Buy into Amazon Stocks and Pound this Friday
GBPUSD Retracement Signal | Pullback to 38.2% Fibonacci Level
GBPUSD is showing signs of a pullback after selling off continuously, as price bounced off the 1.5050 minor psychological support area. Drawing the Fibonacci retracement tool on the latest swing high and low on the 4-hour time frame shows that the 38.2% Fibonacci retracement level lines up with the 1.5250 minor psychological level, which might act as support.
Earlier in the week, the UK reported weaker than expected inflation data, as the headline figure fell from 1.0% to 0.5% in December. This was spurred mostly by falling oil prices and lower prices of supermarket goods
However, BOE Governor Carney assured that the UK will not fall into deflation like the euro zone since it is in a fundamentally stronger position. Even the UK Chancellor positively welcomed the weak inflation figure since it could allow households to stretch their budgets.
With that, the pound could be in for some gains for now, especially since traders are starting to doubt the recovery in the US. Yesterday, the US retail sales report showed weaker than expected results as the headline figure fell by 0.9% while the core reading indicated a 1.0% drop. This could mean gains for the pound in the short-term but the longer-term downtrend might resume sooner or later.
USDJPY Retracement Setup | Pullback to 118.00 Handle
USDJPY seems to be taking a break from its current selloff as it bounced off the 116.00 levels and retreated close to the 118.00 handle. Using the Fib tool on the 1-hour swing high and low indicates that the 61.8% Fibonacci retracement level is already holding as resistance.
Stochastic has just reached the overbought area and turned down, indicating a potential return in bearish pressure. If so, USDJPY could fall from its current 117.50 area and test the previous lows or even create new ones.
Yesterday, the US retail sales report turned out to be a huge disappointment after the headline figure marked a 0.9% drop while the core figure showed a 1.0% decline. This reminded traders that the US central bank might not be ready to tighten monetary policy soon and that the period of low rates might be extended.
With that, the US dollar could resume its slide against most of its forex counterparts, including the Japanese yen. USDJPY has been on a downtrend so far this year, with shallow retracements on its short-term time frames. A break past the 118.00 mark, however, might be indicative of a reversal.
Amazon Shares Testing Support | Floor at $290/Share Level
Amazon shares could be due for a bounce sooner or later as price is sitting at the floor on the $290/share level. Bear in mind though that the selloff has lasted for the start of this year as risk aversion has weighed on US equities.
The downturn in risk-taking has been spurred by speculations of Fed tightening, as strong US economic figures led some traders to price in a rate hike for the first half of the year. However, recent reports indicate that the US economy is not doing as well as the surface-level figures suggest.
The December NFP reading printed a better than expected headline figure but also indicated negative wage growth and a lower participation rate. Meanwhile, the retail sales report showed sharp declines, suggesting that consumers are keeping their hands in their pockets instead of spending.
With that, the path of least resistance for Amazon shares is to the downside unless signs of a stronger pickup in the US economy are seen. A break below the $290/share level could mean more losses for the stock, possibly until the $250/share level in the coming months.