FX Commentary 15 March 2019

Market Talk

– Sterling retraced gains from a day ago as UK parliament voted to extend a Brexit deadline, having pulled back from a 9-month high reached on Wednesday. This outcome was widely anticipated by the market. EU’s Tusk will appeal to EU27 to be open to a long Brexit extension which should be good news for Sterling.

– US-China trade talk is being push back to April as Trump is in no rush to complete a deal, while China’s President Xi would like to link a formal state visit to the US to a trade deal announcement. President would like a deal iron out before he sits down with Trump. President Trump has estimated 3-4 week more to complete trade talks.

– US New Home Sales fell 6.9% in Jan 2019, which was more than expected, but could in part be due to a partial US government shutdown. With fresh uncertainty over US-China trade negotiations and consideration by North Korea to suspend nuclear talk with US, uncertainties are likely to keep safe haven JPY, Gold and US$ strong.

– BOJ announced no changes to monetary policy as expected. BOJ maintains short term interest rate target at -0.1% and 10-year JGB’s target around zero percent. BOJ’s decision on yield curve control was made with a 7-2 vote with 2 members dissenting. There will be a press conference later around noon time.

– China Premier Li Keqiang says the economy faces new downward pressure and China will cut value added tax from April 1 and social security fees from May 1. These measures are aimed at getting the economy going in the face of downward pressure.

Chart Focus Gold

Key Points

1. Buy Gold recommendation

2. Buy Gold at 1296.70. Stop at 1292.05 and target at 1312.45

3. Uncertainties and a pause in Fed rate hike are supporting Gold

4. Price staying above the Fibonacci 62% point and bullish momentum are hinting of a price rally

Fundamental Comments

1. Uncertainties over US-China trade talks and North Korean to suspend nuclear talk are aiding safe haven Gold

2. A pause in Fed rate hike is support Gold

Technical Comments

1. Price reversing its decline ahead of Fibonacci 62% Fibonacci support is a good sign

2. MACD is bullish and turning up while Stochastic is turning up from oversold zone.

Key Levels

Support 1292.80 1288.90 1280.10
Resistance 1304.50 1312.50 1320.90

Technical Overview

USD/JPY – Price reached a high of 111.90 which is Fibonacci 161.8% of the rally from 110.75 to the previous high of 111.45. After the high, price has come back down to 111.45. This is the crucial level which will determine the next directional movement. If above this support, price is likely to move higher. Below this support will open the door to 110.75 again.

Support 111.45 111.10 110.75
Resistance 111.90 112.15 112.45

EUR/USD – Price reached the Fibonacci 62% of the previous decline. The pullback has managed to stay supported at the 20EMA. If price can hold above 1.1290, it is likely to move higher to 1.1390. MACD is still bullish and the 20EMA trend is strong.

Support 1.1290 1.1260 1.1220
Resistance 1.1340 1.1375 1.1420

GBP/USD – 1.3380 is likely to be the peak and we are expecting a correction of this rally. Price is currently sitting on the 20EMA at 1.3225. A break of this support will lead price lower to 1.3130. MACD is still bullish but Stochastic has shown a bearish divergence. We prefer to stick to MACD trend.

Support 1.3220 1.3170 1.3125
Resistance 1.3285 1.3335 1.3380

AUD/USD – We are short at 0.7065 with stop at 0.7105 and target at 0.7005 from yesterday’s call. Price reached a low of 0.7040 before moving to current 0.7080. Our view remains the same. We are looking for one more push lower to 0.7005. MACD is still bullish but Stochastic is neutral.

Support 0.7065 0.7030 0.7005
Resistance 0.7095 0.7125 0.7165

AUD/JPY – Our short position got stopped out this morning for a 40 pips loss. Price reached a higher high but there were bearish divergence warnings from both MACD and Stochastic. We think the topside is limited and favour a decline to 77.70. Above 79.65 would negate our bearish view.

Support 78.95 78.65 78.35
Resistance 79.25 79.65 79.90

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