FX Commentary 2 April 2019

Market Talk

– US ISM Manufacturing PMI was higher than expectations, coming in at 55.3 against 54.2 while US Retail Sales declined to -0.2% against 0.3% expectation. Upbeat manufacturing data managed to overshadow an unexpected decline in U.S. retail sales.

– Eurozone March Final Manufacturing PMI index declined for an eight month, coming in at 47.5 and was the lowest reading since April 2013. Germany’s manufacturing sector contracted at its fastest pace since June 2012. Germany Final Manufacturing PMI was 44.1.

– Brexit is deadlocked again as UK parliament rejected all 4 options meant to break Brexit impasse. Sterling rose on pressure on PM May to go for a soft Brexit. UK’s Sun reported a final round of indicative voting on May’s withdrawal deal could be back on again before Parliament on Thursday.

– RBA left cash rate on hold as expected. RBA lowered inflation expectation to 2.25% in 2020, which seems high in light of recent data and developments. A lowering of RBA’s expectation on inflation was seen as a hint of no rate hike in the near future and it was enough to send AUD/USD down below 0.7100.

– South Korean official said North Korea could be on the brink of a missile launch. If credible, it would lead to risk aversion which has been diminishing in recent days. Safe haven, JPY, CHF and Gold has been weak in recent days.

Chart Focus AUD/USD

Key Points

1. Trading Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7085. Stop at 0.7115 and target at 0.7005

3. RBA’s statement is suggesting an interest rate cut is becoming more likely and interest rate differential is in US$ favour

4. Price is capped by a declining trend line with both momentum indicators moving lower, are hints of a price decline

Fundamental Comments

1. RBA’s policy statement is suggesting an interest rate cut is becoming more likely.

2. Interest rate differential is in US$ favour.

Technical Comments

1. Price has been capped by a declining trendline and is now likely to test the support line at 0.7065.

2. Both Stochastic and MACD are continuing to move lower.

Key Levels

Support 0.7065 0.7025 0.7005
Resistance 0.7085 0.7110 0.7130

Technical Overview

USD/JPY – A break of 111.15 yesterday is likely to lead to a test of the next resistance point at 111.70. Stochastic may in into overbought extreme but MACD is still bullish and rising. 20EMA is also bullish and rising. We expect price to continue towards the 111.70 price target.

Support 111.15 110.95 110.50
Resistance 111.45 111.70 111.90

EUR/USD – Price could be declining in the form of falling Wedge pattern. MACD is bearish but there have been divergence warnings given. Stochastic is moving back into oversold extreme. 20EMA is pointing and moving lower. The next price support lies at 1.1175.

Support 1.1195 1.1175 1.1130
Resistance 1.1230 1.1260 1.1290

GBP/USD – Price tested the 20EMA and failed. Price could be moving lower if current support at 1.3025 fails to hold. The next support is at 1.2976. MACD is bearish and moving lower. Stochastic is weak and could be moving into oversold extreme again. A price move above 1.3100 would negate our bearish view.

Support 1.3025 1.3000 1.2960
Resistance 1.3060 1.3095 1.3150

XAU/USD – Price was capped below 1298.20 and is moving lower. MACD is bearish and is moving lower but a possible bullish divergence could be forming. The next decline could be the last one. Stochastic is moving into oversold extreme again after barely moving above it for a while.

Support 1285.10 1280.10 1276.40
Resistance 1289.45 1294.05 1299.80

NZD/USD – Price reached only a high of 0.6836, missing our sell order at 0.6850. Price has declined lower to 0.6770. While Stochastic is still moving lower, MACD could be showing divergence warning soon if the decline is not strong. A break of 0.6770 is likely to lead price lower to 0.6740.

Support 0.6770 0.6745 0.6720
Resistance 0.6790 0.6835 0.6865

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