FX Commentary 29 April 2019

Market Talk

– U.S. Q1 GDP beat expectation with a 3.2% gain which sent the US$ higher. As outperformance was due mainly to trade and inventories, which is unlikely to be repeated in the next quarter, it resulted in US$ losing its gains.

– Sterling pound, which was weigh down by stagnant Brexit cross parties talks, managed to recover from the week’s low on the back of a soft US$ on Friday. However, with no headway in sights from talks, Sterling is likely to be weak going into the week. BOE monetary policy meeting later in the week on Thursday could weigh on Sterling with no policy changes expected.

– With Kudlow and Trump putting pressure on Fed for a cut rate and expectation of a rate cut by Dec 2019 having risen to 65.4%, based on trading in the Fed Fund futures market, hope of a rate cut could weigh on the US$.

– Crude oil price fell after Trump called on OPEC to raise production level and reduce the price of oil. This help Canadian dollar to a better closing against the US$ but this trend may not be sustainable without OPEC increasing output which is rather unlikely.

– Fed’s favourite data Core PCE Price Index will be released tonight at 8.30pm. China’s PMI will be closely watched at 9am tomorrow morning.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation

2. Sell EUR/USD at 1.1175. Stop at 1.1215 and target at 1.1105

3. Interest rate differential and a comparative stronger U.S. economy are likely to keep the US$ stronger against the Euro

4. Price capped at resistance point with MACD in a bearish trend is a hint of further price decline ahead.

Fundamental Comments

1. Strong U.S. Q1 GDP confirmed view that the US economy is comparative stronger than the Euro zone economy

2. Interest rate differential is also in US favour.

Technical Comments

1. Inability of price to move above 1.1180 is a sign of a weak rally.

2. MACD is still bearish and far away from the zero line, highlighting a strong bearish trend.

Key Levels

Support 1.1140 1.1105 1.1085
Resistance 1.1185 1.1225 1.1260

Technical Overview

USD/JPY – With Japan on long holiday till 6th of May, we are expecting less volatility and movement in this pair. MACD is still bearish and Stochastic is still looking weak at the moment. We are expecting another test of the low again based on these momentum readings as the trend is rather flat.

Support 111.40 111.25 110.85
Resistance 111.80 112.15 112.45

AUD/USD – Our sell call on 24th is still pending as price did not reach our profit target at 0.6950. Price went to a low of 0.6987 and bounced back higher to 0.7060. We would recommend keeping stop at 0.7080 and profit target at 0.6950. With MACD still bearish and with Stochastic near to overbought zone, we are expecting resistance at 0.7070 to cap and price to decline below 0.7000 again.

Support 0.7025 0.6985 0.6950
Resistance 0.7070 0.7120 0.7160

GBP/USD – Price reached a low of 1.2864 last Thursday and has been moving higher to current 1.2940. We are expecting price to be capped at 1.2965 to 1.2975 resistance zone. MACD is bearish and Stochastic is near to overbought zone. We are expecting a price decline back to 1.2865 again over the next few days. A move above 1.3025 would negate our bearish view.

Support 1.2920 1.2865 1.2825
Resistance 1.2965 1.3020 1.3090

XAU/USD – Price managed to rise above the resistance point of 1280.80 to a high of 1288.57. If price is supported at 1280 to 1279, there is a good chance of a price rally towards 1295 in the next few days. However a move below 1271 would negate our bullish view. MACD is still bullish but Stochastic is declining from overbought extreme.

Support 1280.80 1273.20 1266.10
Resistance 1288.60 1295.70 1304.60

USD/CAD – Price is currently supported by its 20EMA point at 1.3460 and we think there will be another rally to 1.3520 again in the next couple of days. With Stochastic in oversold extreme and MACD still bullish, we are expecting support at 1.3450 to hold and price to test 1.3520 again. A move below 1.3400 would negate our bullish view.

Support 1.3445 1.3400 1.3355
Resistance 1.3475 1.3520 1.3560

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