FX Commentary 14 May 2019

Market Talk

– China on Monday announced it would impose higher tariffs on $60 billion of U.S. goods following Washington’s decision last week to hike its own levies on $200 billion in Chinese imports. The goods targeted include a broad range of agricultural products.

– Safe-haven JPY and CHF remained supported as a fresh escalation in Sino-U.S. trade tensions hit sentiment, with each country raising tariffs on the other’s goods. U.S. Treasury yields remained near six-week lows while Gold reached its highest since 11 April 2019.

– Underscoring market concerns over the economic impact of the trade war, 10-year yields remained below those on three-month Treasury bills, dragging US$ lower. A sustained inversion on this part of the yield curve has preceded every U.S. recession in the past 50 years.

– Worries over an escalating trade war and its impact on the global economic growth also hit commodity markets, sending WTI crude oil price down to $60.97 a barrel reversing Canadian dollar strength after a record employment data last week.

U.S. President Donald Trump said on Monday he would meet with Chinese President Xi Jinping at a G20 summit in Japan late next month and an outcome on trade deal with China would be known by then. Market will be waiting for outcome of trade tariffs talks.

Chart Focus AUD/USD

Key Points

1. Trading Sell on AUD/USD

2. Sell AUD/USD at 0.6960. Stop at 0.6995 and target at 0.6880

3. Sino-U.S. tariffs war and risk aversions are both against the Aussie dollar

4. Price has broken below the trend line of a Descending Triangle and MACD is hinting of another price decline

Fundamental Comments

1. Sino-U.S. trade tariffs war is weighing on Aussie

2. Risk aversion is favouring US$ as a safe haven

Technical Comments

1. Price has broken below the trendline of a Descending Triangle

2. MACD is bearish and hinting of another decline

Key Levels

Support 0.6940 0.6915 0.6880
Resistance 0.6965 0.6995 0.7020

Technical Overview

USD/JPY – Our sell call was not filled yesterday as price only reached a high of 109.74. Price went to a low of 109.01 and this may have completed the decline. The low last night was completed with a bullish divergence warning from MACD. Stochastic is rising from oversold extreme. Watch the resistance at 110.05 for clue to the next directional movement.

Support 109.40 109.00 108.65
Resistance 109.70 110.05 110.30

EUR/USD – Price went to a high of 1.1263 and this could be the test we were looking for. Price could have completed it corrective rally and a decline could be about to unfold for 1.1105. MACD has given a bearish divergence warning and Stochastic is moving lower as well. A move above 1.1290 would negate our bearish view.

Support 1.1225 1.1185 1.1150
Resistance 1.1265 1.1290 1.1320

GBP/USD – Price went to a high of 1.3040 last night missing our stop at 1.3050. Price went to a low of 1.2940 and we would recommend bringing stop lower 1.2980 and lowering profit target to 1.2910. MACD is bearish and is hinting of another decline as well. 20EMA at 1.2970 will provide a stiff resistance for another push lower to 1.2900.

Support 1.2940 1.2905 1.2865
Resistance 1.2970 1.3000 1.3040

XAU/USD – Price managed to move above 1288.40 again and reached a high of 1303.20. However there is a Shooting Star candlestick pattern and the rally may be over at 1303.20. MACD is still bullish and this could be a corrective decline. Stochastic has reached overbought extreme and is likely to move lower. We are expecting price to test the support again at 1288.40.

Support 1292.60 1288.60 1280.60
Resistance 1303.20 1310.50 1315.50

USD/SGD – Price reached a high of 1.3705 on the back of trade tariffs spat between U.S. and China. Price has been declining from the high but this decline looks like a corrective decline. MACD is bullish and hinting of a strong bullish trend. We think that 20EMA support at 1.3650 could be a good location to get into a long position for a rally to 1.3735. Stop is recommended at 1.3615.

Support 1.3655 1.3615 1.3580
Resistance 1.3705 1.3735 1.3770

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