Daily Market Review – 05/05/2015

Bearish Correction for Microsoft; GBPUSD Weakness on Focus!



GBPUSD Bearish Flag | Downtrend Continuation Signal

GBPUSD has sold off sharply in the past few days, as data from the UK has been coming in weaker than expected. The pair fell after testing resistance near the 1.5500 major psychological level and looks ready to resume its longer-term drop.

Price is consolidating around the 1.5150 minor psychological level for now though, as traders are waiting for top-tier catalysts before picking a direction. For the UK, the construction and services PMIs are up for release this week and a drop in the readings could spell more weakness for the pound.

As for the US, the non-farm payrolls report due on Friday could set the tone for longer-term dollar movements since this would confirm whether or not the recent downturn has been temporary. If so, the US dollar could regain ground and push GBPUSD back to the 1.5000 major psychological support or lower. On the other hand, a bleak US jobs report might lift GBPUSD back to the 1.5500 handle.

Stochastic is on middle ground but seems to be on its way down, suggesting that the path of least resistance is to the downside. A long red candle closing below the 1.5150 minor psychological might be enough to confirm that downside pressure is picking up.


EURJPY Trend Exhaustion | Potential Reversal Scenario

EURJPY has been on a tear lately, boosted by positive expectations for the Greek debt talks and risk appetite. However, the pair might be gearing up to return some of its recent wins, as price is having difficulty sustaining its climb past the 135.00 major psychological resistance.

A short-term reversal pattern can be seen at the top of the rally, indicating that a downtrend might take place soon. The pair has formed a descending triangle pattern with support around 133.50 to 134.00. A break below this area could confirm that further losses are in the cards.

This pair could go either way though, as both the euro zone and Japan are fundamentally weak but are slowly seeing signs of improvement. Further progress in the Greek debt situation could keep the shared currency supported, as risk appetite could also drive traders away from the lower-yielding Japanese yen.

Stochastic is still pointing down, indicating that selling pressure is present and that price could be in for a decline soon. If so, the pair could head lower by around 150 to 200 pips, which is the same height as the short-term triangle pattern. On the other hand, an upside break past 134.00 could lead to a rally beyond the 135.00 handle.



Pullback on MSFT Shares? | Retracement to Moving Average

On its short-term time frames, MSFT shares are showing signs of retreat from the recent rally. After topping at around $49/share, the price is heading towards an area of interest visible on the 1-hour chart.

For now, the short-term moving average is still above the long-term moving average, indicating that the climb is likely to be sustained. If so, MSFT shares could soon head back to the $49/share level or perhaps make its way to new highs near $50/share.

Stochastic has just reached the oversold region, indicating that buying pressure is about to return once the oscillator starts heading back up. However, if selling pressure is maintained, MSFT shares could make a deeper pullback to the moving average support at $46/share.

A larger correction might even last until $43/share, which lines up with a former resistance level. A break below this region could confirm that a longer-term selloff is taking place and that price could test support at $40-41/share next. The company’s latest earnings report came in higher than expected in terms of EPS, sales, and profit.