FX Commentary 22 March 2019

Market Talk

– Sterling recovered from a low of 1.3004 to 1.3130 after EU leaders said Britain could leave the EU without a deal on April 12 if lawmakers fail next week to back Prime Minister Theresa May’s agreement with EU. An extra two months, until May 22, was given if she wins next week’s vote in parliament.

– EU said that withdrawal agreement cannot be renegotiated which leaves UK with limited scope to maneuver. May’s Brexit deal has been rejected twice and it now leave UK parliament with decision to exit with May’s deal or no deal.

– Fed trimmed US GDP forecast from 2.3% to 2.1% on Wednesday which raised concerns over a possible slowdown in the US economy. Thursday’s initial claims for jobless benefits fell more than expected and Philly Fed index for March jumped to 13.7, exceeding expectations of 3, easing worries about the U.S. economic outlook.

– Investors are also grappling with mixed news on the trade front. US-China trade talks have progressed without progress on a trade deal. China confirms Lighthizer and Mnuchin would visit China on 28/29 March for more talks.

– Bank of England left rates unchanged at its Monetary Policy Meeting on Thursday. Swiss National Bank also left its Libor rate unchanged with it Chairman Jordan saying negative rates will remain for the foreseeable future.

Chart Focus Gold

Key Points

1. Buy recommendation on Gold

2. Buy Gold at 1310.50. Stop at 1302.50 and target at 1321.50

3. FOMC’s no hike decision and North Korea’s demand for US to remove weapons favour Gold

4. Price is supported by 20EMA and trend line with MACD pointing up. Both are likely to support price advance.

Fundamental Comments

1. Federal Reserve’s no hike decision is good for Gold

2. North Korea’s demand for US to remove its weapons from Guam and Hawaii is likely to decrease risk appetite.

Technical Comments

1. Price is supported by the 20EMA and near the bottom of the trend channel

2. MACD is bullish and rising.

Key Levels

Support 1306.60 1298.55 1293.80
Resistance 1312.90 1321.10 1327.20

Technical Overview

USD/JPY – Price managed to recover from the low of 110.30 to a high of 110.95. Price should continue to consolidate again today before another one more decline to 110.20. The likely resistance is at 111.00 to 111.15. Stochastic is moving higher but MACD is still bearish.

Support 110.65 110.25 109.95
Resistance 110.95 111.15 111.50

EUR/USD – Price has pulled back from the high to 1.1340. This is also the 20EMA support point. MACD is bullish and could be turning upward again. Stochastic is near to the oversold extreme. If price can hold above the 20EMA, we are expecting another test to the high at 1.1455 again.

Support 1.1340 1.1290 1.1260
Resistance 1.1390 1.1420 1.1455

GBP/USD – Price recovered from the low of 1.3004 on extension of Brexit by another 2 weeks or more depending on UK’s Parliament decision. Stochastic has given a bullish divergence signal but MACD is still bearish. 20EMA is bearish and we are expecting price to be capped at this resistance. We forecast another decline to 1.2960.

Support 1.3120 1.3085 1.3045
Resistance 1.3170 1.3220 1.3260

USD/CHF – Price is capped by the 20EMA yesterday and we think it will continue to cap. Price is likely to decline to 0.9880 again. MACD is still bearish and strong. Stochastic is flat along the oversold extreme and this is a sign of a strong bearish trend.

Support 0.9895 0.9855 0.9815
Resistance 0.9945 0.9975 1.0010

AUD/USD – Our buy called was triggered yesterday and this morning our stop loss was triggered by a sharp movement in price. We lost 40 pips in the process. We remain bullish on this pair. MACD is turning around and could be leading price higher. Stochastic is neutral. A move below 0.7040 would negate our bullish view.

Support 0.7090 0.7055 0.7010
Resistance 0.7120 0.7165 0.7200

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