Market Talk
– The US dollar was firm on Wednesday after stronger than expected US Retail Sales data tempered expectations of aggressive policy easing by the Federal Reserve at the end of July. However, market is still fully priced for a quarter percentage point cut.
– Gold price fell after a stronger US Retail Sales data lowered expectation of an aggressive interest rate cut. Gold price had rallied on an expectation of an aggressive policy easing by the US central bank from late May’s low of $1269 to a high of $1438. Price is likely to consolidate in the near future.
– The struggling pound retreated to a 27-month low of $1.2396 overnight as Boris Johnson and Jeremy Hunt, the two candidates to be Britain’s next prime minister, vied to out gun each other on taking a harder Brexit stance. A hard Brexit could lead to Bank of England cutting interest rate to support the economy at the expense of the pound.
– Euro declined after a survey by the ZEW institute showed that the mood among German investors deteriorated more sharply than expected in July amid an unresolved trade dispute between China and the United States as well as political tensions with Iran.
– Trump said the United States still has a long way to go to conclude a trade deal with China but the U.S. could impose tariffs on an additional $325 billion worth of Chinese goods if “it needs to do so”. With focus on Fed’s policy, U.S. data and their impact on rate decision, impact on USD/JPY was limited.
Chart Focus AUD/JPY
Key Points
1. Trading sell AUD/JPY recommendation
2. Sell AUD/JPY at 75.85. Stop at 76.15 and target at 75.15
3. Trump’s trade tariffs statement has reduced shifted market flow into safe haven JPY and away from riskier currency AUD
4. A Rising Wedge chart pattern with falling Stochastic is a hint of further price decline.
Fundamental Comments
1. Trump’s trade tariffs comments has shifted market flow into safe haven JPY
2. Risk appetite has decreased leading to less demand for Aussie, which is a proxy for the Chinese economy.
Technical Comments
1. A Rising Wedge chart pattern has been formed and price has dropped below the lower trend line.
2. Stochastic has declined from overbought extreme zone, hinting of a decline in price.
Key Levels
| Support | 75.70 | 75.50 | 75.15 |
| Resistance | 75.95 | 76.15 | 76.35 |
Technical Overview
USD/JPY – Price has moved from a low of 107.81 to recent high of 108.36 since our buy call on Monday. We would recommend bringing stop higher to cost at 107.95 while keeping profit target at 108.50. MACD is rising and Stochastic is rising as well. Support is provided by 20EMA at 108.15.
| Support | 108.05 | 107.75 | 107.50 |
| Resistance | 108.35 | 108.60 | 108.95 |
EUR/USD – Price broke below its support at 1.1235 yesterday and declined to a low of 1.1201. We do not think this decline is over as yet and there will be another decline lower to 1.1180. MACD is bearish and Stochastic is still weak at the moment. 20EMA is bearish and its gradient is steep, which is a hint of a strong bearish trend. A move above 1.1250 would negate our bearish view.
| Support | 1.1235 | 1.1200 | 1.1180 |
| Resistance | 1.1250 | 1.1285 | 1.1315 |
GBP/USD – Our sell call not filled as price only managed to move to a high of 1.2495. Price has declined more than we expected to a 27-month low of $1.2396 overnight. The decline may not be over as yet. We may see another decline below 1.2396 in the coming 24 hours. MACD is still bearish. Only a move above 1.2500 will negate our bearish view.
| Support | 1.2395 | 1.2360 | 1.2340 |
| Resistance | 1.2440 | 1.2485 | 1.2520 |
XAU/USD – Gold has been consolidating for the past few days. Price is in the process of forming a Triangle consolidation chart pattern. We will wait and watch for the breakout as Triangle is usually a continuation pattern, which means the trend is still bullish. MACD is flat at the moment and not indicating any direction.
| Support | 1399.10 | 1385.65 | 1373.90 |
| Resistance | 1416.30 | 1427.20 | 1438.90 |
USD/CHF – We missed our profit target by 1 pip but hit the stop right at the spot. We are stopped out at our cost price. MACD has yet to turn bullish and price has yet to move pass its previous resistance point at 0.9909. We will wait for a better trading opportunity for this pair.
| Support | 0.9860 | 0.9830 | 0.9805 |
| Resistance | 0.9895 | 0.9915 | 0.9950 |
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