FX Commentary 20 March 2019

Market Talk

– FOMC began its meeting last night with an announcement expected tomorrow morning at 2 am. Market expects the Fed to keep its overnight rate unchanged and stick to its pledge to be patient in hiking rates. Fed will also release its views and forecast for economic growth and interest rate known as the “dot-plot”, which may point to either no more rate hikes this year or one at most.

– Brexit chaos continues as May and her ministers study a way out of impasse created by Speaker Brecow’s ruling that May’s Brexit deal could not be put to another vote unless there were substantial changes to the deal that was rejected twice.

– Merkel will fight to the last minute for an orderly Brexit and said EU will react to any wishes UK presents as she wants to ensure good ties are maintained after Brexit. EU leaders said to plan contingent offer on Brexit extension.

– Bloomberg reported that U.S. officials were worried China may be pushing back against U.S. demands in the countries’ ongoing trade talks. The report also said Chinese negotiators were worried they had not received assurances that tariffs imposed on Chinese goods would be lifted once a deal was struck. Dow Jones News reported that talks were in the final stages, noting China Vice Premier Liu He will travel to Washington in the next few weeks. Investors were left puzzled over the conflicting reports.

– US$ was weaker as concerns over the strength of the US economy and expectation of dovish comments and accommodative policy from Federal Reserve. Announcement of Fed’s outcome is at 2am Thursday morning.

Chart Focus USD/CAD

Key Points

1. Trading buy USD/CAD

2. Buy USD/CAD at 1.3330. Stop at 1.3290 and target at 1.3410

3. Interest rate differential and uncertain economic conditions are weighing on the Canadian dollar

4. Price holding above the Fibonacci 62% correction point with both MACD and Stochastic warning of a price low.

Fundamental Comments

1. Recent Canadian data has been poor with BOC citing “increased uncertainties” in its economic outlook

2. Interest rate differential is in US$ favour

Technical Comments

1. Correction could be over with price holding above the Fibonacci 62% correction point

2. Both MACD and Stochastic have divergence warnings of a possible price low.

Key Levels

Support 1.3320 1.3290 1.3250
Resistance 1.3360 1.3410 1.3465

Technical Overview

USD/JPY – Price was capped below 111.70 but if price can hold above the 20EMA at 111.45, there could be another test of the high at 111.90. Stochastic is supporting this view as it is rising from oversold zone. MACD is currently flat and neutral.

Support 111.45 111.15 110.75
Resistance 111.70 111.90 112.15

EUR/USD – Our buy call from 18th Mar is still pending. Yesterday, we had raised our stop to 1.1320 and lower our target to 1.1390 but both points were not reached. We recommend keeping both stop and target at the same point. MACD is neutral and Stochastic is still falling.

Support 1.1320 1.1290 1.1260
Resistance 1.1360 1.1395 1.1420

GBP/USD – Price was capped by 1.3310 yesterday and will need to hold support at 1.3240. If price were to drop below this support, it is likely to decline to 1.3180. If price can hold above 1.3240, there is a chance to test the 1.3315 high again. Stochastic is supporting the bullish view as it is near to the oversold extreme while MACD is neutral at the moment.

Support 1.3240 1.3215 1.3185
Resistance 1.3270 1.3310 1.3350

XAU/USD – Price reached a high of 1310.80 before declining lower. MACD is showing bearish divergence warning of a possible high but price is still sitting on the 20EMA. Stochastic is turning down from overbought extreme. We are expecting a consolidation and a sideway range from 1300 to 1310. Watch for better clue.

Support 1303.10 1296.20 1288.90
Resistance 1310.80 1317.30 1320.90

AUD/USD – Our sell order yesterday was not filled as price went up to a high of only 0.7107. Price has declined to 0.7056, which is the Fibonacci 50% of the rally from 0.7002 to 0.7118. MACD is still bullish but could be about to turn bearish. Stochastic has reached close to the oversold extreme.

Support 0.7055 0.7025 0.7000
Resistance 0.7085 0.7120 0.7155

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