Daily Market Review – 13/05/2015

Greenback and Cisco Weakness to Be Paramount this Afternoon!


USDJPY Range Resistance | Support at 118.50

USDJPY is still moving sideways, with the pair’s range visible on the 4-hour forex chart. Price came off a test of the range resistance around the 120.00-120.50 levels and looks ready to head back to support at the 118.50 minor psychological level.

The main event risk for this setup today is the US retail sales release during the New York trading session. The headline reading is slated to show a 0.3% uptick while the core figure could indicate a 0.4% rise. Stronger than expected readings could allow the dollar to gain ground and possibly break above the range resistance against the yen.

On the other hand, weak data could remind traders that the Fed is not ready to hike interest rates just yet and may lead to a move below the range support. If so, USDJPY could be in for a longer-term selloff, possibly by around 200 pips, which is the same height as the range.

Stochastic is already in the oversold region on the 4-hour time frame though, indicating that a bounce is likely to take place if bullish momentum picks up. Earlier today, Japan printed a better than expected current account surplus, lending more support for the Japanese yen.


AUDJPY Ascending Triangle | Resistance at 96.00

AUDJPY could be due for a breakout soon since the pair is consolidating tightly inside an ascending triangle pattern on its short-term time frames. Price is hovering around the resistance at the 96.00 major psychological level while stochastic is moving down from the overbought zone, hinting that a downside break might take place.

If so, the pair could be in for around 200 pips in losses, which is the same height as the chart pattern. This could take AUDJPY down to the 92.00 major psychological level. Similarly, an upside break could last by around 200 pips and take price up to 98.00.

The path of least resistance is to the downside since Australia just cut interest rates while the BOJ has clarified that they are no longer looking to increase stimulus. In addition, China just cut interest rates over the weekend, signifying that the world’s second largest economy is facing weaker demand and might lower its export volumes from Australia.

The event risk for this setup is the release of Chinese data today, and these include the industrial production and retail sales reports. Weak readings are expected since the Chinese central bank just decided to cut interest rates a few days back to pre-empt any further economic slowdown.



Potential Reversal for CSCO | Moving Average Bounce

CSCO shares are still on an uptrend on the daily time frame for now but price could be in for a reversal since a head and shoulders pattern is forming. The stock is still creating the right shoulder of the formation and is still far away from testing the neckline support though.

A break below the $27/share level might confirm that further losses are in the cards, as this lines up with a near-term support and is below the moving averages. Just recently, CSCO shares bounced off the longer-term EMA support on the daily time frame and may be due to resume its climb to the previous highs near $30/share.

A move past the $30/share level could invalidate the potential reversal formation and allow the stock to establish stronger buying momentum. Event risks for this setup include the US retail sales release in today’s New York trading session, with strong figures likely to support equities and lead to more gains for CSCO.

On the other hand, weak data could undermine the ongoing recovery in the US and lead to lower demand for equities. Support at the $28/share or the moving averages might still hold if the data isn’t too far below expectations though.