FX Commentary 8 April 2019

Market Talk

– The UK government is prepared to pursue changes to the political declaration in order to deliver a deal that’s acceptable to both sides, the FT quotes May’s spokesman as saying after news that May-Corbyn talks are on the brink of collapse. Sterling slumped to the psychological $1.30 level as uncertainty around the U.K.’s split from the EU continues.

– On Friday, PM May had requested a Brexit extension to June 30 2019, with the possibility of an early termination of the extension should UK strike a Brexit deal to exit EU earlier than June 30. A Brexit extension is subjected to the approval of EU’s 27 members.

– CCTV, China official broadcaster, reported on Sat that new progress was made after trade talk wrapped up in Washington on Friday. Trump remains optimistic about a deal but less confident about the timing.

– The U.S. economy added 196K jobs in March, against expectation of 175k. The U.S. unemployment rate remained at 3.8%. The previous month’s poor jobs data was revised higher to 33,000. Friday’s strong jobs report came after the release of disappointing economic data earlier in the week.

Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation

2. Buy USD/CAD at 1.3375. Stop at 1.3340 and target at 1.3445

3. US economy added jobs while the Canadian economy suffered a loss in jobs created.

4. Double Bottom chart pattern with MACD hinting of further upside in price

Fundamental Comments

1. US economy added 196K jobs while Canadian economy suffered a 7.2K loss in jobs.

2. Interest rate differential is in US$ favour

Technical Comments

1. Double Bottom chart pattern hints of a price reversal to 1.3450

2. MACD is bullish and rising supporting the Double Bottom chart pattern

Key Levels

Support 1.3370 1.3335 1.3295
Resistance 1.3405 1.3450 1.3470

Technical Overview

AUD/USD – Our buy call on Friday was stopped out today at 0.7090 for a loss of 35 pips. Price is capped at the 0.7130 on 3 occasions and will need to surpass this resistance for it to be bullish. MACD and Stochastic both gave a bearish divergence warning that led to a price decline. We think price is likely to test the downside at 0.7050. Overall, this pair has been in a range of 0.7165 to 0.7050 for the past 3 weeks. Wait for the breakout for a clearer trend direction.

Support 0.7085 0.7050 0.7015
Resistance 0.7105 0.7130 0.7165

EUR/USD – Price could be forming a potential Inverse Head and Shoulder chart pattern with confirmation at 1.1250. A confirmation of this Inverse Head and Shoulder chart pattern is likely to lead price higher to 1.1315. Watch out for the crossing at 1.1250. MACD and Stochastic are both neutral at the moment.

Support 1.1210 1.1180 1.1140
Resistance 1.1250 1.1285 1.1315

GBP/USD – Price dropped to a low of 1.2985 and there could be a potential Double Bottom chart pattern in the process of forming as long as price does not move below 1.2980. Both Stochastic and MACD are rising from the low but MACD is still bearish. 20EMA resistance lies at 1.3080 and a move beyond this point will likely lead to a price test of 1.3150.

Support 1.3040 1.2980 1.2960
Resistance 1.3080 1.3150 1.3210

XAU/USD – Price reached a low of 1280.80 and has since reversed higher. We think 1280.80 could be a short term bottom and price is likely to move up to test the resistance at 1307.73. Price has surpassed the first resistance of 1294.35 and with MACD and Stochastic both rising, could be on its way to initial 1302.60 and later 1307.73.

Support 1294.35 1288.20 1280.80
Resistance 1299.75 1302.60 1307.73

USD/JPY – Price has reached the Inverse Head and Shoulder chart pattern target of 111.70. In fact price went to a high of 111.79 but there were divergence warnings from both MACD and Stochastic, hinting of a possible high. Price has dropped below 111.45 and could be on its way to 111.00.

Support 111.20 110.95 110.50
Resistance 111.45 111.80 112.15

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