Daily Technical Analysis by Kate Curtis from Trader's Way

[katetrades]

Trader's Way, a prime online Forex and CFD broker, here offers you Technical Market Outlook by Kate Curtis, the company's expert with deep trading and analysis experience.

 

[katetrades]

Last week, ECB Governor Mario Draghi mentioned during his rate statement that the central bank is monitoring the euro's appreciation very closely. This caused a strong selloff for EUR/USD as traders feared a possible currency intervention later on.

The longer-term uptrend is still very much intact though as seen from the rising trend line on EUR/USD's 4-hour chart. Last week's selloff could be the start of a huge correction, at which the pair could pull back to the 1.3300 major psychological level.

As you can see from the chart below, 1.3300 lines up with the 50% Fibonacci retracement level and is a resistance turned support zone. Traders have also shown a lot of interest on this level as seen from the consolidation above and below the major psychological mark. On top of that, 1.3300 is right on the long-term trend line, which could continue to act as support and keep the pair on its uptrend. Stochastic reached the oversold zone and is moving north, suggesting a return of euro bulls this week.

Take note that Draghi has a speech later today and he might grab this opportunity to talk the euro down even further, presenting an event risk for this trade. On the other hand, he could admit that the ECB or other European finance officials aren't ready for an actual intervention just yet. If that's the case, the euro could resume its rally fueled by improving fundamentals in the euro zone.

A long trade at 1.3300 with a stop just below 1.3200 and a target around the recent highs at 1.3700 presents a good reward-to-risk ratio of 4:1.

By Kate Curtis from Trader's Way

 

[katetrades]

Trade Setup for the Day: Short NZD/USD

The New Zealand dollar was able to bounce back against the Greenback during yesterday’s trading, thanks to the G7 statement saying that central bank should make their monetary policy decisions based on economic performance and not currency devaluation.

There were no economic factors that supported this bounce so NZD/USD might resume its selloff pretty soon, especially since it’s heading close to the .8450 minor psychological level. The 4-hour time frame reveals that this level has held strongly in the past and could continue to do so if it gets tested this week.

Take note that the US will be printing its January retail sales figure during today’s New York session and both core and headline figures are expected to show a 0.1% increase. A weaker than expected reading could trigger a dollar selloff and push NZD/USD back to .8450.

If the resistance at .8450 holds, a possible target could be around the recent lows near .8300 and the rising trend line. A stop 25 pips above the .8500 major psychological resistance would yield a 2-to-1 reward-to-risk ratio in this case.

New Zealand will be printing its quarterly retail sales figure for Q4 2012 on Friday’s early Asian session and, judging from the same period’s weaker than expected jobs figures, we might see a negative reading or a downside surprise. If that happens, the rising trend line could be broken and NZD/USD could fall until the next support around .8150.

By Kate Curtis from Trader's Way

 

[katetrades]

AUD/USD is on a falling channel on the 4-hour time frame and is currently testing the top of the range around 1.0350. This is in line with a Fibonacci retracement level and is a minor psychological resistance. With no reports due from Australia for the rest of the week, the downtrend could resume as fundamentals in the country remain poor.

A short trade around 1.0350 or a few pips lower with a tight stop above the channel and a target at 1.0250 would offer a good reward to risk ratio.

By Kate Curtis from Trader's Way

 

[katetrades]

GBP/USD: Break and Retest of 1.5000? (March 13, 2013)

GBP/USD has just broken below the 1.5000 major psychological level in the past week but the pair appears prime for a retest within the day. Using the Fibonacci retracement tool on the recent swing high and swing low to the 1.4820 area reveals that the 1.4975-1.5000 levels are in line with Fibs.

In addition, stochastic has made a bearish divergence on the 1-hour time frame as the oscillator made higher highs while price made lower highs. Stochastic is still in the overbought region and hasn’t crossed down yet, which suggests pound bulls could still be in control at the moment. A cross down from the overbought region will show that sellers have gathered enough momentum to keep the downtrend going.

Yesterday, the U.K. printed a very weak manufacturing production report which showed a 1.5% decline for February. This was way below the consensus of a flat reading for the month. However, the trade balance came in stronger than expected as it showed a deficit of 8.2 billion GBP, smaller than the estimated 8.8 billion GBP shortfall.

No reports are due from the U.K. today but the U.S. retail sales due 1:30 pm GMT could provide enough volatility for this pair. The headline figure is expected to rebound by 0.5% in February while the core version of the report could print a 0.5% uptick as well.

Take note that the recent NFP report printed a strong upside surprise for the same month and that improvements in the jobs sector usually result in a surge for consumer spending. Positive data from the U.S. has been lifting the Greenback so far, which suggests that a potential cable selloff could take place if the report meets or beats expectations.

By Kate Curtis from Trader's Way

 

[katetrades]

NZD/USD Breaks Below .8200 Level (March 14, 2013)

NZD/USD got sold off strongly after the RBNZ announced its interest rate decision during today’s Asian session. Even though the central bank kept rates on hold at 2.50% as expected, RBNZ head Graeme Wheeler commented that domestic economic activity is weak. A couple of reasons that he mentioned for this slowdown were the worsening drought conditions and the strength of the New Zealand dollar.

In fact, he pointed out in his speech a few hours later that he thinks the New Zealand dollar is overvalued by 10-15%, prompting traders to speculate that the RBNZ will engage in currency intervention if the Kiwi doesn’t return to their desired levels.

If you missed the initial reaction to the report, there’s still a chance to catch the rest of the move as European traders and U.S. session traders have yet to react to the news. Based on past price action following the RBNZ statement, NZD/USD typically makes a strong reaction right after the event then consolidates at the start of the London session, after which it makes a breakout in the same direction.

At the moment, NZD/USD is moving below the .8200 major psychological level and is consolidating around .8175, suggesting a potential breakdown later on. The selloff could last until the next minor psychological level of .8150 or possibly until the .8100 major psychological support. Take note that the U.S. is set to release its PPI and initial jobless claims later and that stronger than expected results typically boost the U.S. dollar.

Shorting at the break of .8175 with a stop above .8200 and a profit target around .8100 would yield a good reward-to-risk ratio for a day trade.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD: 4-hour Falling Channel Holding? (March 15, 2013)

After yesterday’s short squeeze on EUR/USD, which pushed the pair back above the 1.3000 major psychological support level, many are wondering if the rally of this pair would actually last. It seems that it could find resistance at the top of the falling channel drawn on the 4-hour time frame at least for the end of this week.

Take note that the top of the channel is close to the 1.3050 minor psychological level, which could act as resistance for EUR/USD. This area also acted as an area of interest in the past, and the lack of good news from the euro zone or any major market catalyst for today could keep the pair’s rallies at bay.

Of course, don’t forget that the European Union Economic Summit is going on today until the start of the weekend, which suggests that there is still some event risk. Also, the U.S. is set to release a bunch of reports, namely the CPI, Empire State manufacturing index, and University of Michigan preliminary consumer sentiment report during today’s New York session.

Shorting at the top of the channel with a stop above the 1.3050 line in the sand could provide a decent 2:1 reward-to-risk ratio for a day trade if you’re aiming for the bottom of the channel or just the 1.3000 major psychological level.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD Weekend Gap Play (March 18, 2013)

EUR/USD made a huge gap down from the 1.3100 area to below 1.3000 over the weekend. The sudden rally that took place during the last two trading days of the previous week can be explained by a quick short squeeze as traders decided to book profits around the pair’s previous lows.

However, sentiment for the euro zone remains negative as the pair opened this week right where it was prior to the short squeeze. Before the pair trades any lower though, traders could take advantage of this potential gap close back to the 1.3050 minor psychological resistance.

There’s a falling channel on the 4-hour time frame, right where the pair closed last week. A short trade on a pullback to the 1.3000 or 1.3050 area with a stop above 1.3100 and a target around the pair’s previous lows could work for today as the euro zone has no major catalysts on schedule.

By Kate Curtis from Trader's Way

 

[katetrades]

Pennant on GBP/USD (March 19, 2013)

After its strong rally towards the end of last week, GBP/USD consolidated tightly in a pennant formation during yesterday’s trading. This is most likely because traders are awaiting the release of top-tier British data within the week.

For today, the U.K. is set to release its CPI figures and possibly report a 2.8% annual increase in consumer price levels for February. The BOE is also set to release its Inflation Report in case the actual CPI data doesn’t stay within the government’s inflation target.

This report could provide a catalyst for a breakout in either direction. Recall that the BOE has committed to looser monetary policy if necessary even at the expense of stronger inflation and the risk of stagflation.

Higher than expected CPI could increase the odds of stagflation in the U.K. which might be more negative for the pound. However, weaker than expected CPI would also imply that the BOE has enough room to implement further easing, therefore the path of least resistance is down.

Stochastic is currently pointing downwards as it moved out of the overbought region. This suggests that selling pressure is still strong as pound bears might take the pair back to its recent lows around 1.4900. Shorting at a break below 1.5075 with a tight stop above 1.5100 and a target around 1.4875 would yield a 4:1 reward-to-risk ratio.

By Kate Curtis from Trader's Way

 

[katetrades]

EUR/USD: Potential Retracement (March 20, 2013)

After Cypriot officials and the Troika unveiled a bailout proposal to save Cyprus’ troubled banks, the parliament rejected the plan since it involved a one-time tax levy on deposits. This prompted fears of a bank run in the country, which might do more damage than good to its finances.

However, the lack of a concrete bailout plan at the moment increases the odds of Cyprus defaulting on its financial obligations. This explains why EUR/USD sold off strongly recently.

If you missed this sharp drop, there could be an opportunity to catch the move on a retracement. Using the Fibonacci tool on the swing high and low on the 1-hour time frame shows that the 38.2% Fib level is in line with the 1.2900 major psychological level while the 50% and 61.8% Fibs are close to the former support area.

Stochastic is in the oversold region, reflecting the lack of selling pressure at the moment. Shorting when the pair pulls back to any of the Fibs with a stop above the 1.2950 minor psychological resistance could be a good day trade, especially since the FOMC monetary policy decision could spark volatility in the markets during the New York session.

By Kate Curtis from Trader's Way