FX Commentary 19 March 2019

Market Talk

– UK’s Parliament Speaker Bercow blocked May’s motion for a 3rd meaningful vote saying the government could not bring the same exact motion twice. Sterling fell as a result. EU leaders are set to meet on Thursday and Friday and all have to agree on extension before it becomes official.

– US Agricultural Secretary said China could triple its purchases of American farm goods. With China President to visit Italy, Monaco and France from Mar 21-26, the most likely meeting of the 2 presidents could be in April. There were reports an agreement could be pushed back to June.

– RBA minutes showed the board noted “significant uncertainties” on economic outlook. RBA said scenarios are evenly balanced for hike and cut in rate but there is no strong case for a near-term move in rate. Australian 3-year bond yields have dropped below RBA cash rate of 1.5%. Market is predicting at a rate cut by RBA.

– FOMC meeting starts tonight with rate announcement on Thursday morning 2am. No change in rate is expected with CME Group Fed Watch tool has predicted market expectation for a rate hike at zero. Investors are also looking clues about Fed’s economic outlook as well.

– US$ was under pressure, weigh down by growing expectations the Federal Reserve would shift to a more accommodative policy stance. Optimism for a resolution on China-US trade talks is likely keep the US$ weaker as investors moved into more risker assets.

Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7115. Stop at 0.7140 and target at 0.7010

3. Bond yields favour the US$ while concerns over a global economic slowdown is weighing on the Aussie.

4. Price is capped by the Fibonacci 62% with divergence warnings from MACD and Stochastic hinting of a top.

Fundamental Comments

1. Australian 3-year bond yields fell below RBA cash rate of 1.5%. Difference in yields between US and Australian bond favours the US$

2. Concerns over a global economic slowdown is weighing on the Aussie.

Technical Comments

1. Price capped by the Fibonacci 62% is hinting of a possible decline ahead.

2. Divergence warnings from MACD and Stochastic are hinting of a possible price top.

Key Levels

Support 0.7085 0.7060 0.7025
Resistance 0.7120 0.7155 0.7195

Technical Overview

USD/JPY – Price reached a high of 111.90 and has turned lower. We viewed the high as the end of a correction and price is on the decline to 110.65. Both momentum oscillators, MACD and Stochastic are moving lower, hinting of a possible price decline. 20EMA has also turned bearish.

Support 111.10 110.65 110.35
Resistance 111.45 111.90 112.15

EUR/USD – Our buy call from yesterday was filled at 1.1340 and price is currently near to our entry point. Overnight, price reached a high of 1.1358 and decline to a low of 1.1323. As there are possible bearish divergence warnings from MACD and Stochastic forming, we recommend bringing stop higher to 1.1320 and target lower to 1.1390.

Support 1.1320 1.1290 1.1260
Resistance 1.1360 1.1395 1.1420

GBP/USD – Price reached a low of 1.3184 and has since moved higher to 1.3273. We are expecting this rally to continue towards 1.3335 and later 1.3380. MACD is still bullish while Stochastic is moving higher. Price must not move below 1.3184 now or it will negate our bullish view.

Support 1.3255 1.3220 1.3185
Resistance 1.3305 1.3335 1.3380

XAU/USD – Price reached a high of 1307.75 yesterday but looked weak. MACD confirmed the weakness as its momentum was weak as well. Stochastic is into overbought zone at the moment. The rally may be ending before its target at 1311 and it could be better to exit and watch further development for directional clues.

Support 1303.10 1296.20 1288.90
Resistance 1307.75 1313.65 1320.90

USD/SGD – Price has been on a decline for the past 7 trading days. MACD has shown a bullish divergence warning and Stochastic is into oversold extreme. We think the decline could be approaching its tail end. There is a support at 1.3495, which is also a Fibonacci 127% price target. We think price could reverse from this support.

Support 1.3495 1.3470 1.3440
Resistance 1.3520 1.3545 1.3570

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