Market Talk
– AUD/USD was on the decline as major banks in Australia hiked home loan rates citing higher cost of funds as reason. This is a pressure on the RBA to cut its cash rate. Upcoming RBA meeting is scheduled for 5th Feb 2019.
– Reports that Trump won’t soften his hard line on trade with China just in return for a promise to buy more US goods reduced risk appetite sending JPY and CHF higher against its peers. It was reported that US wanted Beijing to move on more structural issues such as intellectual theft and forced technology transfers.
– US government shut down continues. Shutdown is likely to affect US growth rate in the 1Q of 2019 and a prolong shut down will have a bigger damper on growth in 2019 and a likely prolong pause in US rate hikes in 2019.
– UK press reported that 19 Remain ministers met in secret in a bid to stop a no-deal Brexit aided Sterling’s rise to almost 1.31. There is growing market expectations of an extension to exit deadline and a likely Brexit divorce deal.
– Tonight we have ECB press conference at 9.30pm after its rate decision at 8.45pm.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 109.75. Stop at 110.10 and target at 108.75
3. Trade tension between US and China has increased with Trump’s hard line stand and US government shut down will affect US growth rate
4. Price has a bearish Engulfing reversal pattern coupled with divergence warnings from MACD and Stochastic
Fundamental Comments
1. Trade tension between US and China is on the rise on news of Trump’s hard line stand on trade with China.
2. US government shut down is likely to affect US growth rate for 1Q 2019
Technical Comments
1. Price has a bearish Engulfing reversal candlestick pattern
2. Both MACD and Stochastic have bearish divergence warnings
Key Levels
| Support | 109.45 | 109.15 | 108.80 |
| Resistance | 109.85 | 110.25 | 110.50 |
Technical Overview
AUD/USD – Price reached a high of 0.7166 this morning and has fallen to 0.7090. There is a strong support at 0.7080 and with Stochastic coming into oversold extreme; we think the downside could be limited. MACD is still bearish at the moment. Resistance at 0.7115 is the level to watch as a move above could signal an end of the decline.
| Support | 0.7080 | 0.7045 | 0.7005 |
| Resistance | 0.7115 | 0.7165 | 0.7195 |
EUR/USD – Price reached a high of 1.1393 overnight but it looks like price is more likely to decline than signal a reversal. We are expecting an ABC correction with price likely to move down to 1.1360 again. Price will need to move above resistance zone of 1.1390 to 1.1410 to signal a reversal. Stochastic is moving lower but MACD is still bullish.
| Support | 1.1365 | 1.1335 | 1.1290 |
| Resistance | 1.1390 | 1.1415 | 1.1455 |
GBP/USD – Sterling has moved higher than our expectation. The 3-day swing rally could have ended or coming to an end. Stochastic is in overbought extreme zone at the moment. MACD is correcting lower but is still bullish. We are looking at a short term decline to 1.2990 in the next 24 hours.
| Support | 1.3055 | 1.3005 | 1.2970 |
| Resistance | 1.3095 | 1.3120 | 1.3150 |
XAU/USD – Our sell call was filled when price reached a high of 1285.73. We think it is safe to bring stop down to cost and keep profit target at 1266.40. MACD is bearish and moving lower. Stochastic has yet to reach oversold extreme. We think there is downside potential and see 1276.30 the support to break for a movement towards 1266.40
| Support | 1276.30 | 1270.80 | 1266.40 |
| Resistance | 1282.60 | 1286.50 | 1290.60 |
USD/CAD – Price was supported at the 20EMA at 1.3320 and with MACD still bullish and rising, we think there is a good chance of price moving to 1.3420. This is the 50% Fibonacci correction of the decline from 1.3660 to 1.3180. We think price will not be able to move above 1.3420 in this rally.
| Support | 1.3345 | 1.3325 | 1.3295 |
| Resistance | 1.3390 | 1.3425 | 1.3450 |
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