FX Commentary 16 April 2019

Market Talk

– Gold fell to its lowest in more than a week on Monday on hopes that the United States and China would reach a trade deal lifted appetite for riskier asset even as the dollar retreated. Price had dipped to a low of $1,281.96, its lowest since April 4.

– U.S. Treasury Secretary Steven Mnuchin said on Saturday he hoped Washington and Beijing were “close to the final round” of negotiations to resolve the trade dispute between the world’s two biggest economies. However, Mnuchin said Monday the two sides had a lot of work left ahead of them.

– U.S and Japan kicked off trade talks on Monday. U.S. President Trump had made it clear he was unhappy with Japan’s $69 billion trade surplus with the U.S. and wanted a two-way agreement to address it. Japan Economy Minister Motegi told reporters that he had a frank and good exchange with Lighthizer on Monday. Talk will resume on Tuesday in Washington.

– Aussie dollar was inching lower in response to RBA’s April monetary policy minutes. Minutes showed RBA’s concern over a marked slowdown in Aussie GDP growth which is at odd with improvement in the labour market.

– Major currencies remained confined to well-trodden ranges on Tuesday, as markets look next to European (Thursday) and Chinese (Wednesday) data for more evidence that the worst may be over for the global economy. Good Friday and Easter holidays in Europe later in the week are also affecting market volume and volatility.

Chart Focus AUD/USD

Key Points

1. Trading Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7150. Stop at 0.7190 and target at 0.7085

3. Concerns about a marked slowdown in Aussie GDP and interest rate differential are both in US$ favour.

4. A price movement below its 20EMA coupled with divergence warnings from both MACD and Stochastic is a sign of more downside.

Fundamental Comments

1. Interest rate differential favours the US$

2. RBA’s minutes revealed the central bank concerns about a marked slowdown in Aussie GDP.

Technical Comments

1. Price moved below the 20EMA which is an indication of an Aussie trend weakness.

2. Divergence warnings from both MACD and Stochastic of a potential price high

Key Levels

Support 0.7140 0.7115 0.7085
Resistance 0.7170 0.7190 0.7220

Technical Overview

USD/JPY – Price reached a high of 112.09 yesterday and is hovering around the high. The lack of a breakout is hinting of a high but MACD is bullish and is showing signs of another price push higher to come. Support lies at 110.80 and if price is able to stay above this support, there could be another push above 112.15. A move below 111.50 would negate our bullish view.

Support 111.80 111.40 111.15
Resistance 112.15 112.45 112.65

EUR/USD – Price managed to stay above 1.1290 but failed to move above the previous day high of 1.1323. MACD is hinting of another price push higher. MACD is bullish and strong at the moment but Stochastic is moving down from overbought extreme. Watch the breakout at 1.1323 or 1.1290 for directional clue.

Support 1.1285 1.1250 1.1210
Resistance 1.1320 1.1345 1.1390

GBP/USD – Price failed to move outside of the band we had prescribed yesterday. We recommend watching the range again for today and to follow in the direction of the breakout either at 1.3125 or 1.3050. MACD is neutral. We prefer to see a breakout of the topside.

Support 1.3080 1.3045 1.3010
Resistance 1.3125 1.3180 1.3230

XAU/USD – Price reached a high of 1290 last night and our sell order was filled at 1289.50. Our view remains unchanged but we would recommend bringing stop lower to 1290.50 while keeping profit target at 1271.50. MACD is bearish and Stochastic is declining. Both momentum indicators are hinting of price moving lower.

Support 1280.20 1271.45 1266.15
Resistance 1286.50 1290.10 1299.50

EUR/JPY – Price may have reached the 161.8% Fibonacci projection point at 126.80 but it seems the rally may not be over as yet. If price can hold above the support at 126.20, there could be another rally towards 126.95. MACD is bullish and strong which gives us the hint of another price rally. 20EMA is bullish and rising.

Support 126.25 125.95 125.65
Resistance 126.75 126.95 127.20

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