Market Talk
– The Euro slumped to a 22-month low against the US$ after data suggested a gloomier economic outlook amid German business leaders. The Ifo Institute reported that confidence in Germany unexpectedly fell for a seventh month in the last eight and contradicted upbeat forecasts with a 99.2 print.
– The US dollar index, which measures the greenback versus a basket of six major rivals, rose to as high as 98.189 overnight, its highest level since May 2017. The index was last quoted at 98.133.
– Crude Oil price dropped on Wednesday amid signs that supply is still adequate despite the U.S. announcing a push for tighter sanctions on Iranian oil purchases. Stockpiles surged to their highest levels since October 2017, countering fears of tight supply despite OPEC’s output cuts and U.S. sanctions on Venezuela and Iran.
– The Canadian dollar fell after BoC abandoned bias for higher interest rate and slashed domestic growth forecast amid an economic slowdown and slower global growth. Bank of Canada kept interest rate unchanged at 1.75%
– Bank of Japan kept monetary policy unchanged and short term interest rate target at -0.1%. BOJ expects to keep interest rate level for extended period of time at least through spring 2020. Press conference by BOJ is expected later in the day.
Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.1180. Stop at 1.1225 and target at 1.1110
3. Poor German data points to a weaker economy compared to US while yields spread is in US$ favour.
4. Price decline has yet to reached Fibonacci 127% target while MACD is bearish and not showing any divergence warning as yet.
Fundamental Comments
1. Poor Ifo data is suggesting a gloomier economic outlook while US data is suggesting a stronger US economy
2. Spread between US and German debts is in US$ favour
Technical Comments
1. Price decline does not look completed with Fibonacci 127% a likely target for price decline.
2. MACD is bearish and there is no divergence warning of a potential low.
Key Levels
| Support | 1.1140 | 1.1105 | 1.1085 |
| Resistance | 1.1185 | 1.1225 | 1.1260 |
Technical Overview
USD/JPY – Price reached a high of 112.40 overnight. A quick decline back to 111.80 could be a sign of a top being formed at 112.40. However, MACD is still bullish and could be rising again while Stochastic is near to the oversold zone. Wait for better trade idea.
| Support | 111.65 | 111.25 | 110.85 |
| Resistance | 112.15 | 112.45 | 112.85 |
AUD/USD – Our order was filled at 0.7040 when price rose to a high of 0.7050. We would recommend bringing stop lower to 0.7055 and keeping profit target the same at 0.6950. Immediate resistance is at 0.7025 and this should cap price rally. MACD is bearish and both lines are far away from the zero line, hinting of a strong bearish trend. A move above 0.7075 would negate our bearish view.
| Support | 0.6980 | 0.6950 | 0.6920 |
| Resistance | 0.7025 | 0.7070 | 0.7120 |
GBP/USD – Price reached a low of 1.2886, just 6 pips ahead of our target but there is no clear indication of a reversal as yet. While Stochastic is in oversold extreme, MACD is bearish and have not shown any divergence warnings as yet. 20EMA is bearish and its gradient is steep, hinting of a strong trend. A move above 1.2970 would be the first indication of a reversal.
| Support | 1.2880 | 1.2840 | 1.2795 |
| Resistance | 1.2920 | 1.2965 | 1.3015 |
XAU/USD – Our view remains unchanged from yesterday. There is a possibility that 1266.10 could be the termination move from 1310 but we are waiting for confirmation of a reversal. A move above 1280.80 would be the confirmation of a reversal. MACD and Stochastic have both given divergence warnings of a possible low. Watch 1281 level for clue.
| Support | 1273.20 | 1266.10 | 1259.65 |
| Resistance | 1280.80 | 1289.80 | 1295.70 |
USD/CAD – After breaking out of its 3-week range, price exceeded our target reaching a high of 1.3519. There are no divergence warnings and we are expecting price to proceed higher. MACD is bullish and high above its zero line. 20EMA is bullish and rising. We are expecting a small correction to 1.3440 and from there a push higher to 1.3570. A move below 1.3390 would negate our bullish view
| Support | 1.3475 | 1.3435 | 1.3400 |
| Resistance | 1.3500 | 1.3525 | 1.3560 |
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