FX Commentary 9 April 2019

Market Talk

– Oil prices have surged to five-month highs on expectations that global supplies would tighten due to fighting in Libya, OPEC led production cuts and U.S. sanctions against Iran and Venezuela. USD/CAD weakened below 1.3300 while Gold gain on inflation fears.

– UK PM May had crunch talks with Labour leader Corbyn to find a compromise deal before she heads out to meet Merkel and Macron before setting out her case for another Brexit delay to June 30 at Wednesday’s EU summit in Brussels. Brexit extension to June 30 will require the agreement of EU’s 27 member states.

– U.S. factory orders for February fell 0.5% amid weakness in the machinery, transportation equipment and electronic products segments. Shipments, however, rose 0.4%.

-U.S. Treasury Department is threatening to impose further tariffs on the EU in the area of passenger helicopters, cheese, wines and more sectors. This could raise trade tensions between U.S. and Europe just as Sino-U.S. tariffs are about to come to a conclusion.

– No major data is on the plate for today. FOMC’s member Clarida will be speaking at 6.45am tomorrow morning.

Chart Focus EUR/USD

Key Points

1. Trading Buy on EUR/USD recommendation

2. Buy EUR/USD at 1.1250. Stop at 1.1210 and target at 1.1315.

3. A pause in US rate hike and recent spate of poor US data is aiding Euro currency

4. A possible Inverse Head and Shoulder chart pattern coupled with bullish MACD is hinting of further price upside

Fundamental Comments

1. A pause in US rate hike by the Fed is aiding Euro currency

2. Recent spate of poor US data is weighing on the US$

Technical Comments

1. A possible Inverse Head and Shoulder chart pattern is hinting of a price rally

2. MACD is bullish and moving higher, hinting of further price upside

Key Levels

Support 1.1245 1.1205 1.1180
Resistance 1.1285 1.1315 1.1345

Technical Overview

USD/JPY – We think that 111.80 could be the high and price is on the way back to 110.70. Price has moved below the support at 111.50 and as long as price stays below 111.50, we think price should be on its way to initial 111.00 and then to 110.70. However both Stochastic and MACD are still hinting of further price upside.

Support 111.20 110.95 110.70
Resistance 111.50 111.80 112.15

AUD/USD – Price has broken above the resistance at 0.7130 and could be heading to the previous high at 0.7170 with 0.7180 a possibility. Both Stochastic and MACD are rising, hinting of further price upside. 20EMA is bullish and its gradient is steep, hinting of a strong uptrend. Stochastic is into overbought extreme.

Support 0.7130 0.7115 0.7085
Resistance 0.7170 0.7200 0.7245

GBP/USD – We think the rally from the base of 1.2985 should be capped at 1.3125. This is just above the Fibonacci 62% resistance point at 1.3115. MACD is still bearish. Stochastic is moving towards overbought extreme. 20EMA is neutral at the moment.

Support 1.3065 1.3030 1.2985
Resistance 1.3115 1.3150 1.3195

XAU/USD – Yesterday, we had called for a test of initial 1302.60 and later to 1307.73. Price reached a high of 1303.60 and is currently consolidating around 1300. Support zone is currently at 1295.10 to 1294.35. We are expecting this support zone to hold and later to push price higher to 1307.70. MACD is bullish and rising but Stochastic is into overbought extreme.

Support 1294.35 1288.20 1280.80
Resistance 1303.60 1307.70 1313.50

USD/CAD – Our buy call was stopped out yesterday for a loss of 35 pips. Price had a failed break above the neckline and had come back to the bottom at 1.3295. 20EMA is currently bearish. Stochastic has reached the oversold extreme but MACD is bearish and moving lower. A price move below 1.3295 will likely target a test of 1.3240. Only a move above 1.3400 will reverse the current bearish trend.

Support 1.3295 1.3260 1.3230
Resistance 1.3320 1.3345 1.3370

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