FX Commentary 24 July 2019

Market Talk

The dollar rose on Tuesday to near a five-week high against a basket of currencies after President Donald Trump and U.S. lawmakers reached a two-year deal lifting government borrowing limits to cover spending. US$ got a boost after the IMF raised its forecast on U.S. growth in 2019 while lowering its global growth outlook.

A Bloomberg report that U.S. negotiators will head to China on Monday for face-to-face trade talks helps to boost the US$ as well while sending safe haven JPY and CHF lower against the US$ while Gold held steady

The Euro weakened broadly as investors geared up for news of fresh stimulus from the ECB. Money markets have trimmed bets on a 10-basis-point deposit rate cut, but analysts expect dovish guidance and possibly more generous terms for planned multi-year loans from the European Central Bank at its meeting tomorrow evening.

Sterling slipped on news Boris Johnson will replace Theresa May as prime minister. Johnson, a hardline Brexiter, has promised to pull Britain out of the European Union before Oct. 31, either by securing a deal with the EU that is approved by Britain’s parliament or leaving the bloc without a deal. Financial markets fear the latter course.

Flash PMI data from Eurozone countries from 3.15pm to 4pm while US PMI is scheduled at 9.45pm

Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation

2. Buy USD/CAD at 1.3120. Stop at 1.3080 and target at 1.3240

3. IMF raising US growth rate for 2019 and interest rate differential are both in US$

4. Price is likely to be supported at 20EMA and a previous resistance point while MACD is bullish and hinting of further price increase

Fundamental Comments

1. Interest rate differential is still in US$ favour

2. IMF raising US growth rate while lowering global growth outlook is in favour of US$

Technical Comments

1. Price is likely to be supported at 20EMA and a previous resistance point turned into support

2. MACD is bullish and strong and this is bullish for USD/CAD

Key Levels

Support 1.3120 1.3080 1.3040
Resistance 1.3160 1.3190 1.3240

Technical Overview

USD/JPY – Price’s range was small overnight and price was capped at a previous Fibonacci 38% correction point at 108.30. Stochastic is into overbought extreme and could be moving lower. MACD is about to have a bearish crossover but 20EMA is still bullish at the moment. We are likely to see range and consolidation again for today.

Support 107.95 107.75 107.50
Resistance 108.30 108.60 108.95

EUR/USD – Price reached a low of 1.1140 and appears to be turning a corner at the moment but MACD is still bearish and Stochastic is still in the oversold extreme. We think if there is a rally, it is likely to be a corrective rally and could be capped at 20EMA point of 1.1190, which is also a previous low point. Only a move above 1.1235 would negate the bearish trend.

Support 1.1135 1.1105 1.1080
Resistance 1.1165 1.1190 1.1230

GBP/USD – Price’s rally yesterday was capped by the 20EMA at 1.2480 and price is currently below the Fibonacci 62% of the previous rally. MACD is still bearish and Stochastic is into the oversold position. With Johnson, the risk is on a no-deal Brexit and this is likely to weigh on the Sterling. We think price is likely to be capped at 1.2480 and likely to test the low of 1.2382 in the next few days.

Support 1.2415 1.2380 1.2330
Resistance 1.2460 1.2500 1.2555

XAU/USD – Price was steady yesterday, despite a strong US$. However, range was also smaller. It could be a sign of consolidation. Stochastic is neutral but weak. MACD is still bearish but is close to the zero line. Keep stop at 1406.50 and profit target at 1452.80 for today. We will evaluate again tomorrow.

Support 1412.55 1400.05 1385.90
Resistance 1422.35 1433.95 1441.60

USD/SGD – Price reached a low of 1.3631 yesterday, missing our buy order at 1.3630. Price has moved higher to 1.3662 and we think price should continue to move up to our target of 1.3720. MACD is still bullish. MACD histogram is strong and hinting of a strong trend. Only a move below the support and 20EMA point at 1.3620 would negate the bullish trend.

Support 1.3635 1.3580 1.3540
Resistance 1.3660 1.3680 1.3720

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