Daily Market Review – 18/05/2015

EURUSD and GBPUSD Return to the Spotlight Today!


EURUSD Rising Channel Resistance | Short-Term Market Correction

EURUSD is establishing an uptrend on its short-term time frames but may be due for a quick correction, as the pair is testing the top of the rising channel on its 1-hour chart. If the resistance around 1.1400 is able to keep gains in check, a pullback to the channel support at 1.1300 to 1.1350 is likely.

For now, the short-term EMA is treading above the longer-term EMA, confirming that the uptrend is likely to carry on. Stochastic is already indicating overbought conditions though, also confirming that a quick selloff might be possible

If buying momentum is sustained, an upside break past the channel resistance and a move towards the 1.1500 major psychological level might take place. On the other hand, a sudden return in bearish pressure could lead to a break of the channel support and a prolonged selloff for the pair.
There are no major events lined up from both the euro zone and the US economy today, although the path of least resistance could be to the upside since the latest set of data from the US fell short of expectations. Later on this week, the FOMC minutes could prove to be a huge event risk, followed by the PMI releases from Germany and France.


Potential Pullback on GBPUSD | Support at 1.5400

GBPUSD has been on a stellar rally, following the UK elections and the BOE Inflation Report. Although the central bank expressed some degree of disappointment with the current economic performance, they did show confidence in their outlook and confirmed that their next move is still likely to be a rate hike.

Traders also seemed to ignore weaker than expected jobs data from the UK, indicating that many are hopeful that the BOE can maintain their hawkish stance. UK retail sales are up for release this week and a strong rebound is eyed, which would confirm BOE Governor Carney’s claim that the downturn in price levels would translate to stronger spending.

A rising trend line can be drawn to connect the recent lows of price action on the 4-hour forex chart of GBPUSD. This coincides with the longer-term EMA, which has also held as dynamic support in the past. A bounce off this area, which is around the 1.5400 major psychological level, could lead to a test of the previous highs around 1.5700.

On the other hand, a surge in dollar demand could lead to a break of the trend line and a potential downtrend for GBPUSD. The upcoming release of the FOMC minutes could be a catalyst for a strong move in either direction this week.



Correction on Walmart Shares | Resistance Around $80/Share

On its daily time frame, Walmart shares seem to be bottoming out from the latest drop and may be due for a pullback. Price could retreat to the long-term descending trend line, which is near the long-term EMA and the $80/share level before resuming its drop.

Earnings reports from the big retailers in the US are up for release this week and strong data could allow for a larger pop higher for WMT. On the other hand, bleak data could lead to the downtrend to resume right away, without a large market correction to the potential resistance zones.

Stochastic is moving up for now, indicating that buying pressure is present and that sellers are taking it easy. If the oscillator reaches the overbought zone and turns lower, WMT could follow in its footsteps and head right back down as well.

Support at the $78/share level is still holding and a break below this floor would confirm that a longer-term selloff is taking place. Next lows could be located around the $75-76/share levels. On the other hand, a strong rally past the $80/share mark might indicate a possible uptrend later on.