FX Commentary 1 April 2019

Market Talk

– Brexit dilemma continues for UK’s PM May. Her deal was defeated in UK parliament for a 3rd time and she is under pressure to find a deal before 12th April. Parliament will vote again on Monday on Brexit options.

– Treasury Secretary Mnuchin said on Friday he had a “productive working dinner” with Chinese trade officials the previous night in Beijing, as both sides restarted negotiations with the hope of bringing an end to their protracted trade dispute.

– China Manufacturing PMI came in better than expected at 50.5 vs 49.6(F). Non-manufacturing PMI was also better than expectations, coming in at 54.8 against 54.5 (F). The manufacturing result surpassed analysts’ expectations and bounce back into expansion for the first time in the past 4 months. This helped to calm concerns over a slowing down of the world second largest economy.

– CFTC’s commitment of traders reported that Euro shorts positions are the largest since Dec 2016. Despite the selling, EUR/USD rate is not the lowest since Dec 2016. This divergence could be a warning for EUR/USD bear.

– US data for tonight includes Retail Sales at 8.30pm and ISM PMI at 10pm. RBA Rate Statement is at 11.30am tomorrow morning.

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 0.6785

3. RBNZ more dovish stance and interest rate differential are in US$ favour.

4. Price is correcting to the Fibonacci 62% correction point with MACD still bearish and hinting of a decline.

Fundamental Comments

1. RBNZ has signal a possible cut in interest rate this year but Fed is likely to be on hold.

2. Interest rate differential is in US$ favour

Technical Comments

1. Price is correcting back to the Fibonacci 62% correction point

2. MACD is bearish and hinting of a corrective rally

Key Levels

Support 0.6815 0.6780 0.6745
Resistance 0.6865 0.6860 0.6890

Technical Overview

USD/JPY – Price has turned up higher again after an increase in risk appetite. The immediate resistance lies at 111.15. A break of this resistance will target the high at 111.70. Stochastic is into overbought extreme but MACD is bullish and strong. 20EMA is also bullish and rising, hinting of a bullish trend in progress.

Support 110.95 110.50 110.15
Resistance 111.15 111.50 111.90

EUR/USD – Stochastic is starting to rise from the oversold extreme but MACD is still bearish. There are bullish divergence warnings from MACD and Stochastic but given the strong trend, it may take a while before this pair makes a reversal. Support lies at 1.1205 and resistance at 1.1260. A move above 1.1260 could be the first sign of a possible reversal of the bearish trend.

Support 1.1205 1.1175 1.1130
Resistance 1.1260 1.1290 1.1330

GBP/USD – Trend for Sterling is bearish but it is not that strong despite that chaos of Brexit. MACD is bearish and its momentum is strong. Stochastic is weak and can barely move out of its oversold zone. The next price resistance is at 1.3095. We are expecting price to be capped at 1.3150 for another test to 1.2960.

Support 1.3040 1.3005 1.2960
Resistance 1.3095 1.3150 1.3200

XAU/USD – After breaking below a 3-week trend line, Gold is on a bearish trend for the moment. MACD is still bearish and its momentum strong. Stochastic can barely move above its oversold extreme. We are expecting price to be capped at 1298.20. The target for our decline is at 1276.40.

Support 1286.40 1280.10 1276.40
Resistance 1293.85 1298.40 1306.65

USD/SGD – Our sell call on Friday for this pair was filled. We are currently short at 1.3550. We would recommend bringing stop loss lower to last Friday’s high of 1.3560 while keeping target at 1.3490. MACD is bearish and its trend momentum is strong. Stochastic is into oversold extreme. Resistances are now at 1.3540 and 1.3560 and we are expecting price to be capped by resistance zone.

Support 1.3525 1.3505 1.3480
Resistance 1.3560 1.3600 1.3635

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