FX Commentary 12 April 2019

Market Talk

– Wall Street Journal reported that China agreed to open its cloud computing sector to foreign companies in an attempt to sweeten a deal with the U.S. This comes after Mnuchin’s remark that Beijing and Washington had pretty much agreed on an enforcement mechanism.

– U.S. Federal Reserve Vice Chairman Richard Clarida told CNBC on Thursday that officials at the central bank see no necessity to move interest rates in either direction at present. Clarida’s comments came a day after the FOMC released minutes from its March meeting, at which the Fed adjusted its forecast to no rate moves this year.

– Worries over a sharp slowdown in U.S. growth were eased as jobless claims data showed the number of Americans filing applications for unemployment benefits last week dropped to a 49 and half-year low. Producer price index also eased worries when it came out at 0.6% against a 0.3% expectation.

– Euro rose to a two and a half week high against the US$ on reported buying by a Japanese bank to purchase a multi-billion dollar aviation finance business from a German bank.

– PM May agrees to continue her meeting with Labour leader Corbyn in an effort to make substantive progress towards finding a cross party compromise Brexit deal that could pass through UK parliament. Progress could see UK exit the EU before June 31 as it is May’s wish to avoid EU’s election.

Chart Focus AUD/USD

Key Points

1. Trading Buy AUD/USD recommendation

2. Buy AUD/USD at 0.7120. Stop at 0.7080 and target at 0.7180

3. A pause in US rate hike and a recovery in China’s economy are in favour of Aussie.

4. Price is consolidating and another rally to 0.7180 is likely with MACD’s momentum still bullish and strong

Fundamental Comments

1. A pause in US rate hike is aiding Aussie dollar strength

2. A recovery in China’s economy is aiding Aussie dollar strength

Technical Comments

1. Price rally may not have ended if support at 0.7115 can hold.

2. MACD is bullish and strong and could provoke another price rally to 0.7180

Key Levels

Support 0.7115 0.7085 0.7050
Resistance 0.7150 0.7180 0.7210

Technical Overview

USD/JPY – Price broke above the resistance at 111.30 and had move higher above the previous high at 111.80. Price could be heading higher to 112.15. Stochastic is into overbought extreme but MACD has turned bullish and is still rising. 20EMA is also rising and is steep, hinting of a strong bullish trend. A move below 111.30 will negate this bullish view.

Support 111.70 111.40 111.15
Resistance 112.15 112.45 112.65

EUR/USD – Price dipped close to the neckline again but this time, it did not move below the neckline. Price continues to move higher to a two and a half week high at 1.1293. We stick to our previous view of a price test of 1.1315. MACD is still bullish while Stochastic has yet to reach its extreme value.

Support 1.1275 1.1250 1.1210
Resistance 1.1315 1.1345 1.1390

GBP/USD – Price range over the past 3 days has been narrowing. This is a sign of consolidation due to market indecision in part to Brexit uncertainty. There are two important points to watch out for in this range. They are 1.3120 and 1.3020. A break in either direction will determine the next direction. MACD is neutral.

Support 1.3050 1.3020 1.2985
Resistance 1.3080 1.3120 1.3150

XAU/USD – Price has fallen more than we anticipated and our assumption of a corrective decline could be wrong. If price were to drop below 1289, there could be more declines in store. If price is able to hold above 1289.50, which is just below the Fibonacci 62% correction point, there is still hope for a rally above 1325. Watch the reaction at 1289.50 for clue.

Support 1289.50 1280.20 1276.30
Resistance 1298.50 1304.50 1310.40

USD/SGD – Our buy order was filled yesterday. Our view remains the same as yesterday. Price reached a high of 1.3578 and will need to stay above the trendline around 1.3560 to maintain its bullish trend. We would recommend bringing stop to cost at 1.3530 while keeping profit target at 1.3600. MACD has turned bullish.

Support 1.3555 1.3525 1.3495
Resistance 1.3580 1.3615 1.3630

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