FX Commentary 23 July 2019

Market Talk

Sterling  dipped on Monday with the U.K.’s  Conservative Party set to announce its next leader and UK’s next PM. Investors are worried Boris Johnson, the front runner to become the UK’s next prime minister, would pull Britain out of the EU on Oct. 31 without a trade deal in place. Hedge funds have increased short positions on the pound to a 10-month high in the week to July 16, according to Commodity Futures Trading Commission data

The euro traded near session lows due to growing expectations European Central Bank President Mario Draghi will signal a rate cut in September at a policy meeting later this week to keep inflation expectations on track. Investors awaited the ECB’s policy meeting and Draghi’s comments at a press conference on Thursday.

The U.S. central bank is widely expected to lower its target range of 2.25%-2.50% by 25 basis points at a meeting ending July 31, but expectations for a larger 50-basis point cut have waxed and waned due to mixed signals from Fed policy makers. The chance of an aggressive Federal Reserve rate cut appear to have eased over the weekend after Boston Federal Reserve President Eric Rosengren, said “the U.S. economy doesn’t require stimulus”

Gold slipped from a 6-year year high as market adjusted to mixed signals from Fed’s officials. Rosengren’s remark was one of the reasons as Gold fell to $1416. Crude Oil rose as tensions in the Middle East persist after Iran seized a British tanker on Friday.

Hong Kong press reported US trade negotiators are likely to visit China next week for face to face talk. A report over the weekend from Xinhua that some local firms were seeking to buy U.S. farm products add to signs of a possible progress between China and U.S. in settling their trade disputes

Chart Focus USD/SGD

Key Points

1. Buy USD/SGD recommendation

2. Buy USD/SGD at 1.3630. Stop at 1.3580 and target at 1.3720

3. Interest rate yield differential and recent poor advance Q2 GDP data is weighing down the SGD

4. Price has broken above a resistance point with strong and bullish MACD’s momentum

Fundamental Comments

1. US yields differential is higher than SGD

2. Singapore recent poor advance Q2 GDP data has led to talks of an October easing by the local central bank, MAS

Technical Comments

  1. Price has broken above a recent resistance level and could be heading to the next resistance point at 1.3720

2. MACD is moving higher and is bullish and hinting of more price advancement

Key Levels

Support 1.3620 1.3580 1.3540
Resistance 1.3650 1.3680 1.3720

Technical Overview

USD/JPY – Price has moved above a downtrend line starting at 108.99 on 10th July to 108.34 on the 17th of July. This could be the start of an up move that could bring price higher to 108.60. Stochastic is rising and MACD is about to move above its zero line. Both momentum indicators are supportive of further price advancement.

Support 107.95 107.75 107.50
Resistance 108.30 108.60 108.95

EUR/USD – Price has moved below a previous low of 1.1190 and there is a danger of further declines. Stochastic is still trending lower and MACD has moved below its zero line and is now bearish. 20EMA is trending down. Most signs are negative at the moment. Price could be heading down to 1.1135.

Support 1.1180 1.1150 1.1135
Resistance 1.1225 1.1245 1.1280

GBP/USD – Price is currently just above the Fibonacci 62% correction point of the rally from 1.2382 to the high of 1.2558. Stochastic is still moving lower into the oversold extreme but MACD is neutral at the moment. Price could be waiting for news of the next UK’s PM and his immediate action and outlook on Brexit. We will stay aside for today on this pair.

Support 1.2445 1.2380 1.2330
Resistance 1.2495 1.2520 1.2560

XAU/USD – Our buy call on Gold was filled this morning as price declined to current 1414. Our view remains unchanged. Keep stop at 1406.50 and profit target at 1452.80. Stochastic is into oversold extreme while MACD could be about to give a divergence warning. MACD is still below the zero line and bearish at the moment.

Support 1413.25 1402.95 1385.90
Resistance 1424.55 1437.55 1452.20

NZD/JPY – Our sell call from Friday was stopped out at 73.20 when price went to a high of 73.22. Our view remains unchanged. Price has declined to 72.65 and we see price continuing its decline down to 71.90 in the next couple of days. Stochastic is turning down but MACD is still above its zero line and bullish at the moment.

Support 72.65 72.40 72.05
Resistance 73.05 73.25 73.60

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.