit also advanced, signaling financial optimism.

The NFP is expected to show a 198K gain in hiring for November, down from the previous 261K increase. Average hourly earnings could recover by 0.3% after staying flat in the previous month, with positive wage growth likely funneling to upside inflationary pressure later on.

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As for the yen, the final GDP reading enjoyed an upgrade from 0.3% to 0.6% versus the 0.4% consensus. The current account balance also beat expectations but average cash earnings disappointed with a 0.6% uptick versus the projected 0.8% rise.

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USDCAD Range Resistance (December 11, 2017)

Postby katetrades » Mon Dec 11, 2017 3:09 am

USDCAD is still trading sideways, finding resistance at 1.2900 and bouncing off support at 1.2675 on the latest test. Price is now nearing the top of the range once more and technical indicators are signaling the resistance might hold.

The 100 SMA is below the longer-term 200 SMA, so the path of least resistance is to the downside. This means that the ceiling is more likely to hold than to break. Stochastic is also indicating overbought conditions and is starting to turn lower, reflecting a return in bearish pressure.

However, if an upside breakout occurs, price could head up by around 225 pips or the same height as the range. Similarly, a downside break could lead to a selloff of the same height.

There are plenty of top-tier catalysts lined up from the US economy this week, but the main event is likely the FOMC decision. Although a December hike is priced in, traders are more eager to find out how the pace of tightening might go in 2018. The Fed is slated to release its updated economic projections and this would give clues next year's rate hikes.

The US is also set to release its latest batch of inflation and consumer spending figures. Note that policymakers signaled a weaker inflation outlook a couple of weeks back, and this might be reflected in the PPI and CPI reports. 

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There's not much in the way of top-tier data from Canada but the Loonie is on weak footing owing to the less hawkish statement from the BOC last week. Oil prices could also influence the positively correlated currency from here.

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GBPJPY Rising Wedge (Dec 12, 2017)

Postby katetrades » Tue Dec 12, 2017 9:30 am

GBPJPY has formed higher highs and higher lows, creating a rising wedge pattern visible on its daily time frame. Price is approaching the peak of the chart pattern, so a breakout could take place sooner or later.

The 100 SMA is above the longer-term 200 SMA on this chart, so the path of least resistance could be to the upside. The short-term moving average is around the bottom of the wedge, adding to its strength as support.

However, stochastic is turning lower from the overbought area to signal a pickup in selling pressure. A breakout in either direction could lead to a move of around 2,500 pips or the same height as the chart pattern.

There are plenty of economic events in the UK this week, including today's CPI release. Headline inflation is slated to hold steady at 3.0% while core CPI could also stay unchanged at 2.7%. Jobs data due on Wednesday could show a smaller increase of 0.4K in claimants and a pickup in the average earnings index, which would also be a positive sign for inflation.

Later on, the BOE will announce its monetary policy decision. No actual changes to interest rates or asset purchases are expected, so traders will pay closer attention to the minutes of the meeting and how policymakers would vote.

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As for the yen, the Japanese currency has been mostly reacting to market sentiment and bond yields these days. Rising US bond yields on the heels of a potentially upbeat FOMC statement and tax reform progress are keeping a lid on yen gains.

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GBPAUD Ascending Trend Line (Dec 13, 2017)

Postby katetrades » Wed Dec 13, 2017 9:11 am

GBPAUD continues to trend higher, moving above an ascending trend line connecting the lows since early September. Price looks ready for another trend line test soon and this support area lines up with a former resistance around 1.7500.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that the uptrend is more likely to continue than to reverse. The 200 SMA is just slightly below the trend line, adding another layer of support in the event of a larger dip.

Stochastic is already indicating oversold conditions to show that sellers are exhausted. The oscillator has yet to pull higher to reflect a pickup in bullish pressure that could allow a bounce to happen. A bullish divergence can also be seen as price made higher lows while stochastic had lower lows.

UK data has turned out stronger than expected so far, with headline CPI up from 3.0% to 3.1% instead of holding steady as expected and core CPI steady at 2.7%. PPI was also stronger than expected but RPI and HPI fell short.

Jobs data is due next and a smaller gain of 0.4K claimants is eyed compared to the earlier 1.1K increase. Also, the average earnings index is projected to advance from 2.2% to 2.5% to reflect stronger wage growth and more upside inflationary pressure.
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This could set up for an upbeat BOE statement later in the week, even as the central bank is widely expected to keep rates on hold. As for the Aussie, rising gold prices are propping it up but the upcoming jobs report could still pose an event risk. An increase of 18.1K in hiring is eyed, much larger than the earlier 3.7K gain.

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EURUSD Descending Channel (Dec 14, 2017)

Postby katetrades » Thu Dec 14, 2017 5:08 am

EURUSD is trending lower and moving inside a descending channel on its 1-hour time frame. Price is testing resistance after a sharp rally, so either a bounce or break could be due.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, which means that the selloff is likely to continue. The channel resistance also lines up with the 50% retracement level.

Stochastic is indicating overbought conditions and is turning lower, reflecting a return in selling pressure. However, the gap between the moving averages is narrowing to suggest a potential return in bullish momentum. A break past 1.1850 could be enough to signal that a reversal is underway.

The FOMC hiked interest rates by 0.25% as expected but Yellen reiterated her cautious inflation outlook and also warned that the tax cuts could lead to a mere short-term boost rather than a long-term one. Upgrades were seen for most of the growth and jobs figures in this year and the next couple of ones, but inflation estimates were mostly unchanged.

As for the euro, the ECB decision today could prove to be a huge event risk as traders are now waiting for clues on a rate hike. Medium-tier data from the euro zone has been mixed since the last decision but inflation has ticked higher.

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US retail sales figures are also lined up today, with the headline figure slated to show a 0.3% gain and the core reading likely to show a much stronger 0.6% increase. Higher than expected consumer spending data could reinforce positive growth expectations and more rate hikes next year.

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GBPUSD Channel Resistance (Dec 15, 2017)

Postby katetrades » Fri Dec 15, 2017 5:57 am

GBPUSD is trending lower and moving inside a descending channel on its 1-hour time frame. Price is currently testing the resistance and could be due for a drop to support soon.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. In that case, price could drop to the 1.3300 handle or lower.

Stochastic is still heading north to show that a bit of bullish momentum is present but the oscillator is also nearing overbought levels to signal rally exhaustion. Turning lower could confirm that bearish pressure is returning.

The BOE kept monetary policy unchanged in this week's statement as expected. Policymakers voted unanimously to keep interest rates and asset purchases on hold. The central bank also cited Brexit as a risk to their economic outlook.

As for the dollar, the currency has been able to hold its ground thanks to upbeat data. Headline retail sales rose 0.8% versus the estimated 0.3% gain while the core reading posted a 1.0% jump versus the estimated 0.6% increase.

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Only the BOE quarterly bulletin and a speech by MPC member Haldane are lined up from the UK today while the US has industrial production and capacity utilization numbers due. The Empire State manufacturing index is also due today.

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EURGBP Channel Resistance (Dec 18, 2017)

Postby katetrades » Mon Dec 18, 2017 5:03 am

EURGBP has been trending lower on its 1-hour time frame, trading inside a new descending channel pattern. Price is currently testing the resistance and could be due for a drop to support.

The resistance lines up with the 50% Fibonacci retracement level on the latest swing high and low, as well as an area of interest or previous support and resistance. This is also in line with the moving averages.

Speaking of moving averages, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that the selloff is more likely to resume than to reverse. Stochastic hasn't quite reached overbought conditions yet but is already turning lower to indicate a pickup in selling pressure.

The euro was in a weak spot last week after the ECB refrained from dropping more hawkish hints, despite upgrading their growth forecasts. Prior to this, a few medium-tier reports from its top economies printed weaker than expected results, so bulls might be worrying about a slowdown as well.

Meanwhile, the BOE wasn't as hawkish either, even though top-tier UK data from earlier in the week turned out mostly stronger than expected. The MPC voted unanimously to keep rates and asset purchases on hold for the time being.

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Up ahead, final CPI readings from the euro zone are due today, ahead of the German Ifo business climate index tomorrow. UK current account balance is due on Thursday and there are no other major reports so traders could pay closer attention to Brexit updates.

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GBPUSD Channel Top (Dec 19, 2017)

Postby katetrades » Tue Dec 19, 2017 6:44 am

GBPUSD continues to trend lower in its descending channel on the 1-hour time frame. Price just bounced off support recently and is finding a ceiling at the channel resistance around the 1.3400 handle once more.

Stochastic is on the move down to confirm that selling pressure is in play. The 100 SMA is also below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the selloff is more likely to continue than to reverse.

However, the gap between the moving averages has narrowed to indicate weaker selling momentum. If an upward crossover materializes, bullish momentum could return and lead to a break past the channel resistance.

The US dollar is enjoying strong support from optimism surrounding tax reform as lawmakers are scheduled to make their final vote likely today. If all goes well, US President Trump can be able to sign the bill into law by the end of the week to mark the first major legislative victory for the administration.

US equities are already trading at record highs in anticipation of a positive outcome. Several analysts have noted that this might merely lead to a short-term boost to growth rather than a long-term one, but the fact remains that it would likely keep business activity and consumer spending elevated early next year if the bill is approved.

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Meanwhile, the pound has lost a bit of ground last week on a relatively cautious BOE statement. Policymakers voted unanimously to keep rates and asset purchases unchanged, although a number of top-tier reports turned out strong. Brexit remains a risk for businesses even as a deal has been made.

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EURAUD Neckline Retest (Dec 20, 2017)

Postby katetrades » Wed Dec 20, 2017 4:59 am

EURAUD previously broke below the neckline of its head and shoulders pattern on the 1-hour time frame to signal a selloff. Price found support around the 1.5340 area and is now pulling back to the broken support near the 1.5500 handle.

Applying the Fib tool on the latest swing high and low shows that this area of interest is between the 38.2% and 50% retracement levels that might keep gains in check. However, the 100 SMA is still above the longer-term 200 SMA to show that the path of least resistance is to the upside.

Stochastic is moving up to show that buyers have the upper hand but the oscillator is dipping into overbought territory to suggest rally exhaustion. Turning lower could draw more selling pressure in and allow the 200 SMA to keep holding as dynamic resistance around the 38.2% Fib.

The euro got a boost from hawkish ECB remarks and news that Germany will be selling more bonds next year. This drove yields higher in the euro region, allowing the shared currency to benefit as well. Data was actually weaker than expected as the German Ifo business climate index fell from 117.6 to 117.2 versus expectations of it remaining unchanged.

Meanwhile, the Aussie is drawing support from the RBA's less dovish stance and the pickup in risk-taking. Even higher gold prices during risk-off days have been able to prop up the correlated AUD. There are no other reports lined up from Australia for the rest of the week, though, so risk sentiment could be the main driving factor.

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German PPI and euro zone current account balance are up for release today and stronger than expected data could remind traders of the upgraded forecasts by the central bank. German GfK consumer climate data and French consumer spending numbers are due on Friday.

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USDCAD Range Resistance (Dec 21, 2017)

Postby katetrades » Thu Dec 21, 2017 6:46 am

USDCAD once again bounced off the top of its range on the 4-hour time frame and could be due for a move back down to support at 1.2675. Stochastic is heading south to show that sellers are on top of their game, but the oscillator is also dipping into oversold territory to reflect exhaustion.

The 100 SMA is above the longer-term 200 SMA also, so the path of least resistance is still to the upside. This means that an upside break from the resistance around 1.2900 is still a possibility. The 100 SMA could also hold as near-term dynamic support while the 200 SMA lines up with the area of interest at the middle of the range.

An upside break could lead to a climb of around 225 pips or the same height as the chart formation. Similarly a downside break on a strong return of selling pressure could lead to a drop of the same height.

The US government is on its way to enact tax reform, which is seen to provide a strong boost to business activity and overall growth in the coming months. This also marks the first major legislative victory of the Trump administration, reinforcing confidence in US economic standing.

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Canada has its CPI and retail sales reports lined up later today and strong data could keep traders hopeful about a BOC hike sometime next year. On the other hand, downbeat results could remind market watchers that the central bank is treating future policy action with more caution this time.

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