FX Commentary 19 February 2019

Market Talk

– RBA outlined its shift from a tightening bias to a “more evenly balanced” neutral policy stance in its policy statement’s minutes released today. While it is not new, Aussie was weaker against its peers as a result. NZ$ was also dragged lower.

– BOJ’s Kuroda, speaking in Japanese parliament, will mull over “easing policy further” if FX moves hurt economy, price and threatens achievement of price goal. Tankan for January showed manufacturing and services both falling to multi-year low this morning.

– Juncker said EU is agreeable to UK asking for an extension. EU again reiterated that Brexit withdrawal agreement is not open for re-negotiation. UK’s Labour Party experienced a split with 7 MPs leaving in protest against Corbyn’s leadership, adding to gloom surrounding the British pound.

– There were talks of Auto tariffs being proposed for European cars but Juncker said Trump gave words that there would be no tariffs on European cars. EU responded by saying it would act swiftly against tariffs.

– Bundesbank said German growth slowdown is likely to persist in 1H of 2019. Villeroy said rate move hinges on duration of economic downturn. Pessimistic economic outlook and talks of auto tariffs are likely to weigh down Euro currency.

Chart Focus AUD/USD

Key Points

1. Trading Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7125. Stop at 0.7165 and target at 0.7055

3. RBA neutral stance and a reduction in risk appetite are weighing on Aussie

4. Price capped at 127% Fibonacci point with Stochastic moving lower is a bearish sign

Fundamental Comments

1. RBA switch from a tightening to a neutral stance is likely to weigh on Aussie

2. Auto tariffs is reducing investors risk appetite and moving funds into safe haven US$

Technical Comments

1. Price was capped by Fibonacci 127% point, hinting of a corrective rally.

2. Stochastic is moving down from overbought extreme hinting of a price decline.

Key Levels

Support 0.7105 0.7070 0.7050
Resistance 0.7140 0.7160 0.7195

Technical Overview

USD/JPY – Our sell call yesterday was filled. Our view remains the same. However this morning Kuroda’s hint of further easing is likely to weigh on the JPY. We could see US$/JPY moving higher. MACD is still bearish. Stochastic is near to overbought extreme. Watch the reaction at Fibonacci 62% correction point at 110.80.

Support 110.45 110.25 109.95
Resistance 110.80 111.15 111.40

EUR/USD – Price has reversed just before the important resistance point at 1.1350. MACD has turned bearish and moving lower. Stochastic has a bearish crossover in overbought extreme and is moving lower. We think price is likely to test the previous low at 1.1235 again in the next couple of days. A move above 1.1350 would negate our bearish view.

Support 1.1285 1.1255 1.1230
Resistance 1.1330 1.1350 1.1390

GBP/USD – Price reached a high of 1.2940 this morning and we think this could be the peak in price. We see price going lower 1.2840 to if price is unable to break above 1.2960. Stochastic has a bearish crossover in the overbought extreme but MACD is still bullish at the moment. A move above 1.2960 would negate our bearish view.

Support 1.2890 1.2840 1.2805
Resistance 1.2940 1.2960 1.3000

XAU/USD – Gold reached a high of 1327.50 yesterday. If price is unable to move above this resistance, there may be a correction to 1315.30. As there is no bearish divergence warning, we feel there could be more upside as long as price can hold above 20EMA support at 1319.

Support 1319.30 1314.10 1305.70
Resistance 1327.50 1331.80 1334.60

NZD/USD – Our stop loss was triggered this morning. We are out with a 20 pips profit. Price have likely hit a high at 0.6892 and could be on its way lower to 0.6785. A break of this support would open the door to 0.6720. MACD has given a divergence warning. Stochastic is turning down from overbought zone. Watch the support at 0.6785.

Support 0.6825 0.6790 0.6765
Resistance 0.6860 0.6895 0.6930

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