FX Commentary 18 April 2019

Market Talk

– The Fed’s Beige Book report, a region-by-region assessment of the U.S. economy based on information collected by the 12 regional Fed banks, found that the U.S. economy continues to grow and labor market remains tight across the country. U.S. trade deficit fell to an eight-month low in February as imports from China plunged, but US$ had little reaction.

The US and China have set a tentative time line for a fresh round of meetings ahead of a possible signing ceremony in late May or early June, according to a Wall Street Journal. Safe-haven yen was slightly up at 112.00 yen per dollar, sitting just above a near four-month low of 112.17.

Aussie employment data was better at 25.7K than expectation of 15K. Labour market data is crucial as the RBA is concerned over a marked slowdown in Aussie GDP growth which is at odd with improvement in the labour market.

UK CPI rose slightly slower than expected in March, easing inflationary pressure that might prompt the BoE to hike rate after Brexit. With little news on Brexit, Sterling continues to drift within a range as it struggles for a clear direction.

Investors’ immediate focus is on the release of Purchasing Managers Indexes (PMIs) for the manufacturing and service sectors in Europe later on Thursday to provide more clues on the strength of the euro zone economy.

Chart Focus USD/JPY

Key Points

1. Sell USD/JPY recommendation

2. Sell USD/JPY at 111.90. Stop at 112.20 and target at 110.95

3. Safe haven JPY could be in demand with reported test by North Korea of a new tactical guided weapon as well as activity at its former nuclear test site

4. A 3-wave corrective pattern is likely to follow after a 5-wave move with Stochastic and MACD both bearish

Fundamental Comments

1. North Korean media reported a test of a new tactical guided weapon.

2. Western media reported activity at North Korean former nuclear test site

Technical Comments

1. After a 5-wave pattern, we are likely to see a 3-wave correction

2. Stochastic is declining and MACD is about to turn bearish.

Key Levels

Support 111.80 111.50 111.25
Resistance 112.15 112.45 112.80

Technical Overview

USD/CAD – Price has been contained in a range for the past 2 weeks. The upper range boundary lies at 1.3400 while the lower boundary is at 1.3290. Last night, we had a test of 1.3290. Price went to a low of 1.3273 and has bounced back up. Price is currently in the middle of this range. After last night lower boundary’s test, we are expecting price to test the upper boundary at 1.3400.

Support 1.3320 1.3290 1.3260
Resistance 1.3360 1.3400 1.3450

EUR/USD – Price is still moving within the upward trending trend channel. The channel has boundaries at 1.1335 and 1.1280. MACD is flat and neutral at the moment and unable to provide a directional clue. Fibonacci 50% resistance lies at 1.1315. Wait for a breakout and follow in the direction of the breakout.

Support 1.1280 1.1250 1.1210
Resistance 1.1320 1.1345 1.1390

GBP/USD – Price broke the lower end of a range boundary and has been trending lower. Price has also stayed below the 20EMA. As long as price is capped at 1.3080, we are looking at a test of 1.2985 again. However, Stochastic is already in oversold extreme and could be turning up soon. MACD is still bearish. Wait for better directional clue.

Support 1.3030 1.2985 1.2965
Resistance 1.3060 1.3090 1.3125

XAU/USD – Price reached a low of 1271.47 but our profit order was not filled due to spread reason as the MT4 price is a bid price. We would suggest closing out the position at current 1272.50 for a $17 profit. MACD is starting to show divergence with price. This is a hint of a low approaching but the bearish trend is still strong.

Support 1271.50 1266.40 1361.50
Resistance 1279.70 1289.30 1295.80

EUR/JPY – Our buy call was filled yesterday at 126.50. Our view remains the same as the previous day. Price went to a low of 126.23 and we would recommend bringing stop loss to 126.20 while keeping profit order at 127.50. Stochastic is into oversold extreme. MACD is bearish but could be turning up.

Support 126.20 126.00 125.60
Resistance 126.50 126.80 127.20

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