FX Commentary 25 July 2019

Market Talk

The Euro continues its fall to a two month low against the dollar on Wednesday, hit by weak economic data and speculation that the European Central Bank may open the door to aggressive monetary policy easing. The probability rose after the Eurozone purchasing managers’ index unexpectedly fell to a 3 month low in June.

The pound rose slightly from recent lows after Boris Johnson won the contest to be the next British PM. Johnson’s promise of a Brexit comes 31st October, with or without a deal raised concerns of a chaotic exit without a deal creating chaos in the financial market.

The US$ fell on Wednesday after Treasury Secretary Steve Mnuchin said there were “a lot of issues” regarding trade discussions with China. Mnuchin and US Trade Rep Lighthizer are heading to China next week for face to face trade talk.

Aussie fell to near the lows for the day after RBA’s governor Lowe commented that further easing policy will come if needed and is tying easing to getting inflation back on track. Market is expecting more rate cuts from RBA later in the year.

ECB policy decision is at 7.45pm tonight with press conference by Draghi at 8.30pm. US Core Durable Goods data is also scheduled for release at 8.30pm

Chart Focus USD/SGD

Key Points

1. Buy USD/SGD recommendation

2. Buy USD/SGD at 1.3645. Stop at 1.3605 and target at 1.3720

3. Interest rate differential and poor Singapore advance Q2 GDP data are not supportive of SGD

4. Price has broken above a resistance and MACD is strong and these are signs of more price advance

Fundamental Comment

1. US yields differential is higher than SGD

2. Singapore recent poor advance Q2 GDP data had led to talks of more easing from MAS

Technical Comments

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

2. MACD is bullish and strong.

Key Levels

Support 1.3625 1.3585 1.3540
Resistance 1.3665 1.3680 1.3720

Technical Overview

USD/JPY – Price range is again small and this is a sign of a price consolidation. Price is likely to be capped at 108.30 which is also the Fibonacci correction point of a previous decline. Stochastic is near to the overbought zone but MACD is neutral at the moment. Price action could be limited to 108.30 to 107.85

Support 107.95 107.75 107.50
Resistance 108.30 108.60 108.95

EUR/USD – Price continues to drift lower. Our view remains unchanged. We are looking at price going lower to 1.1105 from currently level. Price is likely to move after 8.30pm when Draghi press conference starts. We would recommend staying aside till after the press conference.

Support 1.1125 1.1100 1.1080
Resistance 1.1160 1.1190 1.1230

GBP/USD – We saw a rally to 1.2520 but price was unable to sustain and has dropped lower to 1.2470. MACD is above the zero line but is neutral at the moment. Stochastic is rising but not indicative at the moment. 20EMA is flat. We think price is likely to stay in a range 1.2420 to 1.2520.

Support 1.2415 1.2380 1.2330
Resistance 1.2460 1.2500 1.2555

XAU/USD – Gold is still consolidating around 1412 to 1430. Stochastic is rising and MACD is starting to rise but MACD is still zero line. We are expecting the consolidation to continue. We recommend bring stop higher to 1411 from earlier 1406. We would like to lower profit target to 1437

Support 1422.35 1412.55 1400.05
Resistance 1430.10 1441.70 1452.70

USD/CAD – Our buy call for yesterday was filled as price dropped to a low of 1.3117. Our view remains the same. Keep stop at 1.3080 and target at 1.3240. MACD is bullish but both lines are still falling. However both lines could be turning around soon. Price is also supported at the 20EMA at the moment

Support 1.3120 1.3080 1.3040
Resistance 1.3160 1.3190 1.3240

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