FX Commentary 15 January 2019

Market Talk

– News that pro-Brexit conservatives will vote for May helped Sterling above 1.29 but her deal is likely to be defeated in parliament today. News that May might call for a 2nd vote incorporating Merkel’s concession should the 1st vote failed have been making its round as well as a delay to March’s exit from EU.

– China’s drop in exports reignited worries over a global economic slowdown. Contraction in China’s exports and imports pointed to a weakening of the world’s 2nd largest economy as well as faltering global demand.

– China plans more stimulus and fiscal measures to help the economy as economic slowdown deepened but it could risk weakening the Chinese currency.

– Eurozone’s Industrial Production contracted by more than expected, leading to a softer EUR/USD. Bank of Italy’s Rossi sees slowdown in Eurozone and an “acute” economic slowdown in Italy.

– Brexit vote will take place tomorrow morning between 2am to 4am. Be prepared for Sterling volatility.

Chart Focus EUR/USD

Key Points

1. Trading sell EUR/USD recommendation

2. Sell EUR/USD at 1.1485. Stop at 1.1520 and target at 1.1430

3. Worries over Eurozone economy and global economy are likely to weigh on Euro and favours US$

4. Price capped at 20EMA resistance with MACD turning bearish hints of a bearish downtrend

Fundamental Comments

1. Eurozone’s Industrial Production contracted more than expected and is a sign of growing economic slowdown in Eurozone

2. Worries over global economic slowdown are likely to send flows into safe haven and US$.

Technical Comments

1. Price has been capped at the 20EMA resistance

2. MACD is turning bearish and warning of a downturn

Key Levels

Support 1.1455 1.1425 1.1370
Resistance 1.1490 1.1525 1.1570

Technical Overview

USD/JPY – Price has moved above 108.50 but it is likely to be capped at 108.90 for today. MACD is still bullish but Stochastic has moved into overbought extreme. Price is still moving in a sideway range since the flash crash on 3rd Jan 2019. We expected this range movement to continue with 107.70 and 109.10 as boundaries.

Support 108.55 108.25 107.90
Resistance 108.95 109.15 109.45

AUD/USD – Price reached a low of 0.7175 yesterday and we are back to 0.7220 again. This could be part of a bigger correction of the rally since the beginning of the year. If this is the scenario, then price must not go above 0.7235 and price will eventually decline to 0.7160. MACD is still bullish but Stochastic is near to its high extreme.

Support 0.7200 0.7175 0.7150
Resistance 0.7220 0.7250 0.7280

GBP/USD – Voting is likely to take place between 2am to 4am tomorrow morning. There will be greater price volatility during that time. Be prepared for this greater volatility. May’s deal is expected to be defeated but Sterling has been moving higher on hopes of a delay in Brexit later than 29th March 2019.

Support 1.2885 1.2820 1.2775
Resistance 1.2935 1.2965 1.3025

XAU/USD – Price remains within the Triangle pattern and there is still no sign of a movement outside of the Triangle. Both MACD and Stochastic are neutral and not giving any hints. Our open position from 11th is still pending and we recommend closing the position for a loss of $0.80. We will wait for better signals to enter into a long position.

Support 1289.85 1285.95 1280.10
Resistance 1293.05 1296.90 1303.00

USD/CAD – We saw a mini Double Bottom chart pattern yesterday on the 4-hourly chart. Price broke above the neckline and the target was a move to 1.3327. We have seen a high of 1.3295 so far but we are not sure if the rally is completed. MACD and Stochastic are both turning down. Wait for better clues.

Support 1.3255 1.3220 1.3180
Resistance 1.3295 1.3330 1.3365

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