FX Commentary 18 February 2019

Market Talk

– US-Sino trade talks are set to continue in Washington over some other key issues after consensus on some issues were met. Both countries said progress had been made. Trump said there was a possibility to push back trade deadline beyond 1st of March.

– ECB’s Coeure said it was possible for ECB to engage in another targeted longer term refinancing operation or TLTRO. Sluggish economic data in Eurozone has been overshadowing hopes for a 1st ECB rate hike in 2019. There are market doubts if ECB will hike rate in 2019 and Euro currency was weak against most of its peers.

– Sterling received a lift from a strong UK Retail Sales but Brexit negative sentiment capped Sterling’s gains. Talks are planned with EU, with May focusing on getting changes on backstop. May has promised Parliament an opportunity to debate and vote on the way forward if she is unable to conclude a deal which Parliament will vote in favour of by 26th Feb.

-Trump’s signing of spending bill averted a partial US government shutdown but his declaration of a national emergency on border security caused US$ to lose its strength in late Friday’s afternoon trading.

– US and Canada are both on holiday tonight. Liquidity will be poorer without the US market. After London closes at midnight till Australia and Asia comes in, liquidity might be poor.

Chart Focus USD/JPY

Key Points

1. Sell USD/JPY recommendation

2. Sell USD/JPY at 110.50. Stop at 110.95 and target at 109.75

3. Trump’s showdown with Congress and optimism of a trade tariffs resolution are weighing on the US$

4. Price is capped at Fibonacci 38% correction point and 20EMA with MACD turning bearish is a bearish sign.

Fundamental Comments

1. Trump’s showdown with Congress is likely to weigh on the US$

2. Growing optimism of a trade resolution between US and China is likely to weigh on safe haven US$

Technical Comments

1. Price is capped by Fibonacci 38% correction and 20EMA

2. MACD is turning bearish and hinting of a price decline.

Key Levels

Support 110.30 110.00 109.70
Resistance 110.65 110.95 111.15

Technical Overview

NZD/USD – Our position from 14th Feb is still pending. Price has reached the initial target at 0.6885. Price should be moving to 0.6930, after a short consolidation. MACD may show a divergence if the rally is not strong. This could be a hint of a price peak and inability to reach 0.6930. Bring stop higher to 0.6835.

Support 0.6850 0.6810 0.6790
Resistance 0.6890 0.6905 0.6940

EUR/USD – Price did not manage to move above 1.1350 and the bearish trend has not been reversed. Price has moved above a 3-day downtrend line, which could be the first sign of a pause in the bearish trend. MACD and Stochastic are both hinting of price rally. Watch the resistance at 1.1350 for reversal clues.

Support 1.1300 1.1270 1.1240
Resistance 1.1350 1.1390 1.1435

GBP/USD – The bearish trend continues unless price is able to move above 1.2960 to trigger a Double Bottom chart pattern and a Ichimoku reversal pattern. Both momentum indicators are moving higher and hinting of a price rally ahead. Watch the resistance at 1.2960 for directional clue.

Support 1.2895 1.2860 1.2825
Resistance 1.2960 1.3000 1.3030

XAU/USD – Our buy call on Friday was filled and price is now close to our profit objective. We would recommend bringing stop loss higher to 1317.80 and keep profit target at 1326.20. While Stochastic is into overbought extreme zone, MACD is still bullish and strong. Price reaction at 1326.20 is important. If price is unable to move above, it is likely to come back down to 1302 again.

Support 1318.20 1315.20 1307.90
Resistance 1326.20 1331.20 1339.70

USD/CAD – Price made a higher high than Feb 8th at 1.3440 but there were bearish divergence warnings from both MACD and Stochastic. Price has declined down to 1.3227 but we do not think this is the end of the decline. We are expecting this decline to continue to 1.3195. The next direction will be decided by the reaction at 1.3195.

Support 1.3220 1.3195 1.3150
Resistance 1.3255 1.3295 1.3310

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