FX Commentary 8 July 2019

Market Talk

– Last Friday, the U.S. jobs report showed the economy adding 224,000 jobs in June, well above the forecasted number of 165,000 jobs by economists. This strong job data moderated expectations that the Fed could soon be making a move on interest rates.

– The US dollar index surged to a two-week high at 97.23 after the job data from levels below 96.8 last Friday. The safe haven USD/JPY traded at 108.47 against the dollar after seeing levels below 107.6 last week. USD/CHF surged to a high of 0.9930.

– The Aussie changed hands at $0.6980 following levels above $0.702 seen in the previous week. The Euro came under pressure after data on Friday showed that German industrial orders fell far more than expected in May and the Economy Ministry warned on Friday that this sector of Europe’s largest economy was likely to remain weak in the coming months.

– The British pound hit a six-month low to the dollar on Friday, after poor economic data and a rise in expectations that the Bank of England will cut interest rates. Better-than-expected U.S. jobs data sparked a rally in the dollar, adding to sterling’s losses.

– Price of Gold declined to 1398.27, on the back of a stronger US$ on Friday. China has been buying gold and its gold reserves had risen for the 7th consecutive month. China’s June reserve was 61.94 million ounces against end May balance of 61.61 million

Chart Focus GBP/USD

Key Points

1. Buy GBP/USD recommendation

2. Buy GBP/USD at 1.2510. Stop at 1.2480 and target at 1.2590

3. Expectations has sent Sterling to a 6-month low and we could see an unwinding of positions ahead

4. Momentum indicators are warning of a reversal after price reached a 6-month low.

Fundamental Comments

1. Sterling has reached a 6-month low on combination of poor economic data, BOE rate cut and better than expected US job data.

2. A consolidation of the decline may be on the card.

Technical Comments

1. Price has reached a new low and could have reached a temporary bottom

2. MACD and Stochastic have both given divergence warnings

Key Levels

Support 1.2510 1.2480 1.2445
Resistance 1.2555 1.2590 1.2630

Technical Overview

USD/JPY – Price reached a high of 108.60 but failed to cross over 108.80 to trigger a possible Inverse Head and Shoulder reversal chart pattern. Inability to cross over the resistance is likely to see a price decline to 20EMA and price support at 108.05. Stochastic is declining from overbought extreme but MACD is still bullish.

Support 108.25 108.00 107.55
Resistance 108.55 108.85 109.15

EUR/USD – Following a strong NFP, we saw a price decline to 1.1200 with MACD showing a bullish divergence at the moment. However price seems to be in the process of forming a bearish Flag pattern which is hinting of more downside movement. 20EMA is still bearish and acting as a resistance at 1.1250. If price fails to cross the 20EMA, we are likely to see a test of 1.1180.

Support 1.1205 1.1180 1.1155
Resistance 1.1240 1.1270 1.1315

AUD/USD – Our buy call for was stop out on NFP data for a loss of 40 pips. Price managed to stay above a key support at 0.6955 but the decline may not be over as yet. Resistance at 0.6995 will need to break to confirm the low. While Stochastic is rising from oversold extreme, MACD is still bearish. Watch resistance at 0.6995 and support at 0.6955 for clue to the next direction.

Support 0.6955 0.6925 0.6900
Resistance 0.6995 0.7015 0.7050

XAU/USD – Price declined to 1386.64 on Friday but gives no clue to the next direction. Stochastic is rising but MACD is still bearish. While price has stayed above a key support, the rally has not been able to reach the previous high. We could see more consolidation in the range of 1381 to 1438.

Support 1398.00 1386.65 1381.60
Resistance 1407.60 1416.25 1428.20

USD/CHF – Our buy call from last Wednesday was filled on Friday when price rose to a high of 0.9931. We are out with a 77 pips profit. There could be another rally to test the high of 0.9931 again as MACD is still bullish and Stochastic is turning up from oversold extreme. Fibonacci 50% of the rally from 0.9836 to 0.9931 at 0.9884 could be a strong support level to trigger another rally.

Support 0.9885 0.9865 0.9835
Resistance 0.9910 0.9930 0.9965

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