FX Commentary 9 July 2019

Market Talk

– The US dollar traded near a three-week high on Tuesday against its peers, as investors reduced bets on aggressive U.S. interest rate cuts and awaits Fed Chairman Jerome Powell’s two-day testimony before Congress, which starts on Tuesday for clues about a rate cut

– Investors will closely analyze Powell’s comments when he delivers his semi-annual monetary report before Congress to gauge how far the U.S. central bank will lower interest rates. A sharp rebound in U.S. job growth in June reduced expectations that the Fed will cut interest rates by 50 basis points when it meets at the end of July.

– Sterling was pinned near a six-month low versus the dollar on speculation the Bank of England will soon join other major central banks in easing monetary policy in response to growing worries about the global economy and Britain’s exit from the European Union.

– The Euro has been under pressure from dollar strength and weakness in the German industrial sector. ECB’s Coeure statement that the central bank could restart QE if needed also weighs on the common currency.

– No major data are scheduled for today. Powell’s speech is at 8.45pm tonight

Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation

2. Sell AUD/USD at 0.6955. Stop at 0.6990 and target at 0.6900

3. Scaling back of Fed’s US interest rate cut quantum and current interest rate differential are both in US$ favour

4. Price broke its support with a bearish MACD is a hint of further price decline.

Fundamental Comments

1. Scaling back of Fed’s US interest rate cut quantum is in favour of the US$

2. Interest rate differential is in US dollar favour.

Technical Comments

1. Price broke a support with 20EMA strongly bearish is a hint of further price decline

2. MACD is bearish and turning lower

Key Levels

Support 0.6925 0.6900 0.6880
Resistance 0.6955 0.6995 0.7015

Technical Overview

USD/JPY – Price reached a high of 108.95 this morning but with bearish divergence warning from MACD. Stochastic is in the overbought extreme at the moment. If price can stay above 108.70, we think there is a chance of a rally to 109.25. However, failure to stay above 108.70 would bring price lower to 108.30.

Support 108.70 108.35 108.05
Resistance 109.00 109.25 109.60

EUR/USD – We have seen a bullish divergence warning from MACD yesterday but price still moved lower to 1.1210. MACD is still bearish and could be heading lower. Stochastic is moving lower in the oversold zone. The trend is bearish as indicated by a steep 20EMA line. We think price is likely to break 1.1205 and test the support at 1.1180.

Support 1.1205 1.1180 1.1155
Resistance 1.1240 1.1270 1.1315

GBP/USD – Yesterday we had a buy call at 1.2510 which was filled overnight. Trend still looks weak despite divergence warning from MACD. The rally was weak with price reaching a high of 1.2522. MACD looks like it is likely to turn lower. We would recommend getting out of this position at market or keep stop at 1.2480.

Support 1.2500 1.2480 1.2445
Resistance 1.2535 1.2560 1.2595

XAU/USD – Price is consolidating in a small range at the moment. Stochastic is still moving lower but MACD looks like forming a bottom and turning up soon. 20EMA is still trending lower. We expect price to move with a range of 1416 to 1386 for the moment. Watch the range boundaries for clue to the next direction.

Support 1386.65 1381.60 1373.95
Resistance 1396.40 1407.35 1416.30

USD/CHF – Price has reached a high of 0.9940 but with weak momentum. Stochastic is in the overbought zone. MACD is bullish but the upward momentum is weak and a possible divergence with price is likely. 20EMA is still bullish and pointing higher. We think the rally could be in its tail end.

Support 0.9930 0.9900 0.9865
Resistance 0.9965 0.9995 1.0015

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