FX Commentary 30 January 2019

Market Talk

– UK Parliament ruled out a hard Brexit but it is not a blinding amendment. An amendment to replace Irish backstop with alternative arrangements was passed. Sterling dropped on fresh concerns about the possibility of a “no-deal” Brexit as EU warned before and after the parliament vote, that it was not opened to re-negotiation

– Irish Foreign Minister said backstop is necessary. France’s President Office released an official statement that EU-UK Brexit deal, including backstop are not up for negotiation. If an agreement cannot be reached, there is a real possibility of a hard Brexit.

– China’s Vice Premier Liu He will lead and present road map for reforms on Wed and Thurs in talks with US officials in an attempt to resolve deep trade differences and IP issues. There are few indications that China are willing to meet US demands to protect IP rights and forced companies to transfer technology to Chinese firms.

– US consumer confidence fell to an 18-month low, keeping US$ weak. Gold benefited from a weak US$ to reach an 8-month high. Australia’s 4Q CPI beat expectations, sending AUD/USD back to its recent high near 0.72 again.

– FOMC is at tomorrow morning at 3am. No change is expected. FOMC’s press conference is at 3.30am.

Chart Focus NZD/USD

Key Points

1. Trading buy NZD/USD recommendation

2. Buy NZD/USD at 0.6840. Stop at 0.6810 and target at 0.6910

3. A pause in US rate hike and a poor consumer sentiment number are likely to weigh on the US$

4. Price in a rising channel with bullish momentum is a hint of a price up move

Fundamental Comments

1. US consumer sentiment for Jan 2019 fell to an 18-month low, hinting of a weak economy

2. Fed’s pause in rate hike is likely to weigh on the US$

Technical Comments

1. Price is in a rising channel with 20EMA support at 0.6840

2. Momentum is both bullish and rising and hinting of a rising price trend

Key Levels

Support 0.6835 0.6805 0.6775
Resistance 0.6870 0.6910 0.6940

Technical Overview

USD/JPY – Our stop at 109.50 was hit and we are out with a 25 pips profit. We remain bearish and expect price to be capped at 109.55. We see price going lower to 109.10 again in the next 24 hours. MACD is turning bearish and moving lower. Stochastic has room to decline.

Support 109.10 108.75 108.40
Resistance 109.55 109.85 110.20

EUR/USD – Our view has been bullish for the past 3 days. However price has been unable to move above resistance at 1.1450 and we have divergence warnings from both MACD and Stochastic. If price is unable to break above this resistance, it is likely to reversal lower. A price move below 1.1390 would confirm a bearish trend in progress.

Support 1.1415 1.1388 1.1355
Resistance 1.1450 1.1490 1.1515

GBP/USD – Price fell after parliament vote last night to a low of 1.3060. The pullback to 1.3100 could offer a good opportunity to get into a short position for 1.3015 in the next 48 hours. The trend is bearish and looks incomplete. MACD is still bearish and moving lower. A price move above 1.3140 would negate our bearish view.

Support 1.3060 1.3030 1.3005
Resistance 1.3100 1.3140 1.3180

XAU/USD – Gold continues its rally into 1314. While there is divergence occurring, price has not shown any signs of a reversal as yet. The next resistance zone is from 1319.95 to 1326.60. We do not think price will exceed this zone in this current rally as Stochastic is into overbought extreme and MACD might be showing a divergence soon.

Support 1310.25 1304.80 1297.30
Resistance 1315.10 1319.95 1326.60

USD/CAD – Our sell order was filled and we are short at 1.3270. View and target remain the same. We would recommend bringing stop down to 1.3290 to reduce our loss if there is a change in trend. Crude oil price has gone up and we expected this and a bearish MACD momentum to bring price lower to 1.3185.

Support 1.3245 1.3205 1.3180
Resistance 1.3290 1.3325 1.3355

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