FX Commentary 30 April 2019

Market Talk

– The official China PMI data came in at 50.1 against an expectation of 50.5. Official Non-manufacturing PMI was also lower, coming in at 54.3 against expectation of 55.0. The Caixin PMI for April also missed expectation of 51.0; coming in at 50.2.The Aussie dollar saw a small decline as it is often seen as an investment proxy for Chinese economic prospects.

– US Treasury Secretary Mnuchin hopes that the latest talks between the United States and China may seal a trade deal. Talks between US and China are scheduled for today in Beijing.

– US March Core PCE, the Fed’s preferred inflation measure was lower than expectation of 1.7%, coming in at 1.6%. March Personal Spending was a strong 0.9% compared to expectation of 0.7%. Consumer spending enjoyed the sharpest rebound in 9.5 years but core inflation remains near a 14-month low.

– Report from Guardian commented that cross party talks between Labour and May’s party have taken a positive tone and there seems clear ground to continue talking but there is still no breakthrough as yet. If a Brexit deal is not reached before Euro parliamentary election, UK would have to take part which is not PM May’s preferred choice.

– Tonight at 8.30pm, there is Canadian GDP data and at 10pm, there is US CB Consumer Confidence. Tomorrow, it is a holiday in Singapore as well as many countries in Europe but UK and US are both not on holidays. Tomorrow night at 10pm, there is US ISM Manufacturing PMI and on Thursday morning at 2am, there is the FOMC announcement.

Chart Focus AUD/USD

Key Points

1. Trading Sell AUD/USD recommendation

2. Sell AUD/USD at 0.7040. Stop at 0.7080 and profit target at 0.6950

3. Weak Chinese PMI data and a soft Aussie inflation data are weighing on the Aussie dollar

4. Price capped at Fibonacci 50% point with MACD and Stochastic both pointing down are hints of a price decline.

Fundamental Comments

1. Weak China’s PMI is likely to weigh on Aussie dollar

2. Soft Aussie inflation data has rekindled expectation of a Aussie rate cut.

Technical Comments

1. Price capped at Fibonacci 50% correction point is a hint that the rally is a corrective rally

2. MACD and Stochastic are both turning down, hinting of a price decline.

Key Levels

Support 0.7025 0.6985 0.6950
Resistance 0.7070 0.7120 0.7160

Technical Overview

USD/JPY – Price has declined back to the previous day low of 111.35 and a break would likely bring price lower to 110.85. MACD is bearish at the moment. Stochastic is weak and turning lower. 20EMA is bearish and pointing lower. A move above 111.90 would negate our view for a move to 110.85.

Support 111.35 111.05 110.85
Resistance 111.65 111.95 112.15

EUR/USD – Our sell call yesterday at 1.1175 was filled when price reached a high of 1.1191 this morning. Our view remains the same. We would recommend keeping stop at 1.1215 and profit target at 1.1110. Stochastic is into overbought extreme while MACD is still bearish. A move below 20EMA support at 1.1170 would be the first hint of a potential price decline.

Support 1.1155 1.1110 1.1085
Resistance 1.1190 1.1225 1.1260

GBP/USD – Our view remains the same as yesterday. We are expecting resistance at 1.2965 to 1.2975 to cap price advance. We are expecting a price move lower to 1.2865 in the next few days. MACD is bearish and Stochastic is into overbought zone. A move above 1.3025 would negate our bearish view.

Support 1.2920 1.2865 1.2825
Resistance 1.2965 1.3020 1.3065

XAU/USD – Price dropped below 1279 yesterday but stay above 1277.40, which is the Fibonacci 50% point of the rally from 1266.20 to 1288.60. Price is now caught between 2 Fibonacci 50% points. The high on Friday at 1288.60 was also the 50% Fibonacci correction point of the decline from 1310.40 to 1266.20 low. If price moves below 1274, the trend is likely to be bearish with 1266.20 as its target. If price can stay above 1274, it is likely to test the Fibonacci 62% point of 1293.55. Wait for better signals.

Support 1277.90 1274.70 1266.20
Resistance 1288.60 1295.70 1304.60

USD/SGD – Price is supported near the 20EMA support point of 1.3600. MACD is bullish and could be turning up while Stochastic is turning up from near the oversold zone. Momentum oscillators are showing that price is likely to test last Friday’s high of 1.3656. Only a move below 1.3570 would negate our bullish view.

Support 1.3600 1.3575 1.3535
Resistance 1.3630 1.3655 1.3685

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