Market Talk
– Tensions in the Middle East continue to heat up after an Iranian missile shot down an unmanned U.S. surveillance drone on Thursday. That comes following attacks on tankers in the Gulf of Oman last week. USD/JPY, often seen as a safe-haven currency, traded at 107.24 after dropping from 107.80.
– On Wednesday, the Fed stand ready to battle growing global and domestic economic risks as they took stock of intensifying trade tensions and growing concerns about inflation. Market participants viewed the overall tone from the U.S. central bank as more dovish than expected. Today, market is pricing a Fed rate cut in July, according to the CME FedWatch tool.
– China has confirmed that President Xi Jinping and U.S. President Donald Trump will meet on the sidelines of G20 next weekend. The focus now shifts to whether the United States and China can resolve their trade row at a Group of 20 leaders’ summit in Osaka next week, but analysts caution that chances of a decisive breakthrough are low.
– Bank of England on Thursday struck a less dovish tone than other central banks as they voted unanimously to keep interest rates on hold at 0.75% and stuck to their message that rates would need to rise, so long as Britain avoids a damaging no-deal exit from the European Union. Sterling gains were capped by worries that Teresa May’s successor may lead UK out of EU without a divorce deal.
– Flash PMI from Germany is scheduled at 3.30pm and Euro zone is at 4pm. US PMI is at 9.45pm.
Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation
2. Sell EUR/JPY at 121.30. Stop at 121.65 and target at 120.80
3. Tensions in the Middle East and a weak Euro zone economy is likely to weigh on the Euro
4. A Shooting Star candlestick pattern with bearish momentum is hinting of more downside.
Fundamental Comments
1. Tensions in the Middle East is likely to keep demand for JPY
2. Euro zone economy is weak and flash PMI could weigh on the EUR
Technical Comments
1. Recent rally was ended by a bearish Shooting Star candlestick pattern
2. MACD is bearish and Stochastic is falling, hinting of more downside.
Key Levels
| Support | 120.95 | 120.60 | 120.20 |
| Resistance | 121.25 | 121.65 | 122.10 |
Technical Overview
USD/JPY – Price dropped to a low of 107.04 and we think this could be a temporary bottom. Stochastic is into oversold extreme and MACD while bearish is starting to move higher, hinting of a corrective rally. If price can hold 107.00, it should test the resistance at 107.80 again.
| Support | 106.90 | 106.55 | 106.30 |
| Resistance | 107.35 | 107.65 | 107.90 |
EUR/USD – Stochastic is into the overbought extreme but MACD has turned bullish. We will follow the MACD trend and will look for dip to get into the bullish trend. A good location would be the 20EMA support at 1.1260 to get into a long position. A move below 1.1230 would negate our bullish view.
| Support | 1.1260 | 1.1230 | 1.1180 |
| Resistance | 1.1290 | 1.1315 | 1.1345 |
GBP/USD – Price trend as indicated by MACD is still bullish. Stochastic is into overbought extreme but a pullback could offer a good buying opportunity. A decline to 20EMA at 1.2660 could be a good location to get into a long position for a test of the previous high at 1.2760
| Support | 1.2660 | 1.2615 | 1.2570 |
| Resistance | 1.2720 | 1.2760 | 1.2810 |
XAU/USD – Price moved to a high of 1411 overnight without any significant correction in the process. While Stochastic is into overbought extreme, MACD is strong and bullish and indicating a strong bullish trend. We would prefer to look for dips to enter and a good location would be around the 20EMA support at 1371.
| Support | 1386.90 | 1377.35 | 1371.60 |
| Resistance | 1397.05 | 1411.80 | 1426.75 |
USD/CAD – Price did not reached our buy level at 0.6885, reaching only a low of 0.6887. Price has moved higher to 0.6935. With 20EMA still bullish and rising, there is a good chance price will test the Fibonacci 62% correction point of 0.6950. Stochastic has reached the overbought extreme but MACD is still rising and bullish.
| Support | 0.6915 | 0.6885 | 0.6885 |
| Resistance | 0.6945 | 0.6975 | 0.7000 |
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