EUR/USD is still in a strong uptrend on its 1-hour time frame, as seen from the rising trend line that connects the price’s lows. It appears that another test of the trend line could take place within the day, as the pair has retreated upon reaching resistance at 1.3400.
The 1.3300 major psychological level has acted as a resistance area in the past, which means that it could act as support from now on. It is also in line with the rising trend line.
Stochastic is in the oversold region, suggesting that a bounce is in the cards. A long order at 1.3300 with a 50-pip stop and a target at the previous high of 1.3400 would be a 2:1 trade.
GBP/USD: Trading the UK CPI Release (August 13, 2013)
The UK is scheduled to release its annual CPI reading today and possibly show bleaker inflation of 2.8% compared to the previous 2.9% reading. However, this is still way above the BOE’s 2% inflation target, which should remind traders that the central bank is still closely monitoring the annual CPI readings. Bear in mind that Carney specified that one of the potential considerations for reducing stimulus later on is if inflation is likely to stay above 2.5% for the next couple of years.
On the 1-hour time frame, GBP/USD looks ready to pull back to the former resistance area around 1.5400. This is in line with the 50% Fibonacci retracement level.
Stochastic is already in the oversold area, hinting that pound bears are tired. This suggests that a bounce could be in the cards, depending on how the CPI figures turn out.
A bounce from the 38.2% or 50% Fib areas could take the pair back up to its recent highs near 1.5600. A stop below the lowest Fib or below 1.5350 would yield a good reward-to-risk for this trade.
The bottom of GBP/JPY’s 4-hour range held as support yesterday as the pair bounced off the 149.00 area and rallied to 152.00. Right now, GBP/JPY is stalling around the middle of the range, still undecided whether to go up or down.
The UK will release its claimant count change report in today’s London session and this could determine where the pair will trade today. Expectations are of a 14.3K drop in joblessness and a larger than expected decline could push GBP/JPY to the top of the range. On the other hand, an increase in unemployment or a lower than expected decline could trigger another test of the range support.
Stochastic is already in the overbought region, which suggests that a selloff could be in the cards. However, the oscillator hasn’t crossed down yet so there might still be room for some rally.
AUD/CAD’s falling channel on its 4-hour time frame is still holding really well, as the pair is now making another test of the trend line with stochastic in the overbought region.
Sentiment for the Australian dollar remains weak, as the country printed weak jobs growth and a flat retail sales reading last week. Inflation expectations are also down, which suggests that the RBA might hold off any easing for now.
This is mostly a technical trade since sentiment for the Loonie is also on the bearish end. Shorting at market with a stop above .9600 and a target of .9100 would yield a good reward to risk for a swing trade.
GBP/USD has made another new high recently, as it broke slightly above the bullish pennant or flag pattern on its 1-hour time frame. However, it appears that the upward pressure isn’t that strong yet and the pair still has a chance at pulling back to an area of interest before moving further north.
Using the Fibonacci retracement tool on the latest swing high and low on the 1-hour time frame shows that the 50% Fib level lines up with a resistance turned support level. In addition, it is also around the 1.5550 minor psychological level, which suggests that it’s a good support zone.
Take note though that stochastic is not yet in the oversold region, which means that the pair could still dip a little lower before resuming its climb. Going long at 1.5550 with a stop below the 1.5500 handle or the lowest Fib level would yield a 2:1 trade with a target around 1.5650 to 1.5700.
NZD/USD is still moving sideways lately, as resistance at the top of the range or at the .8100 major psychological level still held this week. At the same time, stochastic is pointing down, hinting at a potential test of the bottom of the range around the .7700 handle.
Shorting at market, as the pair has already shown downward momentum, with a stop above the .8100 mark would yield a good reward-to-risk ratio if one aims for the bottom of the range, which is still roughly 300 pips away.
Take note though that there are plenty of event risks during this latter half of the trading week, with the FOMC minutes up for release and the Jackson Hole Symposium ready to take place. Traders could start positioning themselves ahead of these events so expect additional volatility before, during, and after these market catalysts.
GBP/JPY’s longer-term range is still holding for now, as the pair is having trouble breaking past resistance right below the 154.00 major psychological level. Stochastic has shown a bearish divergence, hinting at a move down south.
Shorting at market and aiming for the bottom of the range at the 149.00 area would still yield a decent reward-to-risk, as stochastic is still headed down. Setting a stop above the top of the range or above the 154.00 mark might be enough to weather the volatility of this pair.
However, it might be prudent to risk a smaller amount on this trade as fundamentals are currently in conflict with technical signals. Note that the UK economy has shown several impressive improvements recently and that the revised second quarter GDP is up for release while Japan is dealing with weak data and the possibility of lower spending due to higher tax rates.
USD/CAD: Long-term Ascending Trend Line (August 23, 2013)
Despite the rise in oil prices, the Loonie is having trouble pushing past the rising trend line on its daily time frame. As you can see from the chart, the pair has made several tests of this established rising support zone and might continue to stay above this level.
However, continued downward pressure on oil supply and the corresponding upward pressure on oil prices is expected to build up in the coming days. After all, the tensions in Egypt and surrounding nations appear to be getting worse and could cause disruptions in the operations of oil-producing firms in the region.
If that’s the case, USD/CAD could finally breach the trend line and start a new downtrend. For now, it appears the pair has formed a complex head and shoulders pattern with a rising neckline currently around the 1.0300 handle.
The ascending channel on EUR/USD’s 4-hour time frame is still pretty solid for now, as the pair just bounced off the bottom recently and is trading around the middle.
Judging by that bullish pennant pattern, it appears that EUR/USD is ready to make another test of the top of the rising channel. A strong candle break above the 1.3400 handle could mean that this pair is ready to test the 1.3500 area.
On the other hand, a break below the pennant pattern could mean a test of the bottom of the channel or possibly a break below. Stochastic is pointing down at the moment, suggesting that there is enough bearish momentum.
