FX Commentary 28 March 2019

Market Talk

– On the U.S.-China trade front, U.S. Trade Rep Lighthizer and Treasury Secretary Steven Mnuchin are set to resume negotiations with their Chinese counterparts in Beijing on Thursday, in a bid to strike a deal on trade. US official said progress has been made but there are still sticking points remaining.

– An offer by PM May to quit in exchange to getting her Brexit divorce deal through parliament failed to win over DUP and key opponents. A series of indicative votes in parliament on alternatives to May’s Brexit deal did little to break the impasse. Uncertainty about how, or even if, Brexit will proceed is keeping investors wary and weighing on sterling.

– Draghi said ECB will further delay a planned interest rate hike if necessary. ECB has tools at its disposal to support the economy and may look at measures to mitigate any side effects of negative interest rate. EUR/USD only enjoys a brief rally to 1.1270 before declining back.

– Investors are keeping an eye on yields after the 10-year Treasury yields fell below the 3-month rate last week for the first time since 2007, keeping recession fear alive. The U.S. Treasury yield curve has inverted before each recession in the past 50 years and has only offered a false signal just once in that time, according to data from Reuters. Risk sours as bond yields continue to fall.

– Tonight at 8.30pm US Final GDP will be closely watched given the attentions and concerns to economic growth.

Chart Focus NZD/USD

Key Points

1. Sell NZD/USD recommendation

2. Sell NZD/USD at 0.6850. Stop at 0.6895 and target at 0.6780

3. RBNZ more dovish stance than the Federal Reserve and interest rate differential are in US$ favour.

4. MACD is bearish and hinting of a corrective rally while Fibonacci and 20EMA are suggesting price could be cap at 0.6850

Fundamental Comments

1. Fed is on hold but RBNZ is predicting a rate cut.

2. Interest rate differential is in US$ favour

Technical Comments

1. Price is in a corrective rally and could be capped at the Fibonacci 50% correction point and 20EMA point

2. MACD is still bearish hinting this rally could be a corrective rally

Key Levels

Support 0.6815 0.6780 0.6745
Resistance 0.6850 0.6890 0.6935

Technical Overview

USD/JPY – Our sell call from 26th Mar is still pending. Price has come lower and it is time to shift our stop lower to 110.55 while keeping our profit target at 109.65. Price has moved below 110.35 and it should now be moving lower. MACD has turned bearish and is moving lower. Stochastic is moving lower from overbought extreme.

Support 109.95 109.65 109.35
Resistance 110.35 110.75 111.15

EUR/USD – Our buy order was not filled yesterday, missing out by 3 pips. The up move seems weak and we are abandoning our buy call for now. MACD is bearish and flat while Stochastic has moved back into oversold extreme again, which are not good signs for any bulls. Be prepared for another dip, possibly to 1.1170.

Support 1.1240 1.1205 1.1175
Resistance 1.1285 1.1305 1.1340

GBP/USD – Price dipped below 1.3150 but managed to move back up. Price also exceeded its high at 1.3260 by a few pips as well. We think price is likely to stay within the same range. MACD is getting flat despite the volatile price nature. Stochastic is moving lower but is still in the middle of the range.

Support 1.3150 1.3080 1.3010
Resistance 1.3220 1.3260 1.3305

XAU/USD – Price broke below 1312.40 and moved to a low of 1307.22. This decline could have ended in a 3-wave movement. If 1307.22 is the bottom, we are likely to see a price move up to 1324.60 again. Stochastic is near to the oversold extreme. MACD is still bearish but is not moving lower. A move below 1307.22 would negate the bullish view.

Support 1307.20 1298.50 1292.60
Resistance 1312.40 1318.60 1324.40

EUR/AUD – The corrective rally brought price higher and closer to the 20EMA resistance at 1.5920 and price is now declining. We think price is likely to decline to the previous low at 1.5775. MACD is bearish and has a bearish turn, hinting of more short term downside movement. Stochastic is about to turn lower. Above 1.5920 would negate our short term bearish view.

Support 1.5825 1.5775 1.5720
Resistance 1.5865 1.5915 1.5945

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