FX Commentary 10 June 2019

Market Talk

– US dollar dropped on Friday after a disappointing NFP data signaled a weakening labour market and increased the odds of a Fed rate cut. NFP came in at 75K against an expectation of 175K, sending the US$ broadly weaker against its peers. It was also the second time in four months that employment increased by less than 100K.

– Concerns over the potential impact of U.S.-Sino trade war and signs of a slowing American economy have raised expectations that the Fed would slash interest rates to sustain the U.S. economy. Rising expectation of a US rate cut has dragged US dollar to its worst weekly performance since Oct 2016.

– Trump tweeted on Friday evening that a deal had been reached with Mexico and tariffs will be suspended indefinitely. A decrease in trade tensions resulted in a weaker US$ and dragged safe haven like JPY and CHF down.

– Gold reached a 14-month peak on Friday on rising expectations of a Fed rate cut after a poor job data. Expectations that trade disputes and tariffs war will slow down the global economy are also leading fund inflow into Gold.

– Sterling rose to a two-week high on Friday due to a weak U.S. dollar abut gains were capped by worries over Brexit. The next new UK PM, Boris Johnson is the favourite, could lead UK out of EU without a divorce deal and this could have adverse effects on Sterling.

Chart Focus USD/SGD

Key Points

1. Buy USD/SGD recommendation

2. Buy USD/SGD at 1.3655. Stop at 1.3605 and target at 1.3725

3. Sino-U.S. trade war and a weak Chinese economy are likely to weigh on the SGD

4. 20EMA has turned around with MACD showing divergence, hinting of a possible reversal.

Fundamental Comments

1. Sino-U.S. trade war will keep US$ strong.

2. A weak Chinese economy will weigh on SGD

Technical Comments

1. Price has moved above the 20EMA which is turning around, hinting of a possible low in place.

2. MACD’s bullish divergence is warning of a low and a reversal

Key Levels

Support 1.3650 1.3610 1.3590
Resistance 1.3695 1.3730 1.3765

Technical Overview

USD/JPY – Price is breaking above last Friday’s high of 108.61 and we are expecting this price rally to continue towards 109.10. Stochastic is turning higher and MACD is turning bullish and moving higher. These signs are supportive of a price rally towards 109.10. A move below 108.25 would negate our bullish view for today.

Support 108.60 108.35 108.05
Resistance 108.90 109.15 109.60

EUR/USD – Price reached a high of 1.1347 on Friday but the high was accompanied by bearish divergence warnings from both MACD and Stochastic. Price is likely to fall back towards 20EMA support at 1.1280 or to a previous strong support point at 1.1205. A move above 1.1350 would negate our bearish view for today.

Support 1.1305 1.1280 1.1245
Resistance 1.1345 1.1370 1.1410

GBP/USD – Price reached a high of 1.2776 on Friday but the high was accompanied by bearish divergence warnings from both Stochastic and MACD. Price is currently sitting on the 20EMA. A move below the 20EMA will likely result in a decline to 1.2660 or 1.2640. A break of 1.2640 is likely to see a deeper decline to 1.2560.

Support 1.2670 1.2640 1.2600
Resistance 1.2710 1.2745 1.2775

XAU/USD – Our view remains the same as last Friday. We are looking for a price correction lower to 1317 or 1309. Price has declined below the 20EMA at 1330 and this has increased the possibility of a correction lower to 1317. Both momentum indicators are pointing to more downside. A move above 1348.60 would negate our bearish view.

Support 1324.10 1317.10 1308.80
Resistance 1330.10 1338.70 1348.60

AUD/USD – Our sell call on Friday was stopped out with a loss of 35 pips, when price reached a high of 0.7021. We remain short term bearish. We think a correction is needed after a rally that started from the last trading day of May. We are looking for a price decline to 0.6940 to 0.6930. Momentum indicators, MACD and Stochastic are both declining, hinting of a likely price decline.

Support 0.6940 0.6900 0.6860
Resistance 0.6990 0.7020 0.7045

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