Daily Market Review – 29/04/2015

Pound Weakness may Dominate; US Stock Surge to Continue?

 

Forex

EURAUD Descending Channel | Countertrend Trade Scenario

EURAUD has been gradually treading lower, creating a descending trend channel on its 1-hour forex chart. At the moment, the pair is testing support at the channel bottom near the 1.3700 major psychological level and may be showing a countertrend trade opportunity.

Price could climb back to the top of the range around the 1.3900 major psychological level if the bottom of the channel holds as support. Increased selling pressure, however, could lead to a downside break of support and a stronger selloff for EURAUD.

The path of least resistance is to the upside, as the euro seems to be drawing support from hopes that the Greek debt trouble is about to reach a resolution soon. Positive developments have been reported in the latest negotiations, increasing the odds that Greece can avoid defaulting on its debt or exiting the euro zone.

Meanwhile, RBA Governor Stevens has recently mentioned that monetary policy will remain accommodative in Australia, which suggests that they might still be willing to cut rates in their next statement in May. For now, the moving averages are holding as dynamic resistance levels and stochastic is indicating overbought conditions, suggesting that another leg lower might be seen.

 

GBPNZD Short-Term Reversal | Head and Shoulders Forming

GBPNZD might soon erase its recent gains, as the pair is forming a reversal pattern on its 1-hour chart. Price is creating a head and shoulders formation, with the right shoulder still being completed for now.

The neckline is located at the 1.9800 major psychological support and a break below this area could confirm that a downtrend is in the cards. This could take price lower by roughly 200 pips, which is the same height as the formation. However, if 1.9800 continues to hold as support, GBPNZD could move back to its previous highs at the 2.0000 major psychological level.

Weaker than expected UK GDP data could keep gains in check for this pair, as the reading showed a mere 0.3% growth for the quarter versus the estimated 0.5% expansion. This is also weaker compared to the previous 0.6% GDP reading, suggesting that the UK economy is losing momentum and that the BOE might ditch its hawkish bias.

The RBNZ is set to announce its interest rate decision in the next Asian trading session though and dovish remarks are expected for this central bank. After all, an RBNZ official recently mentioned that they are not ready to hike rates anytime soon and that a cut might even be seen if inflation keeps dropping.

 

Stocks

Rebound in Tesla Shares | Uptrend Taking Hold?

After trading in a continuous downtrend since the latter half of 2014, Tesla shares showed convincing signs of a rebound in the past weeks. Price bounced off the major support near $180/share and proceeded to break above the falling trend line connecting the latest highs on the daily chart.

In addition, Tesla shares also broke above the exponential moving averages on the longer-term time frames. The short-term EMA seems to be making a cross above the long-term EMA, which is an early signal that an uptrend is about to take hold. Stochastic is still moving up but is almost in the overbought zone, indicating that a correction might be possible.

The pickup in oil prices has shored up Tesla shares, thanks to a pickup in demand for electronic cars. Prior to this, cheaper fuel costs have discouraged consumers from purchasing electronic alternatives. Aside from that, improved sentiment for the US economy could also mean stronger spending on big-ticket items.

Zooming out to the weekly time frame, however, reveals that a long-term reversal pattern is forming on the chart. A head and shoulders formation can be seen, with the right shoulder still being completed.