New Zealand Dollar Braces as Emerging Markets, Stocks Vulnerable
By Daniel Dubrovsky
NEW ZEALAND DOLLAR FUNDAMENTAL FORECAST: BEARISH
The sentiment-linked New Zealand Dollar succumbed to intense selling pressure during the first week of October as risk trends dominated headlines.
Next week may offer a similar scenario with New Zealand Business Manufacturing PMI the notable domestic economic event risk. Given that the RBNZ is open to both a rate cut and hike as its next move, this places additional weight on how data performs.
The rest of the week also contains the IMF presenting its World Economic Outlook. Director Christine Lagarde has already expressed her concerns about trade wars and their consequences to global growth. More of the same reiteration there may upset the markets which would thus threaten to add losses back to the New Zealand Dollar.
The markets are also getting acclimated to the reality that tightening global credit conditions are here to stay as the Fed continues pursuing interest rate hikes. As the yield advantage between it and the RBNZ continues to widen, relatively speaking the New Zealand Dollar still has much to lose. Given these risks, the fundamental outlook will have to be bearish.
Amazon Bulls Double Down Despite Shaved Forecasts
By Shoshanna Delventhal
The Street’s relentless Amazon.com Inc. (AMZN) bulls continue to lift their price targets on shares of the online retail behemoth, predicting stock gains of up to 50% over 12 months even as shares pullback since the company reached the $1 trillion mark one month ago and the Street lowers revenue estimates.
“The increase in our price target is primarily due to higher long-term revenue and margin expectations driven by stronger than previously expected growth from Amazon’s retail, cloud, and advertising businesses,” wrote analysts at Stifel, who predict a 25% gain in Amazon stock, as outlined by Barron’s.
Since July 20, Amazon’s average price target has been raised 14.6% to $2,179.02.
Analysts’ forecast also show revenue growth will decelerate in the next three years, which is likely to affect stock growth.
Investors will closely watch the coming quarter’s earnings to see if Amazon can hit targets and maintain strong revenue growth. The key to the shaved revenue estimates and slowing revenue growth forecasts is that investors may have to temper their euphoric forecasts for Amazon.
Nonetheless, the majority of analysts on the Street are rooting for Amazon, with 43 out of 45 analysts rating at buy or outperform, according to Y Charts. Even with decelerated top line growth, bulls argue that revenue will remain robust.
Canadian dollar to rally; trade deal clips economic worry
By Fergal Smith
The Canadian dollar will rally over the coming year, according to currency strategists in a Reuters poll who raised their forecasts for the loonie as a deal to revamp the North American Free Trade Agreement reduced economic uncertainty.
The latest poll of more than 50 market strategists predicted the currency would edge up to C$1.2800 to the greenback.
U.S. President Donald Trump threatened to impose tariffs on Canadian autos if a trade deal was not reached. The Bank of Canada forecast in July that trade uncertainty could subtract about two-thirds of a percent from gross domestic product by the end of 2020.
With the trade deal clinched, investors have raised bets for as many as four additional interest rate increases from the Bank of Canada by the end of 2019.
Twitter Traders See Stock Rebounding 10% Short Term
By Michael J. Kramer
The shares of the social media company may be ready to rise by about 10% over the short term based on technical analysis and bets in the options market.
Analysts expect the company to report strong third-quarter earnings growth at the end of October.
Twitter’s stock plunged through a technical uptrend in the middle of July when shares gapped lower. The shares fell to near technical support around the price of $27.20 after dropping to less than $28 on October 2. However, now there are signs that Twitter’s stock is due to reverse and rise towards technical resistance around $31.90, an increase of over 10% from its current price of around $29.
The relative strength index (RSI) has been trending lower since mid-June when it rose to overbought levels near 90, an elevated level, only to plunge to oversold levels below 30 by the end of July. Since late July, the RSI has started to once again trend higher despite the stock continuing to fall, a bullish divergence. It signals that bullish momentum is now entering the stock.
Walmart’s Stock Faces Steeper Declines Ahead
By Michael J. Kramer
Walmart Inc.’s (WMT) stock remains 15% off its highs despite a rebound in the company’s shares in recent months. Now, technical analysis suggests the stock will pull back in the coming weeks, falling by about 7%.
Analysts have been reducing their earnings estimates for the upcoming fiscal third quarter 2019, which may fuel the stock decline.
Now, the stock is sitting on a technical support level at $93.40. Should it fall below that price, the stock could drop to about $90 and refill the technical gap. The strongest level of technical support comes at around $87, which is 7% lower than the stock’s current price of about $93.50.
The relative strength index is also bearish.
Walmart’s weak growth outlook is getting weaker.
Netflix Stock Could Reward Timely Short Sales
By Alan Farley
Netflix, Inc. (NFLX) ceded leadership of the FAANG complex in July, topping out and gapping down following a poorly received second quarter earnings report. Selling pressure eased in August, but the subsequent bounce has failed to fill the gap while weekly relative strength cycles have hit overbought levels. This potent combination raises the odds for a secondary downturn that rewards opportune short sales.
The company sharply lowered third quarter new subscriber guidance during the July confessional while talking down Wall Street earnings and revenue estimates. A wave of downgrades followed the news, but the usual suspects have come to the rescue in the past two months, talking up 2019 performance ahead of the Oct. 16 third quarter report. Even so, potential investors are acting cautiously, generating few technical signs of committed buying interest.
Earnings are less than two weeks away, which may dissuade risk-conscious short sellers from taking direct equity exposure. These reports have triggered high-percentage rallies and sell-offs in past quarters, inducing intense pain when caught on the wrong side of the equation.
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