Aussie Slump Awaits; Pound Downturn to Follow
AUDCAD Head and Shoulders | Resistance at Parity
AUDCAD may have already reached a top, as a head and shoulders pattern formed on its 1-hour time frame and is indicating a potential turn. In addition, the pair has just come off a test of resistance at parity and may be in for a reversal.
Price has yet to form the right shoulder around the .9900 major psychological resistance and the broken rising trend line on its 1-hour chart. A test of the neckline at the .9800 handle should also take place soon, with a potential breakdown confirming the reversal.
In this case, price could head lower by around 200 pips, which is the same height as the chart pattern. Should the .9800-.9900 area hold as support though, price could make another test of parity and perhaps move past the previous highs at the 1.0100 major psychological handle.
Event risks for this trade include the RBA interest rate statement next week, as traders project that the central bank might also shift to a dovish tone. Recall that the BOC decided to announce a surprise rate cut last week while the RBNZ dropped its hawkish bias in saying that their next move could either be a cut or a hike.
GBPJPY Short-Term Range | Resistance at 179.50
GBPJPY has been moving sideways, as the BOE and BOJ both share a slightly dovish monetary policy bias. In the minutes of their latest policy meeting released last week, the BOE indicated a unanimous vote to keep rates unchanged as weaker inflationary pressures could undermine economic progress.
Meanwhile, the BOJ still decided to keep monetary policy unchanged in their latest policy statement, although they are still open to further easing if necessary. The upcoming release of Japan’s core inflation figures should provide more clues on their next policy moves, as weak data could lead to yen weakness.
With that, the path of least resistance is to the upside, yet price still seems to be finding resistance at the 179.50-180.00 psychological levels. A break past this area could mean gains of around 350 pips, which is the same height as the rectangle chart pattern.
If resistance continues to hold though, GBPJPY could make its way back down to the bottom of the range at the 176.00 major psychological support. Risk aversion is still present in the financial markets and is favoring lower-yielding currencies like the yen. Strong spending and inflation data from Japan on Friday might also drive this pair lower.
New Wave Lower for Tesla Shares | Daily Descending Trend Line
Tesla shares showed increased downside momentum, as the price turned lower before even encountering resistance at the 50 simple moving average on the daily time frame. The shorter-term MA just crossed below the longer-term 200 SMA, confirming that a selloff is possible.
In this case, price could move to the previous lows at $190/share, which might still hold as support. On the other hand, a return in buying pressure could lead to a climb past the resistance area at $230/share and the formation of a double bottom reversal pattern.
For now, MACD is moving up, indicating that the share is oversold and may be due for a bounce sooner or later. RSI is moving down though, which means that buying pressure has yet to strengthen.
The recent FOMC statement lead to a selloff for most US equities, as the prospect of tightening could mean stricter credit and lower spending. This could weigh on purchases of big-ticket items, including Tesla’s cars. This might mean weaker profits for the company and further declines in share prices down the line.