FX Commentary 4 February 2019

Market Talk

– US Jan Non-Farm Payroll was much higher than expected at 304K against expectation of 165K. While the headline number was good, Average Hourly earnings dipped. Unemployment rate also increased to 4%. Fed’s Kaplan said inflation pressure is likely to be muted in a slower economy and Fed’s pause was the right thing to do.

– While UoM Consumer Confidence was above expectation, it was at its worst level since Trump was elected as President. Coupled with a lower hourly earnings and a higher unemployment rate, US$ was weaker against many of its peer except for the JPY.

– China’s Caixin Services PMI was 53.6 vs 53.4 (F) helping to calm worries over a hard landing in China. Last Friday, Caixin Manufacturing PMI contracted more than expected in Jan, dropping to a 23-month low.

– UK’s PM May is seeking a “pragmatic solution” to parliamentary stalemate on Brexit. She is seeking to negotiate with EU on alternative arrangements to replace Irish backstop. There is a news report that quoted Scotland’s First Minister Sturgeon calling for a 2nd referendum as UK is nowhere near to ready for Brexit.

– Wishing all our readers a very Happy and Profitable Lunar New Year 2019. 恭喜发财. Our report will resume on 7th Feb 2019.

Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7245. Stop at 0.7285 and target at 0.7180

3. Poor Australia’s data and a strong US data are likely to weigh down on Aussie dollar.

4. Reversal chart pattern and declining momentum are hints of a price decline.

Fundamental Comments

1. Australia Building Approvals for Dec was down more than expected at -0.84% vs +2% (F)

2. US$ is likely to stay supported as Friday’s US NFP was stronger than expected

Technical Comments

1. Possible Double Top chart pattern in formation which is hinting of a price reversal

2. Both MACD and Stochastic are moving lower, hinting of a price decline

Key Levels

Support 0.7225 0.7180 0.7135
Resistance 0.7265 0.7295 0.7335

Technical Overview

USD/JPY – Price reached a high of 109.57 on the back of a strong NFP number. The next resistance point lies at 109.73 and the important high is at 109.95. MACD is still bullish hinting of a bullish price trend. Stochastic is into overbought extreme and we see a corrective decline first before the bullish trend test 109.95 again in the next couple of days later.

Support 109.40 109.05 108.75
Resistance 109.70 109.95 110.20

EUR/USD – Price is likely to stay within a range of 1.1390 to 1.1515 for the next couple of days. MACD is getting flat, hinting of a sideway price movement. Stochastic is also in the middle of its range. Topside resistance at 1.1575 needs to be taken out if price trend is going to turn bullish.

Support 1.1440 1.1390 1.1355
Resistance 1.1490 1.1515 1.1545

GBP/USD – Price has been in a range of 1.3040 to 1.3160 for the past 3 trading days. We think price is likely to stay within this range for the next couple of days till there is new fresh development in Brexit. Both MACD and Stochastic are not giving any hints at the moment of the next price direction.

Support 1.3060 1.3015 1.2985
Resistance 1.3090 1.3135 1.3160

XAU/USD – Our sell call on Gold was filled on Friday and we would like to bring stop down to 1321.40 while keeping target at 1308.90. Both MACD and Stochastic are moving lower hinting of a price decline for Gold. However MACD is still bullish. This might be a corrective decline and not a bearish trend for gold.

Support 1314.40 1308.85 1304.30
Resistance 1320.90 1326.60 1334.45

USD/CAD – Price reached a high of 1.3157 before breaking down the support at 1.3118 to a low of 1.3068. While the trend is still bearish, there is a bullish divergence warning from MACD, hinting of a possible low. Stochastic is also turning higher. If price is able to hold support at 1.3068, it can go higher to 1.3190.

Support 1.3085 1.3055 1.3015
Resistance 1.3120 1.3160 1.3205

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