Market Talk
The dollar extended its losses against the euro, yen and other major currencies on Thursday as remarks from New York Federal Reserve President John Williams and Richard Clardia bolstered bets that the Fed would cut interest rates by 50 basis points, rather than 25 basis points at its policy meeting at the end of July.
– New York Fed President John Williams, a voting member, said when rates and inflation are low, policy makers cannot afford to keep their “powder dry” and wait for potential economic problems to materialize. Fed Vice-Chair Richard Clarida echoed the same message in another speech increasing bets the central bank would lower interest rates at month-end.
– Trump reported that a U.S. Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone. USD/JPY fell to a low of 107.19.
– Gold prices rose to their highest in more than six years on Friday supported by comments from two top US central bankers that cemented expectations of an interest rate cut. Tensions in the Middle East also supported Gold prices.
– Sterling rebounded on Thursday after stronger than US Retails Sales and attempts by lawmakers to make it harder for UK’s next PM to try to force a no-deal Brexit. Barnier and Irish PM’s comments on Irish border also supported Sterling giving hopes a solution for the Irish backstop could be found for Brexit.
Chart Focus NZD/JPY
Key Points
1. Sell NZD/JPY recommendation
2. Sell NZD/JPY at 72.90. Stop at 73.20 and target at 71.90
3. Tensions in Middle East and trade tariffs is favouring safe haven JPY
4. Price is at a high with bearish MACD divergence and weak Stochastic. Both are hinting of a price decline
Fundamental Comments
- Tension in Middle East is moving capital into safe haven JPY
2. Trade talk between the world 2 largest economies is at an impasse
Technical Comments
- Price is moving higher with bearish divergence warning from MACD
2. Stochastic is weak and near to overbought zone, limiting price upside.
Key Levels
| Support | 72.70 | 72.40 | 72.00 |
| Resistance | 73.00 | 73.40 | 73.90 |
Technical Overview
USD/JPY – Price has declined lower to 107.20 this morning. While Stochastic is into oversold extreme, MACD is still bearish and moving lower, hinting of more downside for price. 20EMA is bearish and its gradient is steep. 20EMA is hinting of more downside. The next price support is at 106.75 and this could be where price is heading to.
| Support | 107.20 | 107.00 | 106.75 |
| Resistance | 107.60 | 108.00 | 108.35 |
EUR/USD – Price has moved up close to the resistance point of 1.1285. There could be more upside as Stochastic has not reached the overbought extreme and MACD is still rising. A move above 1.1285 could see price going to 1.1315 or 1.1325. If price is capped at 1.1285, it could decline to 1.1205.
| Support | 1.1245 | 1.1225 | 1.1190 |
| Resistance | 1.1245 | 1.1285 | 1.1320 |
GBP/USD – Price broke above 1.2510 which negated the bearish trend. The next resistance point lies at 1.2575 and a break will likely pushed price higher to 1.2660. However Stochastic is into overbought zone and MACD histogram is on the high side as well. Watch the reaction at 1.2575 for clues
| Support | 1.2510 | 1.2480 | 1.2445 |
| Resistance | 1.2575 | 1.2630 | 1.2665 |
XAU/USD – Gold broke above a Triangle pattern yesterday and last night has reached a high of 1452.75. This is also the Fibonacci 127% of rally from 1380 to 1438. Stochastic has reached the overbought extreme but MACD is still bullish. We see a correction which can bring price lower to 1433 and from there, another rally to new high
| Support | 1438.90 | 1429.75 | 1416.30 |
| Resistance | 1452.65 | 1467.50 | 1474.55 |
EUR/AUD – Our sell order was filled and price has dropped lower to 1.5915. While the trend is still bearish, MACD and Stochastic are hinting of possible divergences. We could be close to a bottom and price may not reach our target at 1.5860. We would recommend bringing stop lower to cost at 1.5985 and profit target at 1.5885.
| Support | 1.5905 | 1.5880 | 1.5860 |
| Resistance | 1.5935 | 1.5985 | 1.6035 |
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