FX Commentary 10 May 2019

Market Talk

– At 12:01 a.m. ET Friday deadline has been set by U.S. President Trump for the implementation of higher tariffs on $200 billion worth of Chinese goods. China has said it will retaliate if higher tariffs are imposed. Chinese Vice Premier Liu He is currently in Washington for trade negotiations with the U.S.  First day of talk ended with no news.

– Before Friday deadline for tariffs on US$200B of Chinese goods to go into effect, US President Trump said he was taking steps to authorize new tariffs on US$325B of Chinese imports. Investors remain on the edge as they continue to monitor for developments on Sino-U.S. trade front.

-Safe-haven JPY and CHF strengthened amid investor concerns that a long-standing rift over trade between the U.S. and China could deepen if talks between the two fail to reach a last-minute deal. Gold was steady as investors avoided risker assets.

– Sterling decline further to its lowest in the month of May amid doubts  that cross party Brexit talks between the government and main opposition Labour party could ever reached an agreement, thereby extending impasse on Brexit.

– Today at 4.30pm there is UK GDP data to watch out for. Tonight at 8.30pm, there is US CPI data as well as Canadian employment data.

Chart Focus GBP/USD

Key Points

1. Sell GBP/USD recommendation

2. Sell GBP/USD at 1.3045. Stop at 1.3080 and target at 1.2920

3. Brexit impasse and interest rate differential are against Sterling

4. Price is capped by resistance and MACD is bearish. Both are hinting of a price decline.

Fundamental Comments

1. Impasse of a Brexit solution is weighing on Sterling

2. Interest rate differential is in US$ favour.

Technical Comments

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

2. MACD is bearish and is hinting of another price decline

Key Levels

Support 1.2965 1.2925 1.2865
Resistance 1.3015 1.3050 1.3095

Technical Overview

USD/JPY – As escalation in tensions between U.S. and China increased, price has not made a big movement. MACD is showing divergence as price moves lower, hinting of a possible bottom as well. Price has also reached a Fibonacci 161.8 projection point. We may see a corrective rally to 110.30 in the next couple of days.

Support 109.50 109.05 108.85
Resistance 109.90 110.25 110.65

EUR/USD – Price broke above 1.1220 to reach a high of 1.1250. We do not think the rally is completed. We think there should be one more rally to 1.1265-1.1280 to complete this breakout movement. Stochastic is neutral but MACD is bullish and rising. A move below 1.1160 will negate our bullish view.

Support 1.1200 1.1165 1.1135
Resistance 1.1250 1.1280 1.1300

USD/CHF – A price test to 1.0120 did not break the support but instead bounce higher. A triple bottom was created as a result and price will need to break this strong support in order to be bearish. Stochastic is near to oversold zone but MACD is still bearish and hinting of further decline.

Support 1.0120 1.0090 1.0050
Resistance 1.0160 1.0195 1.0230

XAU/USD – After coming down from a break of the neckline, price has managed to stay above the support of 1280.60. Stochastic is rising and MACD is bullish and rising. As long as price can stay above 1280.60, we believe the uptrend to 1301 is not dead.

Support 1280.60 1274.70 1266.20
Resistance 1288.40 1295.70 1304.65

USD/CAD – Our buy call was filled yesterday. Price dropped to a low of 1.3435, narrowly missing out on our stop order. Our view remains unchanged. We are still waiting for price to move above the Ascending Triangle chart pattern. A move above 1.3500 will hasten the rally while a drop below 1.3430 will negate our bullish view.

Support 1.3435 1.3405 1.3375
Resistance 1.3495 1.3535 1.3575

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