FX Commentary 10 April 2019

Market Talk

– UK PM Theresa May met with Merkel and Marcon ahead of Wednesday’s EU summit in an attempt to secure support for the Brexit delay she has requested until June 30. EU’s 27 member states will decide whether and how long an extension to offer to the UK.

– A rise in the yen amid rising safe-haven demand was fueled by flare-up of US- EU trade tensions and the IMF’s downgrade on global growth. US Treasury yields fell as investors, grappling with intensified trade tensions, bought US debts for its safe haven status.

– IMF cuts its forecast for world economic growth this year to 3.3% from 3.5%, saying the global economy is slowing more than expected and that a sharp downturn could require world leaders to coordinate stimulus measures.

– U.S. President Donald Trump threatened to impose tariffs on $11 billion worth of European Union products, to compensate the US for what the US see as unfair subsidies to its Airbus. EU said it stands ready to launch countermeasures against US tariffs.

– All eyes will be on Wednesday’s European Central Bank meeting, the EU summit, U.S. consumer prices and the release of minutes from the March Federal Reserve meeting.

Chart Focus EUR/JPY

Key Points

1. Sell EUR/JPY recommendation

2. Sell EUR/JPY at 125.30. Stop at 125.70 and target at 124.60

3. Trade tension between US and EU and worries over economic growth are likely to aid JPY

4. Wave structure suggests a decline which is confirmed by price inability to move pass 62% Fibonacci point

Fundamental Comments

1. Trade tension between US and EU over Airbus subsides is weighing on Euro currency

2. IMF’s downgrade of global economic growth is likely to benefit JPY

Technical Comments

1. A 5-wave down move following by a Rising Wedge is likely to be follow by a decline

2. Price capped at Fibonacci 62% point is a sign of another down move to follow

Key Levels

Support 125.00 124.60 124.20
Resistance 125.40 125.65 126.25

Technical Overview

USD/JPY – Price reached our initial target of 111.00 and we believe price could be moving to 110.75 in the next 48 hours. Price will need to stay below 111.45 for the downtrend to continue towards 110.75. A move above 111.45 will negate our bearish view. MACD is bearish but Stochastic is moving up from oversold extreme.

Support 110.95 110.65 110.35
Resistance 111.45 111.80 112.15

EUR/USD – Our buy order was not filled as price reached a low of 1.1254. Our view remains the same as yesterday. We believe price is likely to stay supported at 1.1250 and move higher to 1.1315 in the next couple of days. MACD is still bullish and is moving higher. 20EMA is the nearest support for price. Only a move below 1.1230 will negate our bullish view.

Support 1.1240 1.1205 1.1180
Resistance 1.1285 1.1315 1.1345

GBP/USD – We have no view for today on this pair. Price is still trading within a range of 1.3270 to 1.2975. Today, depending on the outcome of Brexit extension, price is likely to move on Brexit news. Stochastic is near to oversold extreme and MACD is about to turn up. Wait for better trade ideas.

Support 1.3030 1.2985 1.2955
Resistance 1.3080 1.3115 1.3150

XAU/USD – Price reached a high of 1306.25 yesterday, just short of our target at 1307.70. MACD is still bullish and Stochastic while in overbought extreme, is showing signs of another price high. We think there should be one more push above 1307 within the next 24 hours. The reaction at 1307.70 will determine the next direction of Gold.

Support 1298.80 1288.20 1280.80
Resistance 1307.70 1312.30 1319.25

USD/CAD – Price broke the support at 1.3295 but bounced back up to 1.3335. Stochastic is moving higher but MACD is still bearish and could be turning lower again. We think price will be capped at 1.3340 and we see another test of 1.3295 and lower for today. A move above 1.3405 will negate our bearish view.

Support 1.3295 1.3260 1.3230
Resistance 1.3340 1.3370 1.3405

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