FX Commentary 26 February 2019

Market Talk

– May and Juncker are reported to have made good progress on political declaration tweaks and agreed on a need to conclude Brexit work by March’s summit but Dutch PM’s Rutte is skeptical of a Brexit breakthrough.

– May reiterated belief that extending Brexit doesn’t solve impasse but UK press reported May is to formally propose delaying Brexit deadline. May is scheduled to address parliament around 1400 GMT (10pm) time today. Together with news that Corbyn supported a public vote on Brexit sent Sterling to a 4-week peak.

– Trump called on OPEC to take it easy on oil, sending crude oil price lower. Canadian dollar was weaker as a result of a lower oil price. Canadian dollar had strengthened to a 15-day low before this news.

– Fed’s Bostic sees one rate hike a year in 2019 and 2020. Jan Chicago Fed national activity index was lower than expected but Feb Dallas Fed manufacturing index exceeded expectation by a wide margin. US$ was stronger against its peers as a result.

– Asian stock markets eased off from a 5-month high as investors curbed optimism on a likely trade deal between US and China. Market may have run ahead of itself as there are no deadline set or formal statements from either side after talks ended over the weekend.

Chart Focus Gold

Key Points

1. Sell Gold recommendation

2. Sell Gold at 1328.70. Stop at 1333.30 and target at 1310.10

3. An easing of optimism from trade talk and a warning of a rate hike a year in the next 2 year is giving US$ strength

4. Price is capped at the Fibonacci 50% correction with bearish momentum reading is warning of a resumption of the down move.

Fundamental Comments

1. An easing of optimism from trade deal is giving support to the US$

2. Strong US economic data and Fed Bostic’s view of a one rate hike a year in 2019 and 2020.

Technical Comments

1. Price is capped at the Fibonacci 50% retracement level, hinting of an end to the correction and a resumption of the down move

2. Stochastic is turning down from overbought zone and MACD is bearish

Key Levels

Support 1325.40 1317.70 1309.90
Resistance 1333.20 1337.50 1346.65

Technical Overview

USD/JPY – Price broke the previous high at 111.15 to reach a high of 111.23 overnight. Trend is mildly bullish at the moment. Price is also moving in a uptrend channel on the daily chart. However, both momentum indicators are not showing bullish trend. MACD is neutral and flat while Stochastic has no special hint. We would prefer to wait for better signal.

Support 110.55 110.25 109.95
Resistance 110.95 111.25 111.45

EUR/USD – Yesterday, price continued in a sideway range for the 4th day. MACD is currently flat and neutral while Stochastic is moving lower but not giving any special hint. We are expecting another range day for today. The range is likely to be 1.1370 to 1.1310.

Support 1.1310 1.1275 1.1235
Resistance 1.1355 1.1390 1.1425

GBP/USD – Price exceeded our 1st target at 1.3100 but fell short of our second target at 1.3160, reaching a high of 1.3148. There may be another push to 1.3160 but the upside could be limited for now and price could be moving lower to 1.3080 to unwind the overbought situation. MACD has not been strong despite a strong price rally.

Support 1.3120 1.3080 1.3030
Resistance 1.3160 1.3190 1.3215

AUD/USD – Price rally off the 0.7068 low may have ended. There is an Evening Star candlestick reversal pattern on the 4-Hourly chart. Stochastic is turning down from overbought zone. MACD is turning down and is currently close to the zero line. Support is at 20EMA at 0.7150. A break of this support will see a price decline to 0.7070 again.

Support 0.7150 0.7115 0.7070
Resistance 0.7185 0.7205 0.7240

USD/CHF – While our idea was right, our order was not filled as price reached a low of 0.9982. It may be a blessing our order is not filled as price is not showing the strong trend bias we were expecting. The rally off the low was weak. MACD was not able to turn bullish while Stochastic did not move above its previous high swing point. Watch the support at 0.9980 and neckline at 1.0025 for clues. Follow in the direction of the breakout.

Support 0.9980 0.9955 0.9910
Resistance 1.0025 1.0060 1.0095

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