FX Commentary 2 July 2019

Market Talk

– The dollar rose to one-week highs against a currency basket on Monday as a trade truce and an agreement to restart troubled trade talks between the U.S. and China dampened demand for safe haven currencies, such as the yen and the Swiss franc. Gold fell 1.76% to a low of 1381.60.

– Trump said he would hold back on new tariffs and that China will buy more farm products, which was within market expectations, however his offer to ease restrictions on technology giant Huawei, was more positives than what investors had expected. Both US dollar and China’s Yuan gained against its peers.

– The US dollar also gained after data showed the U.S. manufacturing activity index, as measured by the Institute for Supply Management, came in slightly higher than expected in June to 51.7. However China PMI, released earlier in the day, was below expectation capping gains made by risker assets.

– The euro sank to a low of 1.1283 with possible US trade tariffs shifting to Europe after a truce with China. There were reports of U.S. proposing to add more tariffs to US$4 bn of EU’s goods. ECB’s de Cos’s comment that inflation was far from its target also weighed on the Euro.

– RBA cuts it cash rate after its monetary policy meeting today to 1.00% from 1.25% previously. However Aussie was higher against the US$ as a result of RBA’s governor Lowe comments that this “cut would support employment growth and further make inroads into spare capacity in the economy”

Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation

2. Buy EUR/USD at 1.1290. Stop at 1.1260 and target at 1.1370

3. Effects of trade tariffs truce has worn out and focus on Fed rate cut are both bad for US$

4. Corrective decline might have reached its target and price could be about to turn up again.

Fundamental Comments

1. Effects of trade tariffs truce has worn out for the US$

2. Focus could be on FOMC rate cut later this month

Technical Comments

1. Price correction has come to Fibonacci 200% and Fibonacci 62% of the big rally

2. Stochastic and MACD has moved into the extreme and could be about to turn around.

Key Levels

Support 1.1275 1.1245 1.1210
Resistance 1.1315 1.1345 1.1375

Technical Overview

USD/JPY – Price is consolidating in a triangle pattern at the moment. A triangle is usually a continuation pattern. As such we are expecting price to move higher to 108.75. Stochastic is moving lower but MACD is moving higher and MACD is bullish as well.

Support 108.25 107.90 107.60
Resistance 108.50 108.80 109.15

NZD/USD – A small Flag pattern may be forming at the moment with bearish implications. If price were to move below 0.6660, price is likely to head lower to 0.6600. Stochastic is still moving lower towards the oversold extreme. MACD is still bearish and moving lower.20EMA has turned bearish and is capping price’s advance at 0.6680.

Support 0.6660 0.6635 0.6605
Resistance 0.6680 0.6705 0.6725

GBP/USD – Price was capped at 1.2710 yesterday but only moved lower to 1.2625. Stochastic is weak but has reached the oversold zone. MACD is bearish but there could be possible divergence forming. If price is supported at 1.2611, the trend is still bullish. At the moment, we would recommend watching 1.2680 and 1.2610 for direction clue.

Support 1.2610 1.2575 1.2555
Resistance 1.2655 1.2680 1.2710

XAU/USD – Price is still looking weak at the moment and will need to cross above 1398 to be bullish again. Stochastic is rising but MACD is still strongly bearish. A move above 1398 will target the gap resistance at 1408.90. A decline below 1381 will continue the bearish trend to 1373.

Support 1388.40 1381.40 1373.55
Resistance 1393.15 1398.00 1408.80

AUD/USD – Our sell call was filled yesterday when price reached a high of 0.6998. Price fell to a low of 0.6955 but on rallied on news of rate cut by RBA. Price is currently capped by its 20EMA at 0.6985. While MACD is bearish, Stochastic has reached the oversold extreme. Our view remains the same as yesterday; we are bearish and looking for a decline to 0.6935. Bring stop lower to 0.7010.

Support 0.6955 0.6935 0.6905
Resistance 0.6990 0.7010 0.7035

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.