FX Commentary 15 May 2019

Market Talk

– The U.S. dollar strengthened on Tuesday and was firmer in Asian morning trade, snapping a 4-day losing streak against its key rivals, amid a contentious dispute between the U.S. and China over trade.

– An increase in risk appetite, helped by a softening of trade rhetoric and Wall Streets’ gains overnight, lead to a weakening of both safe havens JPY and CHF. Treasury yields were higher and price of gold declined as investors moved into risker assets.

– German ZEW economic sentiment slipped into negative territory in May, coming in at -2.1 against an expectation of 5.1. Salvini’s comments that the Italian government was ready to exceed 3% budget deficit and 130% debt to GDP ratio if necessary to spur job growth could lead to confrontation with EC and weighs on the EUR/USD.

– China Industrial production came out at 5.4% against market expectation of 6.5%. Retail Sales number was also lower at 7.2% against expectation of 8.6%. Aussie dollar continues to be weighed down by China’s tariffs conflict with the U.S and following a poor set of Chinese data, sank to a 4-month low.

– Sterling hit a new two-week low on Tuesday as British employment data showed wage growth in the quarter ending March was lower than expected, signaling the possible start of a turbulent period for the broader economy.

Chart Focus USD/SGD

Key Points

1. Trading buy recommendation on USD/SGD

2. Buy USD/SGD at 1.3670. Stop at 1.3630 and target at 1.3745

3. Trade tariffs war between U.S. and China is likely to weigh on SGD and favour safe haven US$

4. Price is coming into a strong support area and a turnaround in MACD is a hint of a price rally.

Fundamental Comments

1. Trade tariffs war between U.S. and China will weigh on the SGD

2. Ongoing trade war favours safe haven US$ and weigh on emerging market currencies like SGD

Technical Comments

1. Price is supported by 20EMA as well as a previous Triple Top’s high

2. MACD is bullish and is correcting from a price peak. A turnaround is a hint of a price rally.

Key Levels

Support 1.3670 1.3650 1.3605
Resistance 1.3705 1.3735 1.3755

Technical Overview

USD/JPY – Price managed to move higher from Monday’s low at 109.01 to current 109.75. Our view remains the same as yesterday. Price could have made a low and could be heading higher to 110.05. MACD has shown divergence earlier and Stochastic is moving higher. Ability to move above 110.05 would be bullish but inability will result in another test to 111.00 again.

Support 109.40 109.00 108.65
Resistance 109.75 110.05 110.50

EUR/USD – After reaching a high of 1.1263, price has been on a decline. The decline reached a low of 1.1200 overnight and price is now below the 20EMA and below a uptrend line. 20EMA is hinting of a bearish trend but Stochastic is into oversold extreme and MACD is not strongly bearish. The decline could be limited to 1.1150.

Support 1.1185 1.1150 1.1115
Resistance 1.1225 1.1265 1.1290

GBP/USD – We had lowered our stop and target for this pair yesterday. Our profit target at 1.2910 was reached and we are out with 135 pips profit. MACD is still bearish. Stochastic is in oversold extreme but 20EMA is still bearish. Trend is bearish unless price can move above 1.2975. Wait for better confirmation to get into another short position.

Support 1.2895 1.2865 1.2830
Resistance 1.2925 1.2965 1.3000

XAU/USD – Price has declined from the high of 1303.40 to current 1293.10. There is a 20EMA support at 1293.10 as well as Fibonacci 50% retracement nearby at 1292.60. If price can stay above 1289.30, there is still a chance for another rally to test 1303.20 but a move below 1288.60 would negate this bullish Elliott Wave structure.

Support 1292.60 1288.60 1280.60
Resistance 1303.20 1310.50 1315.50

AUD/USD – Our sell call was not filled as price only reached a high of 0.6950 overnight. However price has declined lower today to 0.6920. Price may be near to a bottom as MACD while bearish, is starting to show divergence warnings. Stochastic has been in oversold extreme for a while now. The trend may be bearish but be cautious of a corrective rally in the making.

Support 0.6915 0.6880 0.6840
Resistance 0.6940 0.6970 0.6995

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