FX Commentary 23 April 2019

Market Talk

– Crude oil price rose 2.7% after the Trump administration announced that Iranian oil buyers would need to cease import by 2nd May as US end wavier for 8 countries. US Secretary of State Mike Pompeo confirms there will be no exemptions on Iran oil exports sanctions.

– On the US data front, existing home sales for March fell 4.9% to a seasonally adjusted annual rate of 5.21 million. The drop in March came after an 11.2% surge in February. US 10-year Treasury yields rose, dragging US$ higher as signs of strength in the US economy emerged following a weak start at the beginning of the year.

– Comments from China’s policy-making committee to pursue structural changes rather than add stimulus raised investor fears after some signs of stabilization in the world’s second-largest economy. Stimulus from the Chinese government had helped the Chinese economy recover and avoid a slowdown.

– UK parliament returns from Easter’s holiday recess and we can expect more movement in Sterling as the government try to conclude a Brexit deal to avoid European parliament election due in late May.

– US New Home Sales is at 10PM tonight, will be closely watch following yesterday existing Home Sales data last night. Tomorrow there is Aussie CPI at 9.30am in the morning.

Chart Focus EUR/USD

Key Points

1. Trading Sell on EUR/USD

2. Sell EUR/USD at 1.1250. Stop at 1.1275 and target at 1.1205

3. Interest rate differential and economic strength are both in US favour

4. Price capped at resistance points with MACD and Stochastic turning lower, is hinting of a price decline.

Fundamental Comments

1. Recent US and Euro data have shown that the US economy is stronger than the Eurozone

2. Interest rate differential between US$ and Euro is in US favour

Technical Comments

1. Price is capped at Fibonacci 38% point and 20EMA line.

2. MACD is bearish and turning down. Stochastic is also turning down.

Key Levels

Support 1.1225 1.1200 1.1185
Resistance 1.1260 1.1285 1.1320

Technical Overview

USD/JPY – Our sell call at 111.90 from 17th April is still pending. Price dropped to a low of 111.65 but has bounced back higher to 111.90. MACD and Stochastic is now neutral and hinting of a range consolidation ahead. With an extended Japanese holiday approaching, we will close the position if it makes no headway by tomorrow.

Support 111.65 111.25 110.85
Resistance 111.90 112.15 112.45

AUD/USD – Price broke below support at 0.7140 and could be heading lower to 0.7090. MACD is bearish and declining while Stochastic is in oversold extreme but hinting of a strong bearish trend. 20EMA is bearish and its gradient is steep, hinting of a strong bearish trend as well.

Support 0.7105 0.7080 0.7050
Resistance 0.7140 0.7170 0.7205

GBP/USD – Price has reached our target. MACD has a divergence warning and with UK parliament convening, we would prefer to be long Sterling at this low level. MACD is still bearish while Stochastic is still weak. We would prefer to wait for better trade opportunities.

Support 1.2960 1.2920 1.2880
Resistance 1.3010 1.3050 1.3090

XAU/USD – Our sell order was filled yesterday at 1279.50 when Gold rose to a high of 1279.72. Price has declined below 1275.25 and we would recommend bringing stop loss lower to 1281.10 and profit target lower to 1269.50. MACD is still bearish and moving lower while Stochastic is also declining. A move above 1280.80 would negate our bearish view.

Support 1268.90 1263.80 1259.65
Resistance 1275.25 1280.80 1289.30

USD/CAD – Price has been trapped in a range of 1.3280 to 1.3400 for the past 3 weeks. There is still no sign of a possible break of this range at the moment. Crude oil price has been rising to a 6-month high but USD/CAD price is near to the upper boundary of the range. Stochastic is rising from oversold extreme and MACD is turning up again. Watch the upper boundary for a breakout and direction.

Support 1.3340 1.3315 1.3275
Resistance 1.3370 1.3400 1.3450

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