Yen Weakness Dominates the Headlines; Microsoft Volatility Lies Ahead
USDJPY Short-Term Downtrend | Pullback to 119.00
USDJPY has been selling off continuously, opening the case for a short-term downtrend until the end of the week. Price just dipped to the 118.00 level and may be due for a pullback to the broken support around the 119.00 handle.
If this area holds as resistance, USDJPY could explore new lows around the 117.00 levels or lower. Data from the US economy today could determine the pair’s direction, as the retail sales figures are likely to show strong consumer spending gains for November. The headline figure is projected to print a 0.4% rise while the core figure could indicate a 0.1% uptick.
A disappointment, however, might mean more losses for this pair. This would remind traders that the US economy isn’t as strong as initially expected and that the Fed might stay in their cautious route in terms of considering interest rate hikes.
Earlier today, Japan printed a weaker than expected core machinery orders report and a 0.2% decline in its tertiary industry activity. This suggests that the Japanese economy is far weaker compared to the US, although the yen is enjoying the run in risk aversion recently even with expectations of further BOJ easing.
GBPJPY Resistance Turned Support | Testing 185.00 Handle
GBPJPY has sold off in the past few days, creating a large market correction visible on its 4-hour time frame. On this chart, it can be seen that GBPJPY is stalling at an area of interest around 185.00, which acted as resistance in the past.
A bounce off this support zone could mean a continuation of the longer-term rally and possibly a retest of the previous highs around 189.00. Further gains past this point could lead to a move until the 190.00 major psychological level and beyond.
On the other hand, a break below support could lead to a shaper drop to the next support area at 183.00. A move below this area might confirm the reversal on the longer-term uptrend and lead to more losses for the pair. Risk aversion stemming from the Greek political tension could keep this pair heading south.
Data from Japan remains mostly weak and the BOJ is biased towards further easing, which suggests that the path of least resistance is to the upside. Although the BOE shared that rate hike expectations must be pushed back, the fact remains that their next monetary policy move is still likely to be a rate hike
Microsoft Shares Retracement | Area of Interest at $47/Share
Microsoft shares seem to be finding a floor at the $47/share level in the meantime, as price took a break from its recent selloff. Risk aversion was mostly responsible for the price decline, as markets focused on the Greek political situation in the past few days.
Should risk appetite return and lift US equities, Microsoft shares could resume their climb to the previous highs at $50/share and perhaps go for new ones. After all, the Santa Claus rally for the year is set to start in a few weeks and traders might be eager to put their long positions in.
The current support area is also close to the 38.2% Fibonacci retracement level on the latest swing high and low on the 4-hour chart, adding to its strength as a support zone. This also lines up with a previous resistance level. A break below this area could mean a deeper pullback to $45/share, which is also an area of interest.
A break below the Fib levels would indicate a reversal for MSFT shares though, especially if risk aversion stays in the markets much longer. The US retail sales could have an impact on stock price action in today’s New York trading session, as strong data could lift equities.