Daily Market Review – 04/05/2015

Amazon Shares to Surge After Friday’s Stock Rally; Yen on Focus this Monday

 

Forex

NZDJPY Descending Triangle | Potential Downside Break

NZDJPY has formed lower highs and found support around the 90.00 to 90.50 levels, creating a descending triangle formation. Price could be in for a downside break, as fundamental reports from New Zealand and Japan indicate that the path of least resistance is to the downside.

In their policy statement last week, the RBNZ refrained from cutting interest rates but mentioned that they might ease later on if demand continues to weaken. Meanwhile, the BOJ has emphasized that they are not looking to increase their stimulus anytime soon and that policymakers are discussing the technical details of an exit strategy.

With that, NZDJPY could break below support at 90.00 and head lower by around 250 pips, which is the same height as the chart pattern. Stochastic is moving up for now though, suggesting that a bounce back to the triangle resistance is still possible.

If risk appetite surges in the next few days, the pair could still break past the resistance and go for more gains. This could take NZDJPY up to the previous highs near the 92.50 minor psychological resistance or higher. Event risks this week include the quarterly jobs release for New Zealand and the dairy industry auction.

 

CADJPY Rising Trend Line | Fibonacci Support Levels

CADJPY is on an uptrend on its short-term time frames, as the pair is moving above a rising trend line connecting the lows on the 1-hour chart. Price is gearing up to test the trend line support, which lines up with the Fibonacci retracement levels on the latest swing high and low.

In particular, the 50% Fibonacci retracement level appears to be holding as support, as this lines up with the 98.50 minor psychological level. In his latest testimony, BOC Governor Carney reiterated that he is seeing positive developments in the Canadian economy and that no further rate cuts are needed.

In Japan, data has been somewhat better than expected, although there are still signs of weakness in consumer spending and inflation. BOJ officials said that they are discussing the technical details of an exit strategy while one policymaker voted to taper their bond purchase program in the latest rate decision.

Event risks for this trade this week include the Canadian jobs release on Friday which might show strong gains in hiring. If so, CADJPY could resume its climb to the previous highs near 99.50 or higher to 100.00. On the other hand, weak data could spur a downside break and a potential reversal from the uptrend.

 

Stocks

AMZN Shares on MA Support | Renewed Upside Bias

Amazon shares might be ready to resume the climb after partially filling the gap on its latest rally. The stock price has previously surged to the $450/share level and is retreating to the short-term moving average support on its 4-hour chart.

If the short-term EMA already holds as a floor, AMZN shares could head back to the previous highs and beyond. However, a larger pullback to the longer-term EMA might still be possible, as this has also held as a dynamic inflection point in the past. For now, the short-term EMA is treading above the long-term EMA on longer-term time frames, confirming that the uptrend is likely to stay intact.

The main event risk for this setup is the US NFP release on Friday, during which the economy might show if the recent slowdown was just temporary or not. Strong data could renew demand for US equities and restore confidence in the US economy, apart from reviving Fed rate hike expectations.

Stochastic is indicating oversold conditions, which means that the recent correction might already be over and that the price could head north again. A larger pullback, however, could still last until the $380-400/share levels.