FX Commentary 9 January 2019

Market Talk

– US and China extended trade talks into a 3rd day. Trump is reported to want a trade deal with China soon to boost market. Market viewed it positively. Optimism of a trade deal is moving market out of safe haven and into riskier assets. Safe haven JPY, CHF and US$ are the 3 worst performing currencies this morning.

– Commodity currency Aussie was a big gainer while Canadian dollar gained on a rising crude oil price above US50/barrel on the heels of growing optimism of a trade deal boosting global economic market.

– German Industrial Output fell for a 3rd straight month but Euro currency was helped in part by a weak US$. Eurozone’s economy is slowing down and there could be a time delay in rate hike by ECB beyond the 4th quarter of 2019.

– Brexit debate starts tomorrow in UK parliament with vote on Brexit withdrawal deal on 15th Jan 2019. Sterling is expected to be volatile in the lead up to the vote. May is expected to suffer a defeat unless assurances by EU’s leaders on backstop can convince opponents within and outside her party to back her deal.

– Bank of Canada Rate Statement tonight at 11pm and news conference to follow at 11.15pm

Chart Focus GBP/USD

Key Points

1. Sell GBP/USD recommendation

2. Sell GBP/USD at 1.2750. Stop at 1.2800 and target at 1.2670

3. Brexit concerns are likely to weigh on Sterling with rejection likely to cause a big fall in price

4. Price capped at a strong resistance point with MACD bearish and Stochastic near its high does not bode well for Sterling

Fundamental Comments

1. Brexit concerns are likely to weigh on Sterling

2. Rejection of May’s Brexit withdrawal deal could lead to a big fall in Sterling value.

Technical Comments

1. Price has been capped at 1.2750 strong resistance point

2. Stochastic is near to overbought while MACD is still bearish.

Key Levels

Support 1.2705 1.2670 1.2645
Resistance 1.2750 1.2795 1.2815

Technical Overview

USD/JPY – We saw a price decline to 108.44 yesterday but price has bounced back higher again to 109.00. We think price is likely to stay within a range of 108.45 to 109.10 for today. We would recommend taking advantage of a price movement toward 109.00 to get into a short position for 108.50 as we see a possible range movement.

Support 108.70 108.45 108.00
Resistance 109.05 109.45 109.85

EUR/USD – Price move lower yesterday and stayed within the previous day’s range. This resulted in an Inside Day chart pattern and a hint of consolidation. The range to watch will be 1.1400 to 1.1485. MACD is flat and neutral while Stochastic is within its upper and lower range. Both oscillators are not giving hints at the moment. We will wait for further clues.

Support 1.1440 1.1410 1.1385
Resistance 1.1465 1.1490 1.1515

USD/CHF – Price could be forming a small triangle. There could be a one more decline before the downtrend is completed. MACD is still bearish at the moment while Stochastic is weak. This could be a hint of a decline. We think there should be a movement to 0.9660 to complete the down move.

Support 0.9795 0.9760 0.9735
Resistance 0.9820 0.9850 0.9890

XAU/USD – Gold is trading within 4th of Jan’s range and is forming a triangle chart pattern as well. The upper boundary is at 1291 while the lower boundary lies at 1280 at the moment. While MACD is neutral at the moment but Stochastic is near to oversold zone. Watch the lower boundary as a break could lead price lower to 1276.10.

Support 1280.10 1276.45 1269.75
Resistance 1283.75 1286.95 1290.10

USD/CAD – The downtrend continues and it could be heading toward the previous low of 1.3160. MACD has a divergence warning but MACD trend is very bearish and price has not shown any reversal as yet. We think the downtrend can continue towards 1.3160 despite Stochastic in deep oversold condition as the strong bearish trend overrides momentum.

Support 1.3215 1.3185 1.3160
Resistance 1.3265 1.3320 1.3370

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