FX Commentary 18 March 2019

Market Talk

– May was reported to be planning another meaningful vote on her deal with DUP reported to be staying in London over the weekend trying to work on Irish backstop. If parliament agrees to her deal, UK will seek an extension to Jun 30 to finalize a Brexit deal. If her deal is rejected, a longer extension may be required.

BOJ is the most dovish central bank and with little momentum in Japanese economy, an end to loose monetary policy does not seem in sight. JPY is likely to be weak against most of its peers.

Canadian existing home sale declined more than expectation coming in at -9.1% against -4% expectations. Despite a higher crude oil price trend, Canadian dollar is still suffering against the US$ due to a poor set of domestic economic conditions.

Pompeo said Trump might meet China’s President Xi in mid-April or later. This is in line with Trump’s comment yesterday. There could be issues but we believe a deal will be ironed out with more time. There are reports this morning that Trump-Xi meeting could be pushed back to June.

US$ was weaker on the back of a poor economic data. Empire state manufacturing fell to 3.3 compared to the previous month of 8.8 while industrial production in February expanded only by 0.1% against 0.4% expectation. Consumer spending was the only bright spot. Dovish FOMC’s expectation is likely to weigh on US$ during the first half of this week.

Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation

2. Buy EUR/USD at 1.1340. Stop at 1.1290 and target at 1.1420

3. Recent poor economic data coupled with dovish expectation of FOMC’s meeting is weighing on US$

4. Rising momentum coupled with an Ascending Triangle chart pattern is hinting of further upside for price.

Fundamental Comments

1. Dovish FOMC’s expectation is weighing on US$

2. Poor US data from last Thursday and Fridays are weighing on the US$

Technical Comments

1. Ascending Triangle chart pattern is a continuation pattern, hinting of further upside in price

2. Rising MACD and Stochastic indicators are hinting of further price upside

Key Levels

Support 1.1330 1.1295 1.1260
Resistance 1.1360 1.1395 1.1420

Technical Overview

USD/JPY – Price recent movement looks corrective in nature and we are inclined towards being bearish for this pair. The rally to the high of 111.90 was 161.8% of the rally from 110.75 to 111.45 but the correction had dropped below 111.45. MACD is still bullish.

Support 111.40 111.10 110.75
Resistance 111.90 112.15 112.45

AUD/USD – Our sell call from 14th Mar was stopped out this morning at 0.7105 for a loss of 50 pips. The resistance to watch out for is Fibonacci 62% at 0.7125. A move above this resistance would be bullish for price trend. Both MACD and Stochastic are rising and have not reached overbought extreme. This should support further price advance.

Support 0.7095 0.7065 0.7030
Resistance 0.7125 0.7160 0.7195

GBP/USD – We still viewed 1.3380 as a likely temporary peak and we are looking for a decline to 1.3190 before another attempt to break the 1.3380 high. MACD is bullish and Stochastic is rising which is good for the bullish trend. 20EMA is rising and there is a strong support at 1.3190. We view this support as a good opportunity to get into a long position.

Support 1.3250 1.3220 1.3190
Resistance 1.3305 1.3335 1.3380

XAU/USD – Our buy call for Gold on Friday was not filled. Price has moved higher to a high of 1306.25 but has declined lower to current 1299.20. As long as price does not decline below 1296.80, the uptrend is intact and there is still a chance for price to move up. MACD is weak and watch MACD for possible hint of a change in trend.

Support 1296.20 1288.90 1280.10
Resistance 1305.95 1311.25 1320.90

USD/CAD – The rally to 1.3370 high could have ended the correction and price is now ready to decline further to 1.3240. MACD is bearish and is now turning down from the zero line. Stochastic has a crossover and is heading lower as well. A move above 1.3370 would negate our bearish view.

Support 1.3285 1.3240 1.3200
Resistance 1.3330 1.3370 1.3415

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