FX Commentary 12 June 2019

Market Talk

– The US$ hovered near an 11-week low against its peers on Wednesday, weighed by expectations the Fed would cut interest rates twice over the rest of this year. The US$ has been under pressure following a sharp decline in long-term U.S. Treasury yields, which fell to near two-year lows on Friday amid expectations for an interest rate cut by the Fed as early as July 2019.

– The Euro was little affected by Trump’s tweet accusing Europe of devaluing the euro, which has gained roughly 1.4% against the dollar so far in June, and putting the U.S. at a big disadvantage.

– Sterling pulled away from 5-month lows versus the euro on Tuesday after UK wages in the three months to April rose faster than expected. Investors have largely ignored economic data releases in Britain recently, believing the BoE is unlikely to act until UK decides how, when and even if it will leave the European Union.

– Trump said he will not do a deal with China unless it is a great deal increasing tensions between the 2 largest economies in the world. Prospect of additional tariffs on China should both countries failed to reach a deal at G20 meeting continues to weigh on risk sentiment.

– US CPI is scheduled at 8.30pm tonight. ECB’s Draghi is speaking at 4.15pm.

Chart Focus GBP/USD

Key Points

1. Buy GBP/USD recommendation

2. Buy GBP/USD at 1.2710. Stop at 1.2645 and target at 1.2850

3. Expectations of a Fed cut and declining Treasury yields are weighing on the US$

4. Price has rebounded from Fibonacci 50% correction point and both momentum indicators are hinting of a price rally.

Fundamental Comments

1. Decline of US Treasury yields has eroded the appeal of US$

2. Expectation of a Fed cut in rate is weighing on the US$

Technical Comments

1. Price has rebounded from the Fibonacci 50% correction point, hinting that the decline is corrective and could be over

2. Stochastic is turning up and MACD looks like turning higher as well.

Key Levels

Support 1.2710 1.2675 1.2635
Resistance 1.2760 1.2815 1.2860

Technical Overview

USD/JPY – Price continues in its consolidation as risk sentiment remains largely intact. Stochastic is moving lower from overbought extreme but MACD is still bullish but moving lower. These mixed signals complicate the scenario and we feel the consolidation is likely to continue. Play the smaller movements or wait for better trading ideas.

Support 108.35 108.05 107.80
Resistance 108.75 109.15 109.60

EUR/USD – Price is approaching the recent high of 1.1347 again and with MACD still bullish and rising, there is a good chance the price may make a new high today. Stochastic is rising and not into overbought extreme which increase the odds of a price rally. A move below 1.1285 would negate our bullish view.

Support 1.1305 1.1270 1.1240
Resistance 1.1350 1.1390 1.1435

NZD/USD – Our sell call was filled and our view remains the same. We would recommend bringing stop lower to 0.6610 and keeping target at 0.6540. Stochastic is into oversold extreme but MACD is bearish. 20EMA is pointing lower and we will continue to stay bearish.

Support 0.6560 0.6530 0.6505
Resistance 0.6595 0.6620 0.6655

XAU/USD – Price had a shallow correction to 1319.60 ahead of our target at 1317 and has turned higher. If price were to move above 1339, it would confirm the end of the corrective decline and hints of a move above 1348.15. Stochastic is turning up while MACD is starting to turn bullish.

Support 1328.90 1319.65 1311.60
Resistance 1339.10 1348.15 1355.60

USD/SGD – Our buy call on Monday is still opened. Price has dropped lower to 1.3630 and the rally looks weak despite a strong bullish divergence from MACD. Keep stop at 1.3605 and we will re-evaluate again tomorrow. Stochastic is on the low side and could be turning up.

Support 1.3630 1.3590 1.3565
Resistance 1.3655 1.3695 1.3730

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