Daily Market Review – 20/05/2015

Dollar Weakness to Return to the Forefront Today!


USDJPY Range Breakout | Resistance at 122.00

After months of trading inside a range between support at the 119.00 level and resistance at 120.50, USDJPY finally made a breakout to the upside. The pair could be in for more gains from here, possibly until the resistance at the 122.00 major psychological mark.

Stochastic is deep in the overbought region on the 4-hour chart, indicating that a market pullback may be in order. Price could retreat to the broken resistance at the 120.50 minor psychological level, which might now hold as support. On the other hand, a steeper selloff could last until the range support at 119.00.

The path of least resistance is to the upside, as the US central bank is closer to hiking rates compared to the BOJ. However, the release of the FOMC minutes today could prove to be a huge event risk, as this would contain the current economic assessment and outlook of Fed officials.

Recall that Fed Chairperson Yellen assured that the slowdown in the US economy is just transitory, but the lack of support from other FOMC members could indicate that further weakness is on the cards. This might also suggest that the Fed will wait longer before hiking interest rates.


USDCHF Double Bottom | Reversal Taking Place

USDCHF made a successful upside break from the neckline of the double bottom formation on its 4-hour time frame. Price is surging past the .9400 major psychological resistance and could be in for around 300 pips in gains, which is roughly the same height as the chart pattern.

With that, USDCHF could be in for a climb until the .9700 major psychological level. Further gains past this point could mean that a longer-term uptrend is underway. On the other hand, a move back below .9400 could show that the breakout is a false one and that a selloff back to the previous lows at .9100 is possible.

The main event risk for this trade is the FOMC minutes set for release in the New York trading session. This should indicate whether or not the Fed might hike interest rates soon, with most market participants counting on a move in September. Downbeat comments could force the dollar to retreat, as this might suggest that the Fed could wait until next year before tightening.

On the other hand, optimistic remarks from Fed officials could allow USDCHF to sustain its climb as it would hint that a rate hike next month is still possible. There are no reports lined up from Switzerland today but recent data has disappointed.



More Gains for Netflix Shares? | No Retracement in Sight

Netflix shares have been surging in the past few days, as the stock is now trading past the $600/share level. Stock analysts say that NFLX might even reach the $700/share mark soon, as movie streaming services pick up globally.

The short-term moving average is moving higher than the long-term moving average on the long-term charts of the stock, confirming that more gains are likely. In addition, the indicators are treading further apart, reflecting growing strength in the trend.

However, should a market correction take place, Netflix shares could draw support from the nearby areas of interest at $600/share or lower until the longer-term EMA, which has acted as support in the past. Stochastic is almost in the overbought area, hinting that a correction is due.

A larger pullback could last until the $480/share level, which has been a broken resistance mark. This lines up with the 50% Fibonacci retracement on the latest swing high and low. The stock is in the middle of a technical breakout, which also happens to be supported by stronger company fundamentals.