FX Commentary 23 January 2019

Market Talk

– BOJ kept monetary policy unchanged but downgraded inflation forecasts for 2019 primarily due to sharp fall in the price of crude oil. BOJ pledged to maintain current extremely low interest rates for an extended period of time, reflecting the uncertain economic outlook for 2019.

– Swiss National Bank’s Maechler said negative rates and interventions are needed to prevent CHF’s rise. We can expect CHF to remain weak against the EUR and against US$.

– Sterling gained on growing expectations that UK’s departure from the EU could be delayed amid continued parliamentary wrangling over Brexit terms. Labour party said it will support an amendment aim at forcing Article 50 from Mar to end of 2019 should parliament failed to agree on a withdrawal deal by end of Feb 2019.

– Kudlow denied cancellation of preparatory meeting with China at the end of Jan 2019. He reiterated that fulsome discussion is going on even though there is difficulty in talks. US and China had planned trade talks aim at resolving trade fictions and tariffs at the end of Jan 2019.

– World Economic Forum starts today in Davos. With many world leaders, including Trump, not attending the forum, we do no a major impact from the World Economic Forum.

Chart Focus Gold

Key Points

1. Sell Gold recommendation

2. Sell Gold at 1285.60. Stop at 1292.40 and target at 1266.40

3. Gold price is still correcting from a 12% price rally from Aug 2018 to Dec 2018

4. Price is capped at a strong resistance point and with MACD and Stochastic turning down, could see a decline.

Fundamental Comments

1. Gold had a 12% price rally on talk of a slower pace of US rate hikes and a price correction is underway at the moment

2. With a limited upside and a high holding cost, price could be due for a short term decline.

Technical Comments

1. Price correction from a support is capped at the previous strong chart point

2. MACD is bearish and is turning down. Stochastic is also turning lower from overbought extreme.

Key Levels

Support 1280.90 1276.50 1270.15
Resistance 1285.75 1292.15 1294.90

Technical Overview

USD/JPY – Price reached a low of 109.14 but has bounced back higher to 109.80 this morning. Our first target at 109.25 was met but 108.80 looks unattainable. Price is likely to be support at 109.50 and could be heading higher above 109.85 with a likely target at 110.25. Both Stochastic and MACD are turning higher and are supportive of a possible price rally to 110.25.

Support 109.50 109.15 108.80
Resistance 109.85 110.25 110.50

EUR/USD – Price reached a low of 1.1335 yesterday with divergence warnings from both MACD and Stochastic. We think the final decline is done and price could be heading higher over the next few days. A move above 1.1390 would confirm the rally and a low in place.

Support 1.1335 1.1290 1.1265
Resistance 1.1365 1.1390 1.1455

GBP/USD – Our Sterling view remains the same as yesterday. We are expecting price to test 1.3000 over the next couple of days. Price is currently up to 1.2975. Support is at 1.2910 and should hold for 1.3000’s test to happen. MACD is still bullish but Stochastic is into overbought extreme.

Support 1.2920 1.2890 1.2825
Resistance 1.2970 1.3010 1.3045

AUD/USD – Yesterday, we made an amendment to our profit objective for our open AUD/USD position. Price reached a low of 0.7115 and we are out with a profit of 60 pips. While Stochastic is rising from oversold extreme, MACD is still bearish. There is still a possibility of price going to 0.7080 but it will depend on resistance at 0.7160 capping the advance.

Support 0.7115 0.7080 0.7045
Resistance 0.7160 0.7190 0.7235

USD/CAD – Price reached 1.3357 overnight and with Stochastic turning down and MACD showing weakness, there could be a price movement to test the low at 1.3185 again. MACD is weak but is still bullish. There is a possibility of price going higher to 1.3400 but this is not our preferred view.

Support 1.3315 1.3280 1.3235
Resistance 1.3365 1.3405 1.3425

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.