FX Commentary 29 March 2019

Market Talk

– Reuters reported overnight that Chinese officials made unprecedented offers regarding force technology transfers as well as other major sticking points but US Treasury Secretary Mnuchin said there was nothing of substance on China talks. Trade between China and the U.S. has been a key issue for Wall Street as investors fear a prolonged standoff between the world’s largest economies could hinder corporate profits and economic growth.

– U.S. Treasury yields, which has dominated direction in recent sessions, rose from lows despite data showing a slowdown in the U.S. economy. U.S. 4Q Final GDP came in at 2.2% annual rate in the October-December period while economists had expected a 2.4% growth rate. Risk appetite rose together with Treasury yields.

– There will be more voting on Brexit in parliament today. May has proposed a vote on the Withdrawal Agreement. May needs this agreement in order to secure a extension to May 22 as Brexit deadline but DUP has again said it will vote against the deal. There will be more Brexit drama today.

– China’s two largest state-controlled banks posted their weakest quarterly profit growth in more than 2 years, confirming a report 2 days ago of the biggest quarterly decline in Industrial profit since 2011. This adds to worries on economic growth in China as well as global economic health.

– Economic data for today includes UK Current Account at 5.30pm, Canadian GDP at 8.30pm. Saturday morning China reports Manufacturing PMI which could have an impact on FX prices on Monday morning.

Chart Focus USD/SGD

Key Points

1. Sell USD/SGD recommendation

2. Sell USD/SGD at 1.3550. Stop at 1.3580 and target at 1.3490

3. Fed’s pause and recent poor US data are weighing on the US$

4. Price rally could have ended and momentum oscillators are confirming the end of the rally

Fundamental Comments

1. Recent poor US data is weighing on the US$

2. Fed’s pause in rate hike is weighing on US$

Technical Comments

1. Price rally could have ended near the Fibonacci 161.8% projection

2. Momentum oscillators are starting to turn down from overbought extreme

Key Levels

Support 1.3530 1.3505 1.3480
Resistance 1.3570 1.3600 1.3635

Technical Overview

USD/JPY – Yesterday, we lowered stop loss on our 26th Mar position. It was stopped out when price reached a high of 110.82. Price has moved higher to 110.92 but both Stochastic and MACD are flashing divergence warning of a possible price high. If price is capped at 110.92, it is likely to move lower to 110.00 again. Above 110.95 will open up a path to 111.20.

Support 110.50 110.15 109.70
Resistance 110.95 111.15 111.50

EUR/USD – Price could be approaching a low. MACD has been showing divergence warnings. Stochastic is in extreme oversold zone and is turning up. A move above 1.1260 would confirm the reversal. Current support lies at 1.1210 and the target of this current down move is at 1.1175. We prefer to be bearish until a reversal above 1.1260.

Support 1.1210 1.1175 1.1130
Resistance 1.1260 1.1290 1.1330

GBP/USD – Price declined when parliament could not agree on a Brexit path. Stochastic reached oversold extreme and could be turning up. MACD is bearish and is turning higher from the extreme, 20EMA is bearish and 1.3125 could cap price advance for another decline. Only a move above 1.3270 would negate our bearish view.

Support 1.3050 1.3005 1.2960
Resistance 1.3090 1.3150 1.3200

XAU/USD – Gold broke 3-week trendline and declined to a low of 1286.30. The trend is still bearish. 20EMA is bearish and its gradient steep, hinting of a strong bearish trend. MACD is also bearish and its momentum strong. The next support for Gold is at 1280.10

Support 1286.40 1280.10 1276.40
Resistance 1292.50 1301.60 1307.30

NZD/USD -We missed out on our sell for this pair yesterday as price only reached a high of 0.6830. The trend is still bearish. Stochastic is in oversold extreme but MACD is bearish and strong. 20EMA is also bearish and its gradient steep. We prefer to be on the short side and 0.6820 would be our preferred point to get into a short position with a stop above 0.6865. Our target is at 0.6750.

Support 0.6775 0.6745 0.6705
Resistance 0.6820 0.6855 0.6890

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