FX Commentary 27 February 2019

Market Talk

– UK’s PM May will hold a meaningful vote on Brexit deal on the 12th of March. If she loses this meaningful vote, she will hold a new vote on leaving the EU without a deal the next day. Should parliament rejects both votes, a vote on a limited article 50 extension will be held on 14th March.

– May’s speech softened the impact of a no deal Brexit for the moment. If a deal cannot be reached, parliament is likely to extend Brexit deadline to end Jun 2019. Sterling jumped to a 5-month high against the US$ and a 21-month high against the Euro. Come July 2019, if a deal cannot be reached with EU, a no deal Brexit could be the outcome which market has yet to price in.

– Fed’s chairman Powell reiterated again the central bank would be patient and was in no rush to raising interest rate. Powell told Congress that the US economy should keep expanding at a solid though somewhat slower pace this year. Steady rate policy with economic growth was unable to keep US$ away from a 3-week low.

– OPEC chooses to stick to its quota and is pushing for more adherence, sending crude oil price higher and Canadian dollar stronger against the US$. We could see more declines in the USD/CAD in the coming sessions.

US’s President Trump meets North Korea’s President Kim in Vietnam for a second summit. Asian markets are higher on muted trading awaiting the outcome of this summit. This could further increase risk appetite and could be bad for safe haven JPY, CHF and US$.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation

2. Sell EUR/USD at 1.1375. Stop at 1.1415 and target at 1.1290

3. US economy is strong while Eurozone economy is weak, which is likely to lead to a decline in EUR/USD

4. Price is capped at Fibonacci 62% with MACD divergence warning of a price high.

Fundamental Comments

1. Fed’s Powell commented that the US economy should keep expanding at a solid pace though slower pace.

2. Eurozone’s economy drastic slowdown is in sharp contrast to US economy

Technical Comments

1. Price is capped at Fibonacci 62%, hinting of a possible price reversal

2. MACD is showing divergence, warning of possible price top

Key Levels

Support 1.1365 1.1320 1.1290
Resistance 1.1405 1.1435 1.1480

Technical Overview

USD/JPY – Price made a high of 111.23 two days ago but has since settled back into the range. The support is at 110.15 and a break of this support could trigger a move lower to 109.65. However, with MACD neutral and flat and Stochastic near to the low, a break is not likely. Rather price could be in for range trading again.

Support 110.45 110.25 109.95
Resistance 110.70 110.95 111.25

USD/SGD – Price decline has come close to the low of 31st Jan. Both MACD and Stochastic are showing divergence warning of a price bottom nearby. A price move above 1.3490 would confirm this price reversal and call for a move to 1.3575. A move below 1.3440 would negate our bullish scenario.

Support 1.3440 1.3405 1.3365
Resistance 1.3485 1.3515 1.3550

GBP/USD – Price reached a 5-month high on the back of Brexit news. With a no deal scenario averted and an extension likely, Sterling was able to rally to a high of 1.3287. Price is likely to consolidate as Stochastic is overbought. MACD is also near its high and could be pulling back lower. We see Sterling declining to support at 1.3180. Above 1.3290 would negate our consolidation view.

Support 1.3180 1.3130 1.3095
Resistance 1.3260 1.3300 1.3340

XAU/USD – Our sell order was filled overnight. Our view remains the same. Keep stop at 1333.30 and target at 1310.10. MACD is flat and neutral at the moment. Stochastic is in the middle of the range and not giving a good hint. As long as price is capped by 1333.20 high, there is a high chance of a decline to 1317.70 or 1310.10 to complete this decline.

Support 1323.30 1317.10 1303.90
Resistance 1333.20 1337.50 1346.65

USD/CAD – If price is able to hold above support at 1.3150, there is a good change of another test of the high at 1.3250 or 1.3280. Currently price is in the second part of a 3 parts correction progress from the low at 1.3118. Both momentum oscillators, Stochastic and MACD are not giving hints at the moment. A move above 1.3340 would negate our bearish view.

Support 1.3150 1.3110 1.3065
Resistance 1.3195 1.3240 1.3280

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.