FX Commentary 8 March 2019

Market Talk

– EU is reported to be skeptical that a Brexit deal can be sealed before summit on 21st Mar. May’s spokesman said there is no plan for a 3rd vote if May’s deal is rejected next week. Brexit negotiation has hit an impasse just 3 weeks before deadline. EU is reported to have made a new offer to UK on backstop and we wait for UK’s response.

– ECB slashed its growth forecast, delayed a planned rate hike to 2020 and launched an emergency round of policy stimulus. This sudden action led investors fearing the worst for the Eurozone and global economy. This led to a strengthening of safe haven JPY and a rise in US Treasury yields.

– NY Times reported that China is worried about last-minutes changes in trade deal with US. China’s officials are not optimistic because of Trump’s habit of making last-minutes changes. We have seen that recently in a summit between Trump and Kim in Vietnam.

– Global economic growth came back to haunt the market again with ECB’s sudden change to a dovish stance. Safe haven JPY and US$ were the main beneficiaries. Euro hit a 21-month low against the US$. Current strong US$ strength could continue into next week if NFP comes in within expectation.

– Non-Farm Payroll data will be released tonight at 9.30pm. It is likely to add more volatility after last night ECB’s induced volatility and is likely to add more pressure to Euro currency.

Chart Focus EUR/AUD

Key Points

1. Sell EUR/AUD recommendation

2. Sell EUR/AUD at 1.5995. Stop at 1.6035 and target at 1.5905

3. New round of Euro policy stimulus and interest rate differential are weighing on the Euro

4. Price is capped at 20EMA resistance and strong bearish momentum is likely to push price lower

Fundamental Comments

1. Delayed Euro rate hike is keeping interest rate differential in Aussie favour

2. New round of policy stimulus is weighing on Euro in the short term

Technical Comments

1. Momentum is strong and bearish and is likely to continue pushing price lower

2. Resistance at 20EMA is likely to cap price advance

Key Levels

Support 1.5940 1.5905 1.5880
Resistance 1.5980 1.6005 1.6040

Technical Overview

USD/JPY – Price continued its decline into a 3rd day but the pace of decline has been gradual. We are expecting price to move lower to the Fibonacci 50% of the advance from 110.35 to 112.15. That level to watch out for is 111.25. We are expecting price to turn up from this level. A drop below 111.00 would negate our bullish view.

Support 111.25 110.95 110.65
Resistance 111.60 111.85 112.15

EUR/USD – Price broke the previous low at 1.1235 and if price is unable to move above this price, it is likely to continue its decline. MACD trend is strong and bearish. Moving Average line is also bearish and its gradient steep. Both MACD and MA are hinting of a strong downtrend.

Support 1.1175 1.1145 1.1110
Resistance 1.1200 1.1235 1.1280

GBP/USD – The rally to 1.3185 was corrective and price had since dropped lower than our expectation below 1.3100. Stochastic is overbought and should be doing a correction. MACD is still bearish. It looks like the decline has not ended as yet. We are expecting price to move to 1.3025 after a correction to 1.3120.

Support 1.3065 1.3025 1.2990
Resistance 1.3100 1.3135 1.3180

XAU/USD – Price declined to a low of 1280.13 overnight and that could have ended this current price decline. Price is likely in a sideway consolidation at the moment and will continue for the next couple of days. The consolidation range is 1291 down to 1280. MACD and Stochastic are both showing bullish divergence warning of a possible low in place.

Support 1284.35 1281.10 1276.50
Resistance 1290.85 1296.70 1304.10

AUD/JPY – Price reached a low of 78.13 last night. We would recommend bringing stop down to cost at 78.70 and keep profit objective at 78.05. MACD is showing a possible bullish divergence warning. We could be near to the low or 78.13 could be the low. Watch out for signs of reversal.

Support 78.10 77.85 77.40
Resistance 78.45 78.75 79.15

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