FX Commentary 14 March 2019

Market Talk

– US’s Senator Portman said trade talk is making progress and US is in a good position in China talk. He said Lighthizer would not close China deal without IP changes. Trump now says there is a good chance of a deal with China but it doesn’t matter whether a deal is made before or at the summit. We have seen recently he is prone to last minute changes.

– Barnier said EU would want to know why UK wants to extend Brexit talks. EU27 are reported to be sticking to tough line on potential Brexit extension. Moscovoci said EU had done everything it could for a Brexit deal. It looks like EU has closed its negotiation and even with an extension, a Brexit deal may not be possible.

– UK lawmakers voted to block a no-deal Brexit last night. Today, there will be a vote to extend Brexit dead line to 30 Jun 2019 through Article 50. PM May warns UK will still leave without a deal unless something else is agreed. PM May says she will not resign but betting odds are 4:1 she will be replaced by end of March.

– Non-defense durable goods orders posted their largest increase in 6 months in Jan 2019. Overall durable goods rose 0.4% against a 0.5% forecast. US construction spending posted its biggest increase in 9 months. This helps to array fears of a US economic slowdown.

– Tonight UK parliament will vote to extend Brexit deadline to Jun 30. Tomorrow morning there is a BOJ monetary meeting followed by a press conference.

Chart Focus AUD/USD

Key Points

1. Trading Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7065. Stop at 0.7105 and target at 0.7005

3. China Industrial Output and growing concerns of a global economic slowdown are weighing on Aussie

4. Price’s failure to cross over the Fibonacci 50% point and with MACD hinting of a top is likely to decline.

Fundamental Comments

1. China Industrial Output falls to a 17-year low in the first 2 months of 2019 and this is bad for Aussie.

2. Growing concerns of a global economic slowdown is weighing on Aussie

Technical Comments

1. Price’s failure to move above the Fibonacci 50% correction point is a hint of more downside.

2. MACD bearish divergence is a warning of a top and a potential reversal

Key Levels

Support 0.7050 0.7030 0.7005
Resistance 0.7075 0.7100 0.7125

Technical Overview

USD/JPY – Price reached a high of 111.63 which is also the Fibonacci 62% of the decline from 112.13 to the low of 110.77. If price can go above 111.65, it is likely to move higher to 112.15. If price cannot break this resistance, it is likely to decline to 110.80. MACD is neutral at the moment.

Support 111.35 111.00 110.75
Resistance 111.65 112.15 112.45

EUR/USD – Price’s rally reached the Fibonacci 62% of the decline from 1.1420 to 1.1175. MACD is still bullish but Stochastic is into overbought extreme. If price cannot go above 1.1340, it is likely to decline lower to 1.1220. If it can go above 1.1340, it is likely to go back to 1.1420. Watch the reaction at 1.1340 for direction clues.

Support 1.1295 1.1260 1.1220
Resistance 1.1340 1.1375 1.1420

GBP/USD – Price reached a high of 1.3380 on the rejection of a no-deal Brexit. We think this should be the peak for the short term as a Brexit extension has probability been factored in. The high was also the Fibonacci 127% of the previous rally, which is a hint of a corrective move. We think price is likely to decline to 1.3180.

Support 1.3220 1.3170 1.3125
Resistance 1.3280 1.3335 1.3380

XAU/USD – Price reached our target at 1307.90 last night and we are out with an almost $13 profit. An Inverted Hammer on the 4-hourly chart warns of a price correction. Stochastic is into overbought extreme. There may be an opportunity to buy on dip. A decline below 1290 would be a warning of a deeper correction.

Support 1301.40 1290.75 1280.30
Resistance 1311.10 1320.90 1327.15

AUD/JPY – Our short call was filled and price almost hit our stop. Our view remains unchanged. Keep stop at 79.05 and target at 77.75. MACD has a bearish divergence warning which is a hint that a top could be near. Stochastic is moving lower. A price break below 78.65 would accelerate the decline while above 79.05 would likely result in a higher move to 79.65.

Support 78.65 78.35 78.10
Resistance 78.95 79.35 79.65

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