USD/CHF Inverse Head and Shoulders (June 24, 2013)
After breaking above the falling trend line on its 1-hour and 4-hour time frames, USD/CHF has made another signal that a reversal could take place.
On its 4-hour time frame, the pair has made an inverse head and shoulders pattern, indicating that the previous downtrend is about to turn. If the pair makes an upside breakout above the neckline around the .9400 major psychological level, an uptrend could be confirmed.
However, stochastic is in the overbought region, suggesting a potential selloff. The oscillator hasn’t crossed down though, which means that dollar bulls are in control for now.
GBP/JPY is on a short-term downtrend based on its 1-hour time frame. The pair has made lower lows and lower highs, forming a falling channel.
At the moment, GBP/JPY is in the middle of the channel on its way down. Stochastic is moving lower, although it has already reached the oversold area. It hasn’t crossed yet though, which means that pound bears are still in control. The pair could still make its way to the bottom of the channel before bouncing back up.
The market events for the UK today are the BOE financial stability report and the government spending review. Public sector borrowing has improved in the UK recently, which could suggest that we’d hear upbeat comments from both the central bank and the government. If that’s the case, GBP/JPY could find its way back up sooner or later.
There’s a potential short-term retracement on EUR/USD’s 1-hour time frame which could come into play today. There’s a falling trend line connecting the pair’s recent highs while the 50% Fib is in line with a former support around the 1.3070 area.
A few medium-tier euro zone reports are on tap for today, the biggest of which is the German unemployment change report. After posting a 21K increase in joblessness for April, only a 7K rise is expected this time. A higher than expected figure would mean that the jobs sector is still unstable in euro zone’s largest economy, which could be bearish on the euro.
As for the US, the core PCE price index and personal spending and income reports are due. The price index could show a small improvement in inflation while personal spending is expected to be up. If that’s the case, the dollar could draw support from good data.
A stop above the 1.3100 major psychological level would yield a good reward-to-risk when shorting this pair.
GBP/USD is still on a steady downtrend on its 1-hour time frame, as the pair is moving below a falling trend line connecting its recent highs for the month.
The pair appears to have bounced off the 1.5200 major psychological support, but this might just mean that a correction is in the works. If that’s the case, the pair could pull up to the Fib levels which are in line with the trend line.
In addition, the 50% Fib seems to be in line with a former support area, which could act as resistance from now on. Stochastic is still climbing, suggesting that there’s enough upward momentum to push for a retracement.
Shorting around the 1.5300 area with a tight stop and a target of 1.5200 would yield a good reward-to-risk ratio for a day trade.
China just printed its set of PMI figures from HSBC and the government in today’s Asian session, and both reports showed weaker performance in its manufacturing sector. The government figure fell from 50.8 to 50.1 while the HSBC final reading was revised down from 48.3 to 48.2. Weak manufacturing in China could mean weak demand for Australia’s exports.
AUD/USD managed to bounce after the release of these figures, as the actual readings weren’t way below expectations. However, moving forward, it still hints at poorer export industry performance.
There could be a retracement to the .9200 major psychological level for the day, before dollar demand is renewed during the US session. That’s close to the 38.2% Fibonacci retracement level, which has acted as support in the past.
Stochastic is still climbing from the oversold area, suggesting that Aussie bulls are still in control for now. However, once the oscillator turns from the overbought region, the pair could resume its selloff.
EUR/USD has tested the 1.3000 major psychological level a few times already, forming a double bottom pattern on its 1-hour time frame. However, the pair has yet to break above the neckline before confirming that a reversal is taking place.
The neckline is located at the support turned resistance area at the 1.3100 major psychological level. Stochastic is in the overbought region with a bearish divergence, suggesting that bulls still need more momentum to push the pair higher.
If that takes place, EUR/USD could have 100 more pips to rally, as the pattern is roughly 100 pips in height. There are no major reports from both euro zone and the U.S. today, but the speeches from a couple of dovish Fed officials could reduce dollar demand.
NZD/USD has been moving sideways on its 1-hour time frame, as the pair found support around the .7720 level and resistance near .7830. The pair is currently moving closer to the bottom of the range and getting ready to test the support level.
There are no major reports due from New Zealand today, which suggests that NZD/USD could be more dependent on US data. For today, the US will print its ISM non-manufacturing PMI report and possibly show a climb from 53.7 to 54.3. However, if the report disappoints or fails to impress, the dollar could lose ground.
Stochastic is already in the oversold region, suggesting that the pair could be ready to bounce soon. Bear in mind that most US traders will be off tomorrow, as it is the Fourth of July holiday, so profit taking could take place around nearby inflection points.
AUD/USD has been undergoing heavy selling pressure, but it appears the pair has found support around the .9100 area. It could pull up for a quick retracement before the selloff resumes.
Using the Fibonacci retracement tool on the 1-hour time frame shows that the 50% Fib lines up with a former support level at the .9150 minor psychological handle. Stochastic has already reached the overbought region but doesn’t appear ready to head back down yet, which suggests that bulls could still push AUD/USD a bit higher.
A short order at .9150 with a stop above the 61.8% Fib and a target of .9100 could yield a good reward-to-risk ratio for a day trade. There are no reports due from the US, as traders are off on their Fourth of July holiday.
The NZD/USD range on its 1-hour time frame is still intact, as the pair just made a test of resistance this time around.
The pair has been moving between the .7700 area as support and resistance around .7830. The pair jumped to the top of the range but quickly turned as stochastic headed back down. The oscillator is still headed south, which suggests that Kiwi bears are in control of price action.
If that’s the case, NZD/USD could make another test of the bottom of the range near .7700. That’s more than 100 pips from its current levels and a tight stop above the previous day high could yield a good reward-to-risk ratio for a day trade.
Bear in mind though, that the US will be releasing its NFP report in today’s US session and that US traders are just about to return from their Fourth of July holiday, which could mean additional volatility for this pair.
The Loonie has been edging lower against the U.S. dollar gradually, as the pair has formed a shallow rising channel on its 1-hour time frame. The pair is currently testing the top of the channel, with stochastic pointing down and suggesting that a slight selloff could be in the works.
If that’s the case, USD/CAD could fall back to the bottom of the channel around the 1.0500 major psychological support before resuming its climb to the 1.0600 area. A tight stop above the previous highs could yield a good reward to risk ratio for a day trade.
There are no major reports due from the US today but Canada will be printing its building permits data and BOC business outlook survey. Upbeat results could allow the Loonie to bounce back against the dollar, at least for the day.
