FX Commentary 4 March 2019

Market Talk

– WSJ and Bloomberg have reported that US and China are close to striking a trade deal after a year-long tariffs skirmish. WSJ further reported that around Mar 27, during a summit between Trump and Xi, a trade deal would be signed.

– This morning China foreign ministry said that new foreign investment law would be introduced to strengthen IP protection. This is another sign that a trade deal between the 2 largest economies is likely.

– EU’s chief negotiator Barnier was ready to give UK further guarantees that Irish backstop was temporary. This could be the biggest break for May’s Brexit deal and a possible Brexit deal before Mar 29.

– Fed’s member Bostic commented that US data has come in pretty weak at the start of 2019. ISM data showed manufacturing activity for February dropped to its lowest since November 2016, while the University of Michigan survey showed consumer sentiment fell short of expectations in the month.

– Despite the poor US data and an increase in risk appetite with a trade deal likely to be reached within weeks, US$ was the strongest currency on Friday, making gains against its peers and a big gain against Gold.

Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation

2. Buy USD/CAD at 1.3245. Stop at 1.3195 and target at 1.3345

3. Weak Canadian GDP number compared to US and interest rate differential are weighing on the Canadian dollar.

4. Strong price movement is hinting of another rally with MACD strong and bullish.

Fundamental Comments

1. Weak Canadian data is weighing on the Canadian dollar.

2. Interest rate differential is favouring the US$

Technical Comments

1. Price rally was strong as measured by Fibonacci and could have another price advance to complete this rally

2. MACD is bullish and strong

Key Levels

Support 1.3270 1.3230 1.3200
Resistance 1.3300 1.3330 1.3350

Technical Overview

USD/JPY – Price broke above a rectangle consolidation and should be moving higher. The target of this rectangle chart pattern is 112.25. MACD is strong and bullish. Stochastic is into overbought extreme but with the strong MACD, price should be able to advance higher. Only a move below 110.20 would negate our bullish view.

Support 111.85 111.60 111.25
Resistance 112.25 112.60 112.85

EUR/USD – Price has settled into a 50pips range and is not showing any directional preference at the moment. MACD is getting flat and neutral and not giving any hint. Stochastic is on the low side and neutral. Stay aside for the moment and wait for better directional clue.

Support 1.1350 1.1315 1.1290
Resistance 1.1390 1.1420 1.1460

GBP/USD – Our position was stop out on Friday night when US$ strengthened against its peers. Stochastic is moving higher from oversold extreme and MACD is bullish and moving higher as well. Price may be moving up to 1.3280 again. A move below 1.3200 would negate our short term bullish view.

Support 1.3205 1.3170 1.3145
Resistance 1.3245 1.3280 1.3315

XAU/USD – Gold reached our profit target but dropped more than we had expected and the decline does not look like it is completed. There could be one more possible decline to 1287. Stochastic is moving into oversold extreme but is able to support another price decline. A move above 1317 would negate our short term bearish view.

Support 1290.15 1286.35 1276.50
Resistance 1302.70 1317.10 1324.70

USD/SGD – Price reached our profit target on Friday night and we are out with 60 pips profit. Price may have reached a top as MACD is showing divergence warning of a possible high. However, Stochastic did not register a divergence warning. We prefer to wait for better clues on the side line at the moment.

Support 1.3515 1.3485 1.3440
Resistance 1.3555 1.3585 1.3610

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