FX Commentary 12 July 2019

Market Talk

– The dollar was steady on Friday, having regained some traction against its peers after stronger-than-expected US inflation data tempered the prospect of an aggressive interest rate cut by the Fed later this month. Core U.S. CPI excluding food and energy components rose 0.3% in June, the largest increase since January 2018.

– Signs of a pick-up in underlying inflation, along with separate data on weekly jobless claims showing the labor market remained solid, curbed financial market expectations of a more aggressive 50 basis point cut at the Fed’s July 30-31 meeting. Markets are still fully priced for a quarter percentage point cut as U.S. policy makers seek to support a slowing economy.

– President Trump said on Thursday that China was not living up to promises it made on buying agricultural products from American farmers. Trade talks between US-China have resumed but analysts are warning a deal could prove difficult.

– Gold prices rose on Friday and were on track for a weekly gain, as worries over renewed US-China trade tensions and expectations of a US rate cut boosted demand for the safe-haven metal.

– US PPI is scheduled for 8.30pm tonight.

Chart Focus USD/CHF

Key Points

1. Sell USD/CHF recommendation

2. Sell USD/CHF at 0.9895. Stop at 0.9925 and target at 0.9815

3. Expectation of US rate cut and trade tension between US-China are likely to weigh on the US$

4. Price capped by Fibonacci 62% with MACD turning down is a hint of more price decline.

Fundamental Comments

1. Expectation of a US rate cut is weighing on the US$

2. US-China trade tension is weighing on the US$

Technical Comments

1. Price is capped by Fibonacci 62% of the decline from 0.9950 to 0.9841

2. MACD is bearish and is turning down, hinting of price decline

Key Levels

Support 0.9880 0.9840 0.9815
Resistance 0.9910 0.9930 0.9950

Technical Overview

USD/JPY – Price managed to hold above the 107.85 support and we saw a price move to 108.60 this morning. We do not think the rally is sustainable. We are looking at price going lower to 107.50 again in the next couple of days. MACD is still bearish and could be turning down while Stochastic is rising but is weak. However a move above 108.60 would negate our bearish view.

Support 108.25 107.85 107.50
Resistance 108.60 108.95 109.15

EUR/USD – Our buy recommendation was filled yesterday when price dipped to 1.1244. Our view remains the same. Keep stop at 1.1220 and target at 1.1325. MACD is bullish and rising and the decline in Stochastic could be coming to an end and there could be a possible turn around. A move below 1.1210 would negate our bullish view.

Support 1.1245 1.1215 1.1180
Resistance 1.1280 1.1310 1.1345

GBP/USD – Price was capped at 1.2570 overnight but we are expecting price to push higher again today towards 1.2610 in a bigger corrective movement. MACD is bullish and is moving higher. Stochastic, however is turning down from overbought extreme. 20EMA is neutral at the moment.

Support 1.2530 1.2480 1.2440
Resistance 1.2570 1.2610 1.2650

XAU/USD – Price retraced from 1428 high to 1401 low and we think the corrective movement may have ended. We are expecting price to move higher to 1438 in the next few days. MACD is still bullish and could be turning higher. 20EMA is flat and not giving any hints. A move below would negate our bullish view.

Support 1400.25 1395.20 1385.65
Resistance 1409.80 1416.25 1427.20

USD/CAD – Price has broken below an important support at 1.3045 and the trend is bearish at the moment. MACD is bearish and moving lower as well, confirming the bearish price trend. Stochastic is into oversold extreme. The bearish price movement could carry price lower to 1.2940.

Support 1.3015 1.2985 1.2940
Resistance 1.3045 1.3090 1.3120

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