GBPUSD Pair to Tumble; Bulls to Push Google Stock Much higher
GBPUSD Testing 1.5000 Lows | 38.2% Fibonacci Level Resistance
GBPUSD is currently testing the support at the 1.5000 major psychological level after bouncing off resistance at the 38.2% Fibonacci retracement level. This suggests that selling pressure has returned for the pair, as traders price in expectations ahead of this week’s set of events.
The BOE minutes are up for release mid-week and should indicate how policymakers are viewing the recent downturn in inflation. Recall that BOE Governor Carney has mentioned that the drop in price levels might actually wind up good for the UK economy if it spurs more consumer spending. If this view is supported by other policymakers, GBPUSD could bounce off the 1.5000 mark and start a larger market correction.
On the other hand, dovish remarks from most of the MPC could lead to a break below 1.5000 and further declines for GBPUSD. Also due then is the claimant count change, which might show a slowdown in hiring. Lack of wage growth could also add to selling pressure for GBPUSD.
As for the US economy, there are no event risks for today and tomorrow, as traders focus more on risk sentiment when it comes to dollar price action. So far, the recent release of Chinese data has surprised to the upside and appears to be supportive of higher-yielding currencies.
USDJPY Support Turned Resistance | Correction to 118.50 Level
USDJPY has recently pulled up from its downtrend as price bounced off the lows at the 116.00 major psychological support. The pair is retreating to the 118.50 minor psychological resistance, which lines up with the 50% Fibonacci retracement level on the 4-hour forex chart.
A higher retracement could last until 119.00, which might be the line in the sand for a corrective wave. A break past that resistance level could be a sign that a market reversal is taking place and that a test of the previous highs around 121.00 might be in the cards.
There are no event risks for the US dollar this week, as the dollar has mostly been reactive to market sentiment. So far, risk appetite appears present, as the latest round of data from China showed a decent rebound for the world’s second largest economy.
The catalyst for this retracement setup might be the BOJ interest rate decision, although no actual policy changes are expected for now. Dovish remarks might trigger a yen selloff if this leads traders to anticipate actual easing from the central bank later on.
GOOG Shares Find Support at $500 | Pullback to 50 Simple Moving Average
GOOG shares have been trading in a downtrend recently, as speculations of Fed tightening for this year have weighed on US equities early on. However, GOOG stock seems to be finding support around the $500/share level, which is in line with the previous lows.
With that, GOOG shares could pull up to the 50 simple moving average on the daily time frame, which has acted as a dynamic resistance level during the recent downtrend. A pullback to this area could mean a test of the resistance around $525-530/share.
Most stock analysts still hold a buy rating for GOOG shares and treat the recent slide as a fresh buying opportunity. Earnings reports are slated for release soon and a pickup in revenues might lead to another rally for the stock. Increased buying momentum and a rise in risk appetite could even result to an upside break of the 50 SMA.
The outlook for the company remains positive as well, with traders eyeing the positive valuation for the stock as a promising buy signal. Longer-term projections for GOOG shares range from $550-600/share this year.