FX Commentary 5 March 2019

Market Talk

– WSJ reported a formal agreement could be reached at a summit, likely around March 27, between President Donald Trump and Chinese President Xi. This introduces fresh optimism into financial markets and increases risk appetite leading to weakness in safe haven JPY.

– U.S. Treasury, which are surging on the back of trade optimism, and whose demand amplifies the dollar’s carry appeal via widening interest rate differentials is currently driving the US$ strength. Gold is the biggest loser in this market direction as well as Treasury yields.

– Euro dollar is sagging ahead of an ECB meeting this coming Thursday with speculation that more stimulus for the Euro region in the form of targeted longer-term refinancing operation (TLTRO) might be announced. Eurozone economy has been showing a drastic slowdown in economic growth since the start of the year.

– RBA left rates unchanged at its policy meeting today. Aussie dollar was little unchanged after the announcement of meeting result.

– China Caixin/Markit Services PMI for Feb came in at 51.1 below market expectation of 53.5. Aussie declined on this data but managed to hold above the previous low. China sets 2019 GDP growth forecast target at 6-6.5%

Chart Focus USD/JPY

Key Points

1. Buy USD/JPY recommendation

2. Buy USD/JPY at 111.70. Stop at 111.30 and target at 112.50

3. Demand for US Treasuries leads to demand for US$ while trade deal optimism is weighing on safe haven JPY

4. Wave structure, MACD and MACD histogram are pointing to a price rally.

Fundamental Comments

1. Trade deal optimism is weighing on safe haven JPY

2. Demand for US Treasuries is leading to demand for US$

Technical Comments

1. Price is in a sideway correction and wave structure is pointing to another rally.

2. MACD is bullish and MACD histogram is rising up, hinting of a price rally

Key Levels

Support 111.65 111.30 110.95
Resistance 112.05 112.45 112.85

Technical Overview

AUD/USD – Price is near to a previous low at 0.7050. Stochastic is weak but near to oversold extreme. MACD is showing divergence at the moment. If price is able to hold above this support, price may be able to recover towards 0.7145. A move above 0.7090 would be a hint of a price recovery.

Support 0.7050 0.7020 0.6985
Resistance 0.7090 0.7120 0.7150

EUR/USD – The decline overnight reached a low of 1.1308. This was also the 62% of the 1.1233 to 1.1420 rally. This decline could be a corrective decline and not a bearish trend. Watch the support at 1.1308 for directional clue. Stochastic is into oversold zone but MACD is bearish.

Support 1.1308 1.1275 1.1235
Resistance 1.1345 1.1380 1.1420

GBP/USD – Price reached a high of 1.3254 and has since turned down. It has moved beyond the low of the previous day. Price is in a bearish downtrend and in a corrective ABC pattern which could bring price lower to 1.3120. MACD is bearish but Stochastic is into oversold extreme.

Support 1.3150 1.3120 1.3095
Resistance 1.3180 1.3210 1.3250

XAU/USD – Price reached a low of 1282.70 overnight and this could be the temporary bottom. We may see a recovery in price to 1297.00 over the next couple of days. It may extend higher to 1302. After this recovery, we believe there could be another decline to 1278 to end this decline. MACD is bearish.

Support 1282.70 1276.60 1269.30
Resistance 1290.15 1296.70 1304.20

USD/CAD – Our buy call was not filled yesterday. Instead, price has moved higher. Price is now close to our target. Stochastic is deep into overbought extreme. MACD while still bullish is hinting of a pullback in price. We think the upside could be limited to 1.3350.

Support 1.3300 1.3275 1.3235
Resistance 1.3335 1.3375 1.3395

Related Posts

Leave a Reply

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