FX Commentary 17 April 2019

Market Talk

-The NZ dollar dived after annual consumer price inflation came in well below expectations at just 1.5% for the first quarter, leading to investors wagering on RBNZ to cut rates in response.

– Euro sagged after Reuters quoted four sources with direct knowledge of discussions that several European Central Bank policy makers think the ECB’s economic projections are too optimistic as economic weakness in China and trade tensions linger and weigh on Eurozone.

– Japan’s exports fell for a fourth straight month in March as China-bound shipments slumped again, reinforcing growing anxiety that weak external demand is likely to have knocked first quarter economic growth. JPY did not weaken much on this news.

– A bounce in long-term U.S. Treasury yields to a four-week high in the wake of equity gains on Wall Street also supported the greenback. The 10-year Treasury yield reached its highest level since the March Federal Reserve meeting boosting demand for US$

– Sterling slipped after a newspaper reported that Brexit talks between Prime Minister Theresa May’s government and the opposition Labour Party were stalling but the report was subsequently dismissed by a Labour Party spokesman.

Chart Focus Buy EUR/JPY

Key Points

1. Buy EUR/JPY recommendation

2. Buy EUR/JPY at 126.50. Stop at 126.10 and target at 127.50

3. Worries over slowdown in Japan GDP growth due to export slump and easing of tensions are likely to weigh on JPY

4. MACD and Stochastic are rising and price is supported by a rising trend, hinting of a price rally

Fundamental Comments

1. Japan’s export data slump for a fourth straight month reinforcing anxiety of economic growth in Japan

2. Market optimism due to easing of trade tensions is likely to move capital away from JPY and into risker assets

Technical Comments

1. Price is supported by a rising 20EMA and a rising trend

2. Both MACD and Stochastic are rising and hinting of a price rally.

Key Levels

Support 126.35 126.10 125.70
Resistance 126.80 127.20 127.50

Technical Overview

USD/JPY – Price reached a high of 112.16 this morning. While there are divergence warning from both Stochastic and MACD, the trend is strong with price staying above the 20EMA. Price was able to stay above a previous high of 111.80 for the past 3 days. As long as this support holds, there is a possibility of price moving above 112.16 to 112.45.

Support 111.80 111.40 111.15
Resistance 112.15 112.45 112.80

EUR/USD – Price managed to stay within the uptrend channel and could be poised to break above 1.1315 and push towards 1.1345 in the next couple of days. Stochastic is rising from oversold area and MACD is also rising. MACD is bullish as well. A move below 1.1260 would negate our bullish view.

Support 1.1280 1.1250 1.1210
Resistance 1.1320 1.1345 1.1390

GBP/USD – Price broke the lower end of our prescribed range and could be in a bearish trend for the short term. Price should now be capped at 1.3080 and could be moving towards 1.2985. However, Stochastic is turning up from oversold zone and MACD is flat at the moment.

Support 1.3030 1.2985 1.2965
Resistance 1.3080 1.3125 1.3180

XAU/USD – Yesterday, we had recommended bringing stop lower to 1290.50. For today, we would recommend bringing stop lower to 1286.50 while keeping target at 1271.50. Price went to low of 1272.93 overnight and has bounced back higher to 1278.20. It may continue towards 1285.05 before turning down again as MACD is bearish but Stochastic has given a divergence warning.

Support 1271.50 1266.40 1261.50
Resistance 1280.80 1287.30 1295.80

AUD/USD – Our sell call was stopped out this morning at 0.7190. A better China GDP growth sent Aussie higher to 0.7205. If price moves within the trend channel again, the upper limit could be 0.7220. Stochastic and MACD are both rising and not reversing as yet.

Support 0.7185 0.7140 0.7115
Resistance 0.7205 0.7220 0.7265

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