FX Commentary 17 June 2019

Market Talk

– The dollar hovered near a two-week high early on Monday, as strong U.S. retail sales data tempered some of the fears about a sharp downturn in the world’s largest economy. US Retail Sales increased in May and sales for the previous month were revised higher, hinting at a resilient consumer spending that could concerns about a slowdown in the world largest economy.

– Investors are also looking ahead to an upcoming meeting by the Fed in the middle of the week, amid rising expectations that the U.S. central bank could be cutting interest rates soon.  While few expect the Fed to cut rates at Wednesday’s policy review, traders are wagering that policy makers will do just that in its July’s meeting.

– The European Central Bank, with growth slowing and inflation staying well below the its target, recently raised the prospect of even more stimulus, arguing that a rate cut or even more asset purchases may become necessary to revive or sustain the Euro zone economy.

– Data released last Friday showed China’s industrial output growth in May slowing to a more than 17-year low, widely below expectations. That figure came in at 5%, as compared to expectations of a 5.5% growth from a year earlier by analysts polled by Reuters. The latest data from China comes as Beijing remains locked in a trade war with Washington, raising concerns over a slowdown in the former’s economy.

– Australia’s central bank will be releasing its monetary policy meeting’s minutes tomorrow morning at 9.30am. This could give clues to another possible further rate cuts by the RBA.

Chart Focus USD/CHF

Key Points

1. Sell USD/CHF recommendation

2. Sell USD/CHF at 1.0000. Stop at 1.0060 and target at 0.9890

3. Expectation of a US interest rate cut and tensions in the Middle East is likely to favour the CHF

4. Price is approaching an key resistance point with momentum indicators looking like turning down.

Fundamental Comments

1. Rising expectation of a US rate cut is weighing on the US$

2. Tensions due to a spate of attack on tankers is shifting capital into safe haven CHF

Technical Comments

1. Price is approaching a Fibonacci 62% correction point as well as a resistance point

2. Stochastic has reached its extreme level and MACD is turning down.

Key Levels

Support 0.9960 0.9925 0.9880
Resistance 1.0010 1.0050 1.0095

Technical Overview

USD/JPY – Our sell recommendation was filled on Friday and price went to a high of 108.71. Keep stop at 108.90 and target at 107.30. Stochastic has reached the overbought extreme and MACD is not strongly bullish. We may have reached a temporary top before price starts to be decline.

Support 108.45 108.15 107.80
Resistance 108.80 109.15 109.45

EUR/USD – Last Friday, we had lowered our stop to 1.1305 and kept profit target at 1.1215. Price reached a high of 1.1289 and had dropped lower to 1.1202. We are out with a profit of 80 pips. Price has corrected higher early this morning to 1.1225 but looks more likely to test the low of 1.1202 again later today. There is a chance price could go lower to 1.1180.

Support 1.1200 1.1180 1.1140
Resistance 1.1225 1.1265 1.1305

GBP/USD – Price broke 1.2660 price support which is also the neckline of a Double Top chart pattern. Price is currently moving towards the price target of the Double Top pattern at 1.2560. MACD is still bearish and strong and there is a high chance we can exceed 1.2660.

Support 1.2580 1.2540 1.2510
Resistance 1.2600 1.2660 1.2710

XAU/USD – Price reached a high of 1357.85 and has since decline lower to 1336. First support is at 1333.90 and this could provide a support for another test of the high at 1357.85. MACD is still bullish while Stochastic is moving lower from overbought extreme.

Support 1333.10 1329.80 1319.70
Resistance 1343.35 1350.70 1357.85

AUD/USD – Price reached a low of 0.6860 but MACD is still bearish. MACD is still strongly bearish and there is likely to be another test to 0.6860 and likely to the next lower support at 0.6815. Stochastic is still moving lower but has not reached the oversold extreme. A move above 0.6970 would negate our bearish view.

Support 0.6860 0.6815 0.6780
Resistance 0.6890 0.6920 0.6945

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