Daily Market Review – 12/05/2015

Twitter Weakness to Drive US Stock Slump this Tuesday!

Stocks

AUDJPY Symmetrical Triangle | Upside Breakout Taking Place?

AUDJPY has formed a symmetrical triangle consolidation pattern on its 1-hour forex chart, as buyers and sellers struggle to pick a direction. Price got a boost earlier on in the week after China announced a surprise interest rate cut geared at supporting investment activity in the country.

Further gains past the triangle resistance could allow AUDJPY to rally by roughly 200 pips, which is the same height as the chart pattern. Resistance at the 96.00 handle could also be tested and if it holds, price could form an ascending triangle pattern instead.

Fundamentals still point to potential losses for the pair, as the RBA recently cut interest rates and Australia released a bleak jobs report. Data from China is coming up later on in the week and downbeat industrial production and retail sales figures might lead to speculations of weaker export demand for Australia.

Stochastic is already indicating overbought conditions on the 1-hour chart, signaling that another leg lower is likely. However, the short-term EMA is treading above the longer-term EMA, suggesting that the climb could carry on and that AUDJPY is currently supported by the pickup in risk appetite.

 

GBPJPY Bullish Flag | Uptrend Continuation Pattern

GBPJPY made another strong rally after the BOE interest rate decision, as the central bank decided to keep monetary policy unchanged. This follows the policymakers’ blackout period leading up to the UK election, which revealed that the Conservatives would stay in power and that a continuation of the government policies is in order.

This could also spark a continuation of the pound’s rallies, as GBPJPY formed a bullish flag pattern on its 1-hour chart. An upside break past the near-term resistance at 187.20 could confirm that more gains are in the cards. Meanwhile, a downside break could spark a market correction to the areas of interest.

Price could pull back to the previous resistance around the 186.00 major psychological level before heading further north or until the moving averages support for a market correction. The longer-term exponential moving average is in line with an area of interest and the 184.00 major psychological support.

Event risks for this setup include the BOE Inflation Report on Wednesday, which should shed more light on the central bank’s economic assessment and outlook. Also due then is the UK claimant count change, which might show another 20K drop in joblessness and bring the unemployment rate down from 5.6% to 5.5% in April.

 

Stocks

Strong Selloff for TWTR | Approaching Support at $30/Share

Twitter shares suffered a strong selloff in recent trading sessions, as the earnings report showed a grim outlook for the company. As it turns out, the social media platform is still having trouble retaining a strong user base compared to its other rivals like Facebook or Instagram.

Price is now treading close to the key support area around $30-35/share, which has held in the past months. A bounce off this floor could lead to a climb up to the next area of interest near $45-50/share, creating a range for stock price action. On the other hand, a break below support could signal the start of a longer-term drop.

Stochastic is already in the oversold area, registering a bullish divergence from the previous lows. Price made higher lows while the oscillator is drawing lower lows, suggesting that it’s about time for buying pressure to come back. However, the moving averages seem to suggest that further losses are likely.

The short-term exponential moving average on the daily chart just crossed below the longer-term EMA, indicating that a downtrend might be taking hold. A drop below $30/share could lead to around $10 in losses, as this is the same height as the current range.