Daily Market Review – 16/04/2015

Cisco and USDCAD Downtrend Imminent

Forex

NZDUSD

NZDUSD Triangle Breakout | Rally Until .8000?

NZDUSD has previously consolidated inside a symmetrical triangle chart pattern on its 4-hour forex chart and is breaking out to the upside. This suggests that the pair could be in for more gains and that a reversal from the longer-term downtrend is likely.

The chart pattern is around 300 pips tall, which means that the rally could last by the same amount. With that, NZDUSD could be able to climb until the .8000 major psychological resistance. A pullback to the broken triangle resistance around .7700 is still possible since stochastic is in the overbought region.

However, if the upside break proves to be a fakeout, price could still fall back inside the triangle pattern and test the support near the .7500 handle. Event risks for this trade today include the US initial jobless claims, along with the building permits and housing starts figures.

Earlier this week, New Zealand’s dairy auction indicated another fall in prices, which might indicate that the industry hasn’t fully recovered yet. This could be negative for the New Zealand dollar as it would imply lower milk payouts for farmers and lower trade revenues. Risk appetite seems to be shoring up the Kiwi for now, allowing the pair to stay afloat.

 

USDCAD

USDCAD Range Breakdown | Potential 400-Pip Selloff

After months of trading inside a range, USDCAD finally picked a direction and broke below support at the 1.2400 major psychological level. This suggests that the pair could be in for more losses, possibly of 400 pips or the same height as the range. If selling pressure is sustained, USDCAD could drop to the 1.2000 major psychological support.

A few days back, the US printed a dismal NFP reading, which was enough for the dollar to return most of its recent wins. After all, this led traders to reduce bets that the Fed can be able to hike interest rates this year.

Meanwhile, the BOC has sounded a bit more upbeat in their latest rate statement. Governor Poloz suggested that a recovery is already taking place in Canada, dousing fears that another surprise rate cut is likely.

However, if risk aversion returns and supports the safe-haven US dollar once more, the pair could head back inside the range and resume its climb back to the 1.2800 major psychological resistance. Stochastic is indicating oversold conditions on the 4-hour time frame, which means that sellers are already exhausted.

 

Stocks

CSCO Shares Reversal Pattern | Head and Shoulders Forming

CSCO shares seem to be done with their current climb, as a reversal pattern can be seen on its daily chart. A head and shoulders pattern is being created, with price still forming the right shoulder of the chart pattern.

If resistance at the current levels holds, price could head down to the neckline support around $27/share. A break below this area would confirm the longer-term drop, perhaps until the nearby support at $26/share or all the way down to $24/share.

Risk aversion and a downbeat outlook for the US economy has been weighing on equities these days, as the latest set of reports has been disappointing. This suggests that the supposed recovery is still facing headwinds and that the Fed might not be able to tighten monetary policy this year.

Apart from that, the IMF growth downgrade on the US economy and the weak data from China are also dragging higher-yielding assets lower, which adds to the weight on US equities and CSCO shares. If risk appetite improves though, the stock could still have a shot at testing the previous highs near $30/share.