FX Commentary 2 January 2019

Market Talk

– Belated Happy New Year. May we profit together from the FX market in 2019.

– China December Manufacturing PMI contracted for the first time in 19 months. This data reinforces the view that China’s economy is losing momentum. Dec data was 49.7 against expectation of 50.2.

– China’s President Xi vowed that the pace of reform will not stagnate. Market hopes that tax cuts, ample liquidity and trade talks with US will keep the Chinese economy from contracting.

– AUD/USD, being a proxy for China’s Yuan, was down despite CBA/Market Manufacturing PMI showing a slightly higher number 54.0 against an expectation of 53.7. Aussie hit a 52 weeks low of 0.70009 after breaking the strong support of 0.7020.

– Safe haven JPY was the strongest currency today on concerns over a slowing global economic growth, while Aussie was the weakest currency for today. We are expecting this trend to continue for the rest of the day.

– US government shutdown hurts the US currency. Expectation of a slower pace of rate hikes by the Federal Reserve also weighed on the US currency. Gold benefited from US$’s weakness with a push above $1286.

Chart Focus USD/SGD

Key Points

1. Sell USD/SGD recommendation

2. Sell USD/SGD at 1.3660. Stop at 1.3730 and target at 1.3570

3. Concerns over US government shutdown and expectation of a slower pace of US rate hike is weighing on US$

4. Price turning back from Fibonacci 38% correction with both momentum oscillators turning down are signs of a possible price decline

Fundamental Comments

1. Concerns over when Trump and Democrats can reach an agreement to end US government shutdown is hurting US$

2. Expectation of a slower pace of Federal Reserve rate hike is hurting US$ strength

Technical Comments

1. Price turning back from Fibonacci 38% correction could be a sign of a bearish turn of trend

2. Stochastic and MACD are both turning down from extreme condition are signs of a price decline.

Key Levels

Support 1.3630 1.3600 1.3570
Resistance 1.3665 1.3700 1.3735

Technical Overview

USD/JPY – Price has been declining and we see a support at 108.90 and a strong support zone at 108.60 to 108.40. We think price decline could be halted at 108.90. We do not see price falling below this support at the moment despite the strong bearish trend. Condition is oversold and we expect a correction first before the bearish trend can resume. Watch the reaction at 108.90.

Support 108.90 108.60 108.40
Resistance 109.40 109.80 110.10

EUR/USD – Price has moved above the previous week’s high of 1.1485 and we expect this trend to continue. We expect a test of 1.1540 in the next 48 hours as both MACD and Stochastic are still rising and not into extreme zone at the moment. MACD is bullish. Support is at 1.1430 and this support should not break if the bullish trend is to continue.

Support 1.1470 1.1430 1.1395
Resistance 1.1500 1.1540 1.1580

GBP/USD – MACD is turning bullish and we may see a rally to 1.2820 in the next 48 hours. For this rally to happen, price must not fall below 1.2700. We see price support at 1.2740, which is also near to the 20EMA support of 1.2742. The first resistance is at 1.2780 and a break will bring price higher to 1.2820.

Support 1.2740 1.2705 1.2680
Resistance 1.2780 1.2820 1.2880

XAU/USD – The trend is bullish and price will continue to rise towards 1300 in the next 24 hours but we do not think price will cross over 1304. Stochastic is near to extreme level but MACD is bullish and still rising and could bring price higher to 1300. Support is provided by 20EMA at the moment at 1270.

Support 1282.20 1274.80 1266.50
Resistance 1289.90 1296.85 1303.10

USD/CAD – We see last week’s high of 1.3663 as the temporary high and a price correction lower to 1.3540 in the next 48 hours. Both Stochastic and MACD are turning down from their extreme condition and price could decline in line with both momentum oscillators. However, MACD is still bullish and the turn lower could be a correction.

Support 1.3565 1.3530 1.3505
Resistance 1.3630 1.3663 1.3720

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