Traders to Ditch Google and USDCAD this Wednesday
USDCAD Approaching Range Bottom | Support at 1.2400
Thanks to weak US retail sales data, the Greenback sold off against the Canadian dollar recently and put USDCAD close to the range support around the 1.2400 major psychological level. In fact, a descending triangle pattern can be seen as the pair has formed lower highs.
A bounce off the 1.2400 support level could lead to another move back to the top of the triangle around the 1.2550 minor psychological resistance. However, if selling pressure is strong enough, a downside break could take place and lead to more losses for USDCAD. Take note that the triangle pattern is around 400 pips in height, which means that the resulting breakdown could be of the same size.
The IMF recently downgraded its growth forecasts for the US economy, indicating that the Fed might not be able to afford tightening monetary policy until the end of this year. The upcoming BOC interest rate decision could be a major event risk for this setup, as Governor Poloz might also give a downbeat assessment of the Canadian economy.
If risk sentiment continues to favor the US dollar against the Loonie, USDCAD might even see an upside break from the triangle formation and move up to the top of the range around the 1.2800 major psychological level.
CADJPY Nearing Top of the Range | Resistance at 96.50
CADJPY has been moving sideways on its short-term time frames, as the pair is struggling to pick a clear direction. Price just bounced off the bottom of its range and at the 94.50 minor psychological level and is nearing the top at the 96.50 minor psychological resistance.
Risk aversion is favoring the Japanese yen at the moment, as China just printed a round of weak economic data. While the quarterly GDP reading came in line with expectations of 7.0% growth, the industrial production and retail sales reports fell short of consensus.
Later on, the BOC interest rate decision might have a strong impact on this pair, as the Canadian central bank might maintain a dovish bias. Although the recent jobs figures showed stronger than expected headline results, underlying data revealed that the gains were mostly in part-time work and that labor force participation is falling.
With that, the path of least resistance is to the downside and price could fall upon hitting the top of the range. Stochastic is almost in the overbought region anyway, which means that Loonie bears might take control of price action soon enough.
Double Top Breakdown on Google | Potential Selloff to $500/Share
Google shares just confirmed a reversal pattern on its 4-hour time frame, as price broke below the neckline support of the double top formation. This suggests that GOOG could be in for more losses in the coming days, especially as confidence in the US economy has weakened.
GOOG could fall to the next support level around $500/share after the US retail sales report printed weaker than expected results and the IMF downgraded growth forecasts for the economy. This suggests that the recovery isn’t strong enough to warrant monetary policy tightening from the Fed.
However, if risk appetite picks up and supports US equities once more, Google shares could climb back above the resistance and head up to its former highs near $570-580/share. For now, stochastic on the 4-hour chart is pointing down, indicating that selling momentum is picking up.
The moving averages have also created a downward crossover, adding confirmation that a selloff is likely to take place. If these indicators move further apart, the bearish momentum could get stronger and the downtrend might be sharper.