FX Commentary 18 June 2019

Market Talk

– The U.S. dollar was roughly unchanged on Monday, hovering near the two-week high set earlier in the session as investors reconsidered how dovish the Federal Reserve is likely to be at this week’s policy meeting. Fed meeting will start on Tuesday with rate decision announcement on Wednesday 2pm NY time. (Singapore time Thursday 2am)

– The British pound slid to its lowest since January 2019 at 1.2532 on worries that Boris Johnson, the front-runner to replace Prime Minister Theresa May, could put Britain on a path towards a no-deal Brexit. There is a Bank of England’s interest rate decision on Thursday.

– Gold prices slipped further on Monday after sliding from a more-than-14-month high the previous session following better than forecast U.S. industrial output data and retail sales and consumer confidence readings on Friday pushed back market’s expectations of any quick rate cut by the U.S. Federal Reserve.

– The Australian dollar is also at its lowest levels since the flash crash of early January, hit by growing expectations of another rate cut by the country’s central bank. Minutes of June’s meeting showed that “more likely than not” further policy easing would be appropriate.

– U.S-China trade friction and rising geopolitical tensions in the Strait of Hormuz after recent attacks on tankers are all undermining risk sentiment. JPY, CHF and Gold are likely to be sought after.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation.

2. Sell EUR/USD at 1.1255. Stop at 1.1290 and 1.1170

3. An unlikely rate cut at this week’s FOMC meeting and current interest rate differentials are in US$ favour.

4. Price is capped by 20EMA and Fibonacci 38% correction point and a weak momentum is hinting of more downside

Fundamental Comments

1. As expectations are scaled back on a Fed rate cut for tomorrow meeting, it is likely to favour the US$

2. Interest rate differentials is in US$ favour

Technical Comments

1. Price is capped by 20EMA and Fibonacci 38% correction point

2. MACD is bearish and Stochastic is weak.

Key Levels

Support 1.1205 1.1165 1.1125
Resistance 1.1245 1.1270 1.1305

Technical Overview

USD/JPY – Our sell call from Monday is still opened. Price was capped again at 108.75 and has since moved lower to 108.25. We would recommend bringing stop lower to 108.60 and keep profit target at 107.30. MACD is turning bearish and Stochastic is moving down.

Support 108.15 107.80 107.50
Resistance 108.45 108.75 109.15

USD/CHF – Our sell call was not filled as price only reached a high of 0.9992. There is a 20EMA support at 0.9965 and price will need to move below this support for the bearish trend to gain traction. MACD is still bullish but Stochastic is moving lower. A move above 1.0010 would negate our bearish view.

Support 0.9960 0.9925 0.9890
Resistance 1.0000 1.0030 1.0065

GBP/USD – Price continues to move lower to a low of 1.2512 and there are still no signs of a reversal as yet. MACD is still bearish and moving lower. Stochastic is into oversold extreme but 20EMA trend is bearish and strong and likely to keep Stochastic in oversold zone.

Support 1.2515 1.2475 1.2435
Resistance 1.2545 1.2580 1.2625

XAU/USD – Monday’s low of 1332.95 may be the correction low and price could be on the way to test the high of 1357.85 again. MACD has turned bullish and is starting to move higher. Stochastic has also turned around near to the oversold zone. A move below 1332.95 would negate our bearish view.

Support 1343.40 1336.70 1329.95
Resistance 1350.90 1358.85 1365.85

AUD/USD – Price broke the support at 0.6860 and reached a low of 0.6832 this afternoon. MACD is still bearish but could be showing bullish divergence. Stochastic is deep into oversold extreme but 20EMA is bearish and its gradient is steep, hinting of a strong bearish trend.

Support 0.6820 0.6795 0.6765
Resistance 0.6860 0.6885 0.6915

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