FX Commentary 28 June 2019

Market Talk

– The dollar was mixed on Friday morning in Asia as investors awaited a crucial meeting between the leaders of the United States and China at a Group of 20 meeting over the weekend for any signs of progress to end their heated trade war.

– Market clings on to hopes of progress after South China Morning Post reported that Washington and Beijing were laying out an agreement that would help to avert the next round of tariffs on an additional $300 billion of Chinese imports. However analysts caution that a resolution at the G20 summit is far from certain.

– The drawn out trade war has slowed global growth and pushed many central banks toward cutting interest rates to support their economies. Any sign the trade war will come to an end would be a significant boost for the global economic outlook.

– The Euro remains weak due to speculation the European Central Bank will ease monetary policy while uncertainty about who will be UK’s next PM and worries about whether the UK would be able to avoid a no-deal, chaotic exit from the European Union kept Sterling on a weak footing.

– UK Current Account is scheduled at 4.30pm and Canadian GDP is at 8.30pm tonight. There is China’s PMI data to watch out for over the weekend.

Chart Focus USD/JPY

Key Points

1. Buy USD/JPY recommendation

2. Buy USD/JPY at 107.50. Stop at 107.05 and target at 108.45

3. Fed’s hint of no aggressive rate cut and interest rate differential are both in US$ favour

4. Support at Fibonacci 38% correction point and a bullish MACD is hinting of a price rally.

Fundamental Comments

1. Fed’s hint of no aggressive rate cut in July is helping the US$

2. Interest rate differential is in US$ favour

Technical Comments

1. Price’s decline is supported at the Fibonacci 38% correction point.

2. MACD is bullish and could be turning higher

Key Levels

Support 107.45 107.05 106.75
Resistance 107.85 108.15 108.45

Technical Overview

AUD/USD – Price could be moving towards the target at 0.7020 despite the divergence warnings given by MACD. However, price could be forming a Rising Wedge chart pattern which is a reversal pattern. MACD is still bullish despite the divergence. We remain bullish but would prefer to be cautious of a possible top approaching.

Support 0.6995 0.6970 0.6935
Resistance 0.7020 0.7050 0.7095

EUR/USD – Our buy call was not filled yesterday as price range was limited due to a sideways movement. Our view remains unchanged and bullish, in line with yesterday’s view. MACD is near the zero line and could be turning higher. Stochastic is already turning up. A move above 1.1390 would confirm the bullish movement.

Support 1.1345 1.1310 1.1270
Resistance 1.1375 1.1400 1.1445

GBP/USD – Price has been caught in a range in the past 2 days. The high is at 1.2725 while the lower support is at 1.2650. MACD is flat and neutral at the moment. Stochastic is neutral as well. 20EMA is bearish and could be moving lower. We remain bearish on this pair and a break of 1.2615 could confirm the bearish trend.

Support 1.2655 1.2610 1.2565
Resistance 1.2700 1.2735 1.2765

XAU/USD – Price went to a low of 1398.46 overnight and this could be the correction we were looking for. Price had moved higher to 1424.55 this morning but had declined lower to 1409.50. Stochastic is still rising but MACD is flat at the moment. There is a possibility that this morning rally is part of a bigger correction. Watch support at 1406.60 for clues.

Support 1409.50 1398.20 1386.10
Resistance 1421.85 1428.55 1438.90

EUR/AUD – Price declined to a low of 1.6202 this morning and this could be the end of the down move we are looking for. Stochastic is in the oversold extreme and MACD while bearish, could have reached a low and is turning higher. 20EMA is still moving lower and indicating a downtrend. We would prefer to stay neutral at this point.

Support 1.6200 1.6150 1.6100
Resistance 1.6240 1.6280 1.6320

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