FX Commentary 28 May 2019

Market Talk

– Dutch PM Rutte said UK withdrawal agreement is not up for renegotiation and whoever succeed May will still end up with the same withdrawal agreement. A general election or second referendum seems more likely than a no-deal Brexit. Sterling struggles to maintain its gains following May’s resignation.

– The common currency failed to cling on to gains on Monday. Investors, relief at limited success for Eurosceptic parties in European parliamentary elections were worried about remarks from two Eurozone officials that the EC is likely to start disciplinary steps against Italy on June 5 over the country’s rising debt and structural deficit levels, which break European Union’s rules.

– The US$ was struggling against a basket of six major currencies, having fallen off a two-year peak in Friday’s session due in part to the U.S.-China trade dispute. Many of the currency pairs hugged recent ranges, as activity thinned out overnight with markets in the United States and UK closed for market holidays

– Gold prices touched a more than one-week high on Monday as fears of a protracted U.S.-China trade war hurt risk sentiment, while poor economic data from the United States bolstered bets of a U.S. Federal Reserve rate cut.

– There is US Consumer Confidence tonight at 10pm and NZ Business Confidence data at 9am tomorrow morning.

Chart Focus USD/JPY

Key Points

1. Sell USD/JPY recommendation

2. Sell USD/JPY at 109.45. Stop at 109.80 and target at 108.40

3. A protracted US-China trade war and poor US economic data favour safe haven JPY

4. A possible Flag chart pattern which is forming with a bearish MACD pattern is a hint of a price decline.

Fundamental Comments

1. A protracted US-China trade war is likely to favour safe haven JPY

2. Last week poor economic data has bolstered chances of a Fed’s rate cut.

Technical Comments

1. Price has broken below a bearish Flag pattern

2. MACD is bearish and could be turning down, which is a hint of a likely price decline.

Key Levels

Support 109.30 109.00 108.75
Resistance 109.70 109.95 110.20

Technical Overview

AUD/JPY – Price has been in a consolidation for the past 2 weeks and this week, there is still no sign of a potential breakout. It looks like price is likely to continue in a range of 76.40 to 75.40. MACD is flat and neutral while Stochastic is near to the high side but not yet into overbought extreme. Wait for better trade idea.

Support 75.65 75.35 75.00
Resistance 76.00 76.30 76.70

EUR/USD – The trend is bullish but with concerns over Italy-EU confrontation, the view becomes cloudy. If price can stay above 1.1160, there is a good chance of price going higher to 1.1215. However if price were to fall below 1.1160, it could be heading back to 1.1105. MACD is bullish but Stochastic is moving lower from overbought zone.

Support 1.1160 1.1140 1.1105
Resistance 1.1195 1.1220 1.1245

GBP/USD – Price looks weak as it was not able to overcome the resistance at 1.2760. MACD is still bullish and Stochastic could be turning up from oversold zone. If price is able to hold above 1.2645, there is still a chance of another rally to 1.2810. However a move below 1.2645 is likely to see another test of the low at 1.2605.

Support 1.2665 1.2640 1.2605
Resistance 1.2710 1.2750 1.2785

XAU/USD – Price reached a high of 1287.25 and has declined lower. Price is now sitting on the 20EMA support at 1282.50. Stochastic is turning lower from overbought zone but MACD is still bullish and could be turning up. A price move below 1280.60 could mean a decline to 1269 again.

Support 1282.25 1278.80 1269.20
Resistance 1287.30 1291.40 1298.60

AUD/USD – Price reached a low of 0.6912, filling our buy call at 0.6915. Keep stop at 0.6870 and target at 0.6995. 20EMA is bullish and pointing higher. MACD is still bullish and moving higher. Stochastic is correcting from the extreme level. Signs are good that Aussie is poised for a rally.

Support 0.6910 0.6885 0.6860
Resistance 0.6935 0.6965 0.6995

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