FX Commentary 27 March 2019

Market Talk

– U.S. data pointed to a slowdown in the underlying economy amid soft housing and consumer confidence numbers. Consumer Confidence fell to 124.1 in March from 131.4 in February, well short of economists’ forecasts for a reading of 132. Housing Starts fell 8.7 percent in February, widely missing expectations. Building permits declined, but at a slower rate than forecast by economists.

– Inverted yield curve persisted as benchmark 10-year Treasury yields sat at 2.42 percent in afternoon trading, about 3 basis points below its session’s high. The yield curve inverted amid the release of weak economic data from the U.S. and around the world as well as a downgraded U.S. economic outlook from the Federal Reserve.

– Fed’s member Daly said Fed funds rate is now at neutral and patience is the way forward. Fed don’t want to guess but will look at data. Fed’s guidance on rate path means yield curve inversion may not predict recession as it had in the past.

– Reserve Bank of New Zealand kept its cash rate on hold at 1.75% as expected. RBNZ said the next rate move is likely to be down, leading to a decline in NZD/USD. Weak global and domestic economic outlooks were given as reasons for RBNZ’s dovish shift.

– Two leading Eurosceptic MPs indicated they might agree to support PM May’s EU withdrawal deal rather than risk the UK parliament cancelling Brexit. Northern Ireland’s DUP was quoted by Sky News as saying it preferred a long delay and a change of leadership rather than accept the deal. It later said its position was unchanged.

Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation

2. Buy EUR/USD at 1.1240. Stop at 1.1210 and target at 1.1340

3. A poor set of US data overnight and a good IFO Business Climate index are both in favour of the Euro.

4. A possible 5-wave movement may be over and MACD is showing divergence, confirming a possible low.

Fundamental Comments

1. Poor US Consumer Confidence and Housing Starts data are likely to weigh on the US$

2. A good IFO Business Climate index suggests Euro zone’s largest economy is on the mend.

Technical Comments

1. MACD is showing a divergence and hinting of a price low.

2. A 5-wave movement may be over and a correction is ahead.

Key Levels

Support 1.1245 1.1205 1.1175
Resistance 1.1290 1.1320 1.1355

Technical Overview

USD/JPY – Our sell call was filled last night and currently price is close to our stop loss price of 110.75. Our view remains unchanged. Stochastic is into oversold extreme and could be turning down. MACD is still bearish. A move below 110.35 would be the first sign of a decline while a move above 111.20 would hint of a movement to 110.90

Support 110.40 109.95 109.65
Resistance 110.75 111.15 111.55

NZD/USD – Price fell sharply on RBNZ’s dovish shift in monetary policy. While trend is likely to be bearish, a correction could be in store before further decline. We are looking at a corrective rally to 0.6830 as a possible location to get into a short position. Both momentum oscillators are bearish and are moving lower.

Support 0.6795 0.6770 0.6740
Resistance 0.6825 0.6850 0.6870

GBP/USD – Price is inside the range of the previous day, which is a sign of consolidation. Tonight parliament proceeding is likely to have a volatile impact on price. Both MACD and Stochastic are pointing lower on the 4-hourly chart. A move above 1.3260 is likely to lead to a test of 1.3380 while a break of support at 1.3150 is likely to see 1.3010 again.

Support 1.3150 1.3080 1.3010
Resistance 1.3220 1.3260 1.3305

XAU/USD – Price has declined to 1315 from the high of 1324.40. It is currently sitting on the 20EMA and is near to the lower trend line. MACD is still bullish and could be turning higher again. Stochastic might also be turning higher which could be a sign of price moving higher as well. A move below 1312.40 could be a hint of further downside.

Support 1312.50 1306.50 1298.50
Resistance 1318.60 1324.40 1330.10

EUR/AUD – Price is recovering from yesterday sharp decline. The corrective rally could bring price to 1.5875 to 1.5900. 20EMA resistance line is at 1.5930. MACD is bearish and its momentum trend is strong. Stochastic is rising from oversold extreme at the moment. We think this recovery rally would be the focus for the next 24 hours.

Support 1.5825 1.5775 1.5720
Resistance 1.5865 1.5890 1.5930

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