FX Commentary 13 June 2019

Market Talk

– Safe haven JPY gained as risk sentiment deteriorated amid uncertainty towards the United States and China clinching a deal on the sidelines of the June 28-29 Group of 20 summit meeting in Japan. Protest and riots in Hong Kong also weigh on risk sentiment.

– Australia’s unemployment rate stayed stuck at 5.2% in May as a surge in part-time hiring was met by an ever-expanding pool of labor, a sure sign of spare capacity that argued for another cut in interest rates perhaps as soon as next month by the RBA. Trade tariffs tensions also weigh on the Aussie.

– The euro took a hit after U.S. President Donald Trump said on Wednesday he was considering sanctions over Russia’s Nord Stream 2 natural gas pipeline project and warned Germany against being dependent on Russia for energy.

– Sterling slipped as British lawmakers on Wednesday defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit. This has increased the risk of a no-deal Brexit come Oct 31. Candidates for the PM post, while hoping for a Brexit deal, have not ruled out an exit from EU without a divorce deal.

– Oil prices tumbled 4% on Wednesday to their lowest settlements in nearly five months, weakened by another unexpected rise in U.S. crude stockpiles and by a dimming outlook for global oil demand. Canadian dollar weakened as a result.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation

2. Sell EUR/USD at 1.1295. Stop at 1.1325 and target at 1.1215

3. Trump’s warning for Germany and a deterioration in risk sentiment are likely to favour US$ which is a safe haven

4. A possible Double Top reversal chart pattern with bearish MACD is a hint of more price downside.

Fundamental Comments

1. Trump’s warning on Germany’s dependent on Russia for energy is likely to weigh on Euro

2. Risk sentiment has deteriorated on China, HK and now the European front and is likely to favour the US$ as a safe haven.

Technical Comments

1. A possible small Double Top reversal chart pattern could be forming

2. MACD is turning lower and could turn bearish soon, hinting of more price decline

Key Levels

Support 1.1280 1.1255 1.1220
Resistance 1.1305 1.1345 1.1390

Technical Overview

USD/JPY – Deterioration in risk sentiment has sent JPY lower to 108.15. MACD has turned bearish but there is a divergence warning of a possible low. We are not expecting a big move or a breakout at the moment as MACD is rather mixed. We think the downside could be limited to 107.80 and the upside limited to 108.40.

Support 108.25 107.85 107.50
Resistance 108.45 108.80 109.15

GBP/USD – Our buy call was filled yesterday but with a no-deal Brexit not ruled out, the risk has increased for Sterling and a sharp fall late overnight is not a good sign. We would recommend exiting our 1.2710 long at current 1.2690 for a 20 pips loss. We think Sterling is now likely to test the low of 1.2580 again.

Support 1.2670 1.2630 1.2595
Resistance 1.2710 1.2760 1.2810

NZD/USD – Our short position is still open. Yesterday we had recommended bringing stop lower to 0.6610 while keeping profit target at 0.6540. We will stick with our targets on both sides for today as well. MACD is bearish and could be turning lower again while Stochastic is still weak and could barely move above the oversold zone.

Support 0.6560 0.6530 0.6505
Resistance 0.6595 0.6620 0.6655

XAU/USD – Our view remains the same as yesterday. We think the low at 1319.80 has ended the corrective decline. Gold could be climbing higher again and is likely to test and exceed its previous high of 1348.15. MACD is bullish and Stochastic is rising. Only a move below 1319.80 would negate our bullish view.

Support 1328.90 1319.60 1311.60
Resistance 1339.10 1348.15 1355.60

USD/SGD – Price has managed to recover higher to 1.3655 but price seems to be in a sideways consolidation. MACD is getting flat while Stochastic has come close to the overbought extreme while price moves in a sideway range. We would recommend existing our long position at our cost and wait for better trading opportunities.

Support 1.3630 1.3590 1.3565
Resistance 1.3655 1.3695 1.3730

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