FX Commentary 16 July 2019

Market Talk

– Minutes from the Reserve Bank of Australia’s monetary policy meeting in July showed the central bank was ready to adjust interest rates if required. RBA had cut the cash rate to a new all-time low in July after that meeting. The previous meeting had also resulted in a quarter point interest rate cut.

– The pound struggled near a six-month low against the dollar on Tuesday. Persistent worries over Brexit have capped its rally and gains against the US dollar. Sterling stood at $1.2519 following an overnight loss of 0.5% but a slip below $1.2439 would take sterling to its lowest since early January.

– The Euro had moved little in the past few days, constrained by expectation of a dovish European Central Bank, who may roll out quantitative easing in the future should the European economy starts to decline. The ECB is scheduled to hold its policy meeting next week.

– The US dollar is likely to stay weak in the coming week weighed down by expectation of a FOMC rate cut at the end of this month as well as Trump administration stance against a strong US dollar. Trump himself has increased his tweets in dollar-related comments prompting speculation that Trump administration could carry out an operation to weaken the US$.

– UK Earning is scheduled at 4.30pm tonight while US Core Retail Sales data is at 8.30pm. There are many Fed’s members on speaking duties today.

Chart Focus GBP/USD

Key Points

1. Sell GBP/USD recommendation

2. Sell GBP/USD at 1.2510. Stop at 1.2540 and target at 1.2440

3. Sterling is weighed down by persistent worries over Brexit and a possible interest rate cut by BoE.

4. Price has broken a bearish Pendant chart pattern with momentum indicators hinting of more price decline.

Fundamental Comments

1. Brexit worries is weighing on the Sterling

2. Worries over an interest rate cut by BoE are also weighing on the Sterling.

Technical Comments

1. Price has broken a bearish Pendant chart pattern

2. MACD and Stochastic are both moving lower, hinting of more price decline.

Key Levels

Support 1.2485 1.2440 1.2400
Resistance 1.2520 1.2570 1.2610

Technical Overview

USD/JPY – Our buy recommendation was filled yesterday when price reached a low of 107.81. Price has continued to move higher to current 108.05. Our view remains unchanged but volatility has declined and there is a possibility of a sideways movement. MACD remains below zero line and Stochastic remains below the oversold extreme zone.

Support 107.75 107.50 107.15
Resistance 108.20 108.60 108.95

EUR/USD – Our buy recommendation from last Thursday is still opened. Price has barely moved in the past 3 days since. Price has been confined to a narrow range of 1.1237 to 1.1283 in the past 4 days. MACD is still below the zero line. Stochastic has been rising but price has barely risen, giving us concerns. We would suggest closing the position at current level of 1.1260.

Support 1.1250 1.1235 1.1200
Resistance 1.1285 1.1315 1.1345

AUD/USD – Price has come close to the previous high at 0.7047. The next direction is likely to be decided by the reaction at this resistance point. If price is able to move above this resistance, we see price going higher to 0.7070 to 0.7090. However, failure to move above 0.7047 is likely to send price lower to 0.6980. MACD is above the zero line and bullish.

Support 0.7010 0.6980 0.6960
Resistance 0.7050 0.7080 0.7115

XAU/USD – Our view remains unchanged from last Friday. We think the low is in and price should be going higher to 1438. However for the past two days, price has been consolidating from 1409 to 1417. MACD is getting flat but is still above the zero line. 20EMA is also getting flat. We recommend patient and remains bullish for 1438.

Support 1407.60 1399.10 1385.65
Resistance 1418.25 1427.20 1438.90

USD/CHF – Price reached a low of 0.98165, missing our profit target at 0.9815. Price has moved higher to 0.9850 but we think price should be capped at this level for another test of the 0.98165 low. MACD is still below the zero line and bearish and 20EMA is currently capped price rally.

Support 0.9830 0.9805 0.9775
Resistance 0.9860 0.9895 0.9915

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