FX Commentary 25 June 2019

Market Talk

– The FX market traded cautiously on Tuesday morning as investors await a highly-anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the upcoming G-20 summit in Japan. The two leaders are expected to discuss the protracted trade fight between their two countries.

– China and the U.S. have already slapped tariffs on billions of dollars’ worth of each other’s goods over the past year. In May, the two economic powerhouses hiked tariffs targeting some goods. The Trump administration has said previously that Trump is ready to raise tariffs on all Chinese goods into the U.S. if the two countries fail to arrive at a deal.

– U.S. on Monday imposed sanctions on Iran over the latter’s shooting down of an unmanned American drone last week. Tensions between the two countries have remained high since a recent attack on oil tankers near the Strait of Hormuz.

– Sterling hovered just off one-month highs reached earlier on Monday against the dollar, with traders reluctant to take big positions on the pound until the conclusion of the Conservative Party leadership contest.

– The dollar softened against a basket of currencies on Monday on bets the U.S. Federal Reserve may lower interest rates more than once this year, while tensions between Iran and the United States provided safe-haven support for the JPY and CHF. Gold climbed to a 6-year high.

Chart Focus NZD/USD

Key Points

1. Sell NZD/USD recommendation

2. Sell NZD/USD at 0.6670. Stop at 0.6710 and target at 0.6600

3. Tensions in Middle East and interest rate differential are in US$ favour

4. Price is approaching the Fibonacci 161.8 point and MACD is showing a possible bearish divergence.

Fundamental Comments

1. Tensions in Middle East is likely to favour the US$

2. Interest rate difference is in the US$ favour

Technical Comments

1. Price is approaching a strong resistance point at Fibonacci 161.8%

2. MACD is showing possible bearish divergence

Key Levels

Support 0.6635 0.6600 0.6560
Resistance 0.6655 0.6675 0.6710

Technical Overview

USD/JPY – Yesterday, price did not reach our selling point and our order was not filled. Price has since decline to 106.77 this morning. While MACD has a bullish divergence, Stochastic is still looking weak and unable to rally. 20EMA is still bearish and its gradient steep, hinting of a strong bearish trend. We expect price to be capped by resistance at 107.25.

Support 106.75 106.50 106.30
Resistance 107.00 107.25 107.55

EUR/USD – Price has reached the Fibonacci 127% of the rally from 1.1105 to 1.1346. Stochastic has not reached the overbought zone as yet and MACD is still rising and strong at the moment. We think this strong momentum can bring price higher to 1.1490 as long as price stays above 1.1340.

Support 1.1365 11325 1.1290
Resistance 1.1415 1.1450 1.1495

GBP/USD – We got this pair wrong yesterday. While there is a bearish divergence warning, price has continued to move higher. Stochastic is also in the overbought extreme but price is unaffected by the extreme momentum condition. 20EMA is also bullish and rising. We are expecting price to test the resistance at 1.2770.

Support 1.2740 1.2705 1.2675
Resistance 1.2770 1.2810 1.2855

XAU/USD – Price continued to move higher despite the bearish divergence warning given by MACD. 20EMA is still rising and its gradient steep, hinting of a strong bullish trend. Fibonacci 50% of the decline from 1920 to 997 comes in at 1458. We expect price to test this strong resistance within this week.

Support 1412.40 1399.65 1386.90
Resistance 1438.90 1447.65 1458.90

AUD/USD – Price has reached the resistance point at 0.6970. MACD is showing a weak divergence warning and Stochastic is into the overbought extreme at the moment. We think the rally could be capped at the next resistance point at 0.7020. A break above would be good for Aussie but failure could result in price falling lower to 0.6900.

Support 0.6945 0.6905 0.6885
Resistance 0.6970 0.6995 0.7020

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