FX Commentary 14 February 2019

Market Talk

– Sterling gained on news of Brexit negotiator Robins’ words that it’s either May’s deal or a significant delay to the whole process. But its denial and a below expectation UK CPI sent Sterling back lower. Tusk said EU was waiting for concrete and realistic proposal from London to break Brexit impasse.

– Munchin and Lighthizer meet with Liu He today for trade talks to resolve tariffs dispute. US is said to be considering a 60 days extension to 1st March deadline. Optimism of a US-China trade deal was given a lift with news that Trump and Xi would meet in March.

– Two Fed speakers who spoke yesterday gave a similar view of 1 rate hike in 2019 while keeping a “wait and see” approach. Risk sentiment continued to stay buoyed on optimism of a US-China trade deal. US$ was stronger as a result except against Aussie and NZ dollar.

– Aussie dollar was helped by a better than expected China trade data. Canadian dollar could be stronger today after IEA warned that Venezuela crisis risked disrupting global crude oil market. Saudi Arabia said it would cut crude export and deliver an even deeper cut to its production. This could give rise to a crude oil price rally and a stronger Canadian dollar.

– Eurozone Dec Industrial Production was -0.9% against -0.4% expectation. Euro was weak against the US$, sending it to a 10-day low at 1.1248. Euro weakness against the US$ is expected to continue again today.

Chart Focus NZD/USD

Key Points

1. Buy recommendation on NZD/USD

2. Buy NZD/USD at 0.6815. Stop at 0.6765 and target at 0.6930

3. A less dovish RBNZ stance and optimism of a US-Sino trade deal is keep NZ$ strong

4. Price pullback to Fibonacci support with bullish MACD trend offers a good buying opportunity

Fundamental Comments

1. RBNZ was less dovish than other central banks and hinting interest rate could go either way is keeping NZD strong

2. Optimism of a US-Sino trade deal is weighing on US$ and keeping NZD strong

Technical Comments

1. Price pullback to the Fibonacci 50% point offers a good buying opportunity into a bullish trend

2. MACD trend is bullish and rising, hinting of further price upside.

Key Levels

Support 0.6820 0.6790 0.6760
Resistance 0.6850 0.6885 0.6930

Technical Overview

USD/JPY – Our sell call yesterday was wrong and got stopped out. Price trend is strong and despite divergence warning from MACD, is still continuing higher. The next resistance zone is at 111.20 to 111.40. Watch this resistance zone for directional clues. We are expecting a price reversal from this resistance zone. Above 111.40, the next price resistance is at 112.20

Support 110.90 110.65 110.30
Resistance 111.20 111.60 111.90

EUR/USD – Price was unable to move above 1.1350 yesterday and decline to a new 10-day low at 1.1249. There was a MACD divergence when price made another low at 1.1249. We think price could be near to a bottom. We favour a price move to test 1.1320 to 1.1350 today in a base building process. Stochastic is moving into oversold extreme but MACD trend is still bearish,

Support 1.1270 1.1245 1.1215
Resistance 1.1315 1.1350 1.1390

GBP/USD – Price reached a high of 1.2958 yesterday and from this point we saw a decline to 1.2842. Price managed to stay above 1.2830 and we think the decline could be near to its tail end or may have already ended. MACD has given a bullish divergence warning of a possible low. If price is able to stay above 1.2830, we should see another test of 1.2960 or 1.2990 again.

Support 1.2840 1.2805 1.2770
Resistance 1.2880 1.2910 1.2960

XAU/USD – Price has a false break to 1318.05 last night but dropped back to 1305. We think price is moving in a sideway correction at the moment. Momentum indicators are not giving any hints at the moment. We recommend looking at price boundaries at 1318 and 1302 for clues. We favour a move on the topside.

Support 1304.75 1301.40 1297.20
Resistance 1310.05 1315.50 1323.50

USD/CAD – Price failed to move above 1.3270 and has declined to 1.3235. We think price should be moving down to 1.3195 again. A break of this support will see a price move to 1.3170. MACD is still in a bearish trend at the moment and Stochastic is turning down. A price move above 1.3290 will negate our bearish view.

Support 1.3230 1.3195 1.3160
Resistance 1.3270 1.3305 1.3330

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