Market Talk
– The dollar held steady early in Asia on Friday as investors were reluctant to take large positions ahead of next week’s Fed meeting. Rising expectation of a U.S. rate cut has led the US$ to a 11-week lows against its peers. Investors are waiting for cues on a possible interest rate cut in light of rising risks to trade and global growth.
– Tepid inflation and weakening economic data in the midst of a U.S.-China trade war has led to reduced manufacturing activity in both U.S. and China. There are rising expectations that the Fed would cut interest rate to sustain U.S. economic growth with tepid inflation not a concern.
– The pound held near a five-month low against the euro on Thursday after Boris Johnson won by far the most support from Conservative lawmakers in the first round of the contest to replace Prime Minister Theresa May. Concern about Britain crashing out of the European Union without a deal has grown as Johnson has not ruled out a no-deal Brexit.
– Gold climbed to a week’s high on Thursday, supported by expectations for an interest rate cut by the U.S. Federal Reserve following soft inflation data and tensions in the Middle East following a spate of attacks on tankers although an uptick in equities capped Gold’s gains.
– US Retail Sales is scheduled at 8.30pm tonight and BoE’s Carney will be speaking around 9pm.
Chart Focus USD/JPY
Key Points
1. Trading Sell recommendation on USD/JPY
2. Sell USD/JPY at 108.40. Stop at 108.90 and target at 107.30
3. Rising tensions and expectations of a rate cut are weighing on the US$
4. Price is on the verge of a trendline break and MACD is bearish and pointing lower
Fundamental Comments
1. Rising tensions due to a spate of attacks on tanker is shifting capitals into safe haven JPY
2. Rising expectation of a US rate cut is weighing on the US$
Technical Comments
1. Price is at the edge of a trendline and a break of this trendline is likely to move price lower
2. MACD is bearish and is turning lower, hinting of a price decline
Key Levels
| Support | 108.15 | 107.85 | 107.50 |
| Resistance | 108.45 | 108.80 | 109.15 |
Technical Overview
USD/CHF – Price is sitting on the edge of a small trend line and a break is likely to move price down to 0.9890 or 0.9860. Stochastic is moving lower from overbought zone and MACD is also moving lower as well. MACD however is still bullish. A move above 0.9965 would negate this bearish view.
| Support | 0.9920 | 0.9890 | 0.9860 |
| Resistance | 0.9965 | 1.0005 | 1.0050 |
GBP/USD – Price is near to a support at 1.2660 and a break of this support is likely to lead price lower to 1.2580. A break would also confirm a Double Top chart pattern with a price target at 1.2560. MACD has turned bearish and is still moving lower. Stochastic is also moving lower towards the oversold extreme.
| Support | 1.2660 | 1.2620 | 1.2580 |
| Resistance | 1.2710 | 1.2760 | 1.2810 |
NZD/USD – Our profit order was filled at 0.6540 this morning. Price has probably reached a temporary bottom but the trend is still bearish. We are expecting a corrective rally to 0.6550 or 0.6560 before another decline resumes again. MACD is bearish but Stochastic has little room to decline at the moment.
| Support | 0.6525 | 0.6500 | 0.6480 |
| Resistance | 0.6550 | 0.6585 | 0.6620 |
XAU/USD – Price started to move higher at 2pm today and has broken above the recent high of 1348.15. The next target is the Fibonacci 127% of the rally from 1269 bottom to the recent high at 1348.15, which is at 1369.30. MACD is rising and bullish. Stochastic is still rising despite in the overbought zone.
| Support | 1348.15 | 1339.10 | 1329.80 |
| Resistance | 1357.30 | 1361.45 | 1369.30 |
EUR/USD – Our sell call the day before was filled but price has not moved the way we have anticipated. Instead of a sharp decline, price has drifted lower. Stochastic is into oversold extreme and MACD has turned around from its trough. This could mean price reaching a bottom. We would recommend bringing stop lower to 1.1305 while keeping profit target at 1.1215.
| Support | 1.1265 | 1.1225 | 1.1200 |
| Resistance | 1.1305 | 1.1345 | 1.1390 |
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