FX Commentary 27 May 2019

Market Talk

– U.S. durable goods data was lower in April amid a slowdown in exports and a buildup in inventories possibly due to trade war. This is the latest economic data set showing cracks in the economy. The previous day, US manufacturing activity came in at a 9-year low.

– Economic worries, brought about by trade war, have seen the 10-year US Treasury yields dropped to the lowest level since Oct 16, 2017. Part of the yield curve has stayed inverted, increasing worries that a US recession could lie ahead.

– China’s banking and insurance regulator said on Saturday it did not expect a persistent decline in the yuan and warned speculative short sellers they would suffer “heavy losses” if they bet against the currency. Trump has recently warned China against manipulating its currency to offset the effect of tariffs.

– British Prime Minister Theresa May set out a departure date after failing to push through a Brexit divorce deal, helping the pound to snap a record losing streak against the Euro. Concerns that leading contenders to succeed May all want a tougher divorce deal, potentially increasing the chances of a ‘no-deal’ Brexit, continues to pressure Sterling and cap its gains.

– The euro barely budged in early Monday trade after pro-EU parties held on to two-thirds of seats in the EU parliament elections, limiting gains for nationalist opponents. Early results and projections showed greater fragmentation in the European Parliament over the next five years, due to the surge of anti-EU and nationalist parties across the region

– Market is likely to be quiet today as both UK and U.S. are on holiday today.

Chart Focus AUD/USD

Key Points

1. Buy AUD/USD recommendation

2. Buy AUD/USD at 0.6915. Stop at 0.6870 and target at 0.6995

3. A 90-day reprieve for Huawei and a decline in US Treasury yield is good for the Aussie

4. A potential Double Bottom chart pattern and MACD moving higher could be hint of a price rally.

Fundamental Comments

1. A 90-day reprieve for Huawei could see Aussie regain some of its losses

2. US 10-year Treasury yields has declined which is a drag for the US$

Technical Comments

1. A potential Double Bottom chart formation could be in the process of forming

2. MACD is bullish and moving higher, which is a hint of a price rally.

Key Levels

Support 0.6900 0.6865 0.6830
Resistance 0.6930 0.6965 0.7000

Technical Overview

USD/JPY – Our sell call on Friday was not filled as price failed to reach 109.90. Price reached a low of 109.28 on Friday and this may be the temporary low. Price is likely to do a correction back to the 20EMA at 109.70. As MACD is still bearish, we are expecting another decline from this resistance. A move above 110.30 would negate our bearish view.

Support 109.25 109.05 108.75
Resistance 109.70 109.95 110.20

EUR/USD – Price reached a 2-year low on Thursday at 1.11055 and on Friday, we saw a strong rally up to 1.1210. Stochastic is into overbought zone but MACD is still bullish and trending higher.20EMA is bullish and its gradient is steep. This is a hint of a strong price trend. Our view remains unchanged. We are expecting a price test of 1.1265 in the next couple of days.

Support 1.1185 1.1145 1.1105
Resistance 1.1225 1.1265 1.1295

GBP/USD – Price has moved above 1.2710 and price could be on its way towards 1.2810. Stochastic is into overbought zone but MACD is bullish and still trending higher. We are expecting price to move higher towards initial 1.2780 and later 1.2810. Support is at 1.2695. A move below 1.2645 would negate the bullish trend.

Support 1.2710 1.2685 1.2645
Resistance 1.2760 1.2785 1.2810

XAU/USD – Price reached a high of 1287.25 this morning but we think it should move higher to 1288.60. Stochastic has not reached the extreme level as yet and MACD is still bullish. 20EMA is still pointing higher and is gradient is getting steeper. This is a good sign of a strong bullish movement. A price move below 1280 would negate our bullish view.

Support 1284.55 1280.60 1274.60
Resistance 1288.60 1291.70 1298.35

USD/SGD – Price reached a high of 1.3827 on Thursday and we saw a decline on Friday to 1.3729. Stochastic is into oversold zone but MACD is still bearish. We do not think the decline is completed and we are expecting another decline to 1.3700. Price is likely to do a corrective rally to unwind the oversold Stochastic and a move to 1.3760 would be a good level to get into a short position.

Support 1.3730 1.3700 1.3675
Resistance 1.3760 1.3785 1.3820

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.