Shallow Retracement or Breakdown on EUR/USD (April 24, 2013)
EUR/USD is currently testing the 1.3000 major psychological area, as the path of least resistance is downwards. After all, fundamentals in the euro zone remain very weak as the region grapples with several financial and economic challenges.
Today’s release of the German Ifo business climate report could provide a catalyst for a stronger move down as a lower figure is expected.
The pair could still retrace to the 38.2% Fibonacci retracement level in line with a former support area. With all the negative factors weighing on the euro, a shallow retracement or a sharp breakdown could be likely.
If the pair eventually drops below the 1.3000 handle, a stronger downward trend could ensue and the next support level on the longer-term time frame is around the 1.2750 mark.
GBP/USD: Trading the U.K. GDP Report (April 25, 2013)
On its 1-hour time frame, GBP/USD is testing the falling trend line connecting its recent highs from the second week of April. On top of that, the pair is also stalling around the 1.5300 major psychological level.
Perhaps the release of the U.K. GDP report for Q1 2013 will be the biggest market catalyst for today as this could send GBP/USD above the trend line or all the way back down to 1.5000. The report would confirm if the U.K. entered another technical recession for the third time in five years if it comes in negative. Analysts are expecting a 0.1% uptick to follow the 0.3% drop in Q4 2012, but the odds are tilted to the downside as the cold weather in January and March might’ve taken off a huge chunk of growth.
A straddle play could be your setup if you’re not biased in any direction and would just rather catch the overall momentum. The pair could make a strong break below the 1.5300 handle if the report misses expectations or it could rally above the 1.5350 minor psychological resistance if it comes in strong.
This report typically triggers a lot of volatility for the pound, so it make sense to have a wide enough stop of at least 50 pips to give the trade enough breathing room.
U.S. GDP Release: Trading USD/JPY (April 26, 2013)
The U.S. will print its Q1 2013 GDP reading in today’s U.S. session and the report is slated to show 3.0% economic growth for the quarter, higher than the previous reading of 0.4%.
The U.S. dollar has been reacting to fundamentals lately so a strong reading could trigger a rally for the currency while a weak reading might trigger a selloff. USD/JPY seems to be presenting a potential range play for this event.
The pair is currently moving closer to testing the 98.50 minor psychological level on the 1-hour time frame. This level has acted as resistance in the past then as support later on, which means that there are plenty of traders watching this level.
A good U.S. GDP figure could trigger a bounce from 98.50, especially since stochastic is nearing the oversold region, while a weak figure might result in a breakdown back to the recent lows near 97.00.
GBP/USD is moving closer to testing the top of the rising channel on the 1-hour time frame, although the pair seems to be retracing at the moment. Weak U.S. data has been propping up this pair so far, and it remains to be seen whether the upward momentum can be sustained.
The U.K. will be printing its PMI figures for services, manufacturing, and construction later on in the week and slight pullbacks are expected for all industries. Traders could start pricing in negative expectations as early as today and these could weigh on the pound.
Take note though that stochastic is in the oversold region, suggesting that pound bulls might take charge soon. If that’s the case, GBP/USD could test the channel resistance around 1.5550 to 1.5650. If that area holds as resistance, GBP/USD could be on its way back down to the 1.5200 mark.
An entry around 1.5600 with a 100-pip stop and a 300-pip profit target would be a 3:1 trade.
USD/CAD: Trading the Ivey PMI Release (May 6, 2013)
After last week’s strong selloff, USD/CAD is currently stalling around the 1.0075 resistance turned support level. This is in line with the 50% Fibonacci retracement on the 4-hour time frame.
During the previous release, the Ivey PMI came in much stronger than expected at 61.6. For the month of April, the Ivey PMI is projected to dip to 58.3, reflecting a slight slowdown in the manufacturing industry.
A weaker than expected reading could trigger a bounce from USD/CAD’s current levels back above 1.0100 while another strong reading might push USD/CAD to the next support level near 1.0020. Take not that this is in line with a former resistance area and is the 38.2% Fibonacci level.
Stochastic is pointing down, indicating a potential move south, but the oscillator could turn as USD/CAD finds support at any of the Fib levels. A stop below parity with a target around 1.0100 to 1.0150 would yield a decent reward-to-risk ratio.
The RBA just cut interest rates by 25 basis points from 3.00% to 2.75% earlier in today’s Asian session. This pushed AUD/USD below the support level around 1.0230 to a low of 1.0178 right after the statement.
In past rate decisions where the RBA cut interest rates, the pair usually makes a strong break to the downside then makes a small retracement prior to the European session. The pair could still pull up to the 38.2% Fibonacci retracement level before heading any lower in the later trading sessions.
A good entry point could be the 1.0230 mark, which is in line with the 38.2% Fib and the former support level. Stochastic is already heading lower on the 15-minute chart though, which suggests a further move down. After all, European and American traders have yet to react to the surprise rate cut earlier today.
A stop above the highest Fib level or at 1.0300 with a target of 100 pips or more would yield a good reward-to-risk ratio for a day trade.
EUR/USD is slowly edging closer and closer to the 1.3000 major psychological support again as the pair has formed lower highs on its 1-hour chart. In fact, it has created a descending triangle pattern on the same time frame.
For now, there are no major reports due from the euro zone, which explains why the pair is currently stuck in a consolidation pattern. The lack of data could keep the pair inside the triangle, with some opportunities to scalp off the top or the bottom of the formation.
Only the medium-tier German industrial production report is due from the region today and this report is projected to print a 0.1% decline, which is a disappointment compared to the previous 0.5% uptick. A weaker than expected reading could push EUR/USD to test the bottom of the descending triangle or even make a breakdown, depending on the actual result.
Stochastic, however, is suggesting a potential bounce back up as it is currently pointing north. Aim for the top of the triangle for a day trade or the previous highs around 1.3100 for a longer-term setup.
NZD/USD just broke below the .8500 major psychological support level recently, mostly because of the downturn in risk appetite. The recent speech by RBNZ Governor Graeme Wheeler also revealed that the central bank actually secretly intervened in the currency market last month after NZD/USD topped at around .8675.
The RBNZ’s willingness to intervene could keep the Kiwi’s rallies at bay as traders might be more cautious about another potential intervention. Price did pull up to the 61.8% Fib, which is just below the former support at .8500 when New Zealand printed a strong employment report.
On the 1-hour time frame, stochastic has already reached the overbought region, showing that a selloff could follow soon. If the support turned resistance area continues to hold, NZD/USD could test its former lows just below the .8400 handle.
A stop above the .8500 level and a target at .8400 yields a good reward-to-risk ratio for a day trade.
After several failed attempts in the past few months, AUD/USD finally made a convincing break below the 1.0200 major psychological level in yesterday’s trading.
The recent RBA interest rate cut may have been one of the major factors driving the selloff, although the pair did draw a bit of support from strong Australian jobs data released this week. However, the rally didn’t last and AUD/USD soon found itself below 1.0200 and even 1.0100 in today’s Asian session.
This could be a signal that a longer-term downtrend is set to take place for AUD/USD. Remember that the previous range was roughly 400 pips in height as the pair found resistance at 1.0600 and support at 1.0200 in the past. This suggests that the breakdown could be of the same height, taking the pair below parity later on.
GBP/USD Rising Channel Still Intact (May 13, 2013)
GBP/USD had a strong selloff towards the end of the previous week when the U.S. Federal Reserve talked about their concrete plans to exit from their ongoing open-ended asset purchase program. However, the pair has found support at the bottom of the rising channel on the 4-hour time frame.
This channel support could be a key area for the week, as it is in line with the 1.5350 minor psychological support level. A breakdown from this area would confirm the start of a downtrend for GBP/USD.
On the other hand, a bounce from this area, which could be triggered by a strong UK claimant count change release or upbeat remarks from BOE Governor King midweek, could push GBP/USD back to the top of the channel around 1.5600.
