FX Commentary 26 July 2019

Market Talk

The euro rose from a two-month low against the dollar on Thursday, after the European Central Bank failed to deliver an interest rate cut that some investors had expected. The single currency outlook remained downbeat after Mario Draghi said rates would stay “at their present or lower levels” and opened the door for more quantitative easing. 

New orders for key U.S.-made capital goods surged 1.9% in June, while weekly jobless claims declined to 206,000 in the latest week. Strong data suggested any rate cuts by the Fed would be a modest insurance cut and throws into doubt the easing cycle that market has predicted.

Expectations for a dovish ECB policy, the RBA’s cautious guidance and fears of a hard Brexit after Boris Johnson took over as prime minister in the U.K. have all put pressure on their respective currencies. Weakness in the U.S. dollar’s major rivals has seen the greenback rose to hover near a one-month high despite an impending US rate cut.

Gold eased off a one-week peak on Thursday as robust U.S. economic data outweighed the European Central Bank’s decision to adopt an accommodative monetary policy and with investor focus on next week’s Federal Reserve meeting.

The Federal Reserve’s monetary policy meeting is scheduled for July 30-31, and markets are widely expecting an interest rate cut of at least 25 basis points with a slight chance of a 50 basis points cut.

There will be no updates form 29 July to 31 July 2019. Updates will resume on Thursday, 1st Aug 2019.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation

2. Sell EUR/USD at 1.1155. Stop at 1.1195 and target at 1.1050

3. ECB dovish policy and interest rate differential are both against the Euro

4. Price pullback to 20EMA with MACD bearish is an opportunity to get into a short trade

Fundamental Comment

1. Interest rate differential is in US$ favour

2. ECB stance on easy monetary policy is likely to weigh on the Euro

Technical Comments

1. Price pullback to the 20EMA offers an opportunity to get into a short position

2. MACD is below the zero line and bearish and could be turning lower

Key Levels

Support 1.1125 1.1100 1.1060
Resistance 1.1155 1.1190 1.1230

Technical Overview

USD/JPY – Price reached a high of 108.70 overnight but price could be near to its high as Stochastic is starting to give divergence warning, hinting of a correction before another price rally as MACD is still bullish and above the zero line. We see price coming down to 108.30 in a correction

Support 108.30 107.95 107.75
Resistance 108.70 108.95 109.25

USD/SGD – Our buy call was filled yesterday and for today, our view remains the same. Bring stop higher to 1.3620 while keeping profit target unchanged at 1.3720. Stochastic is rising again and MACD is still bullish and its momentum strong. 20EMA is bullish and rising as well.

Support 1.3665 1.3625 1.3580
Resistance 1.3680 1.3720 1.3750

GBP/USD – For 2 consecutive days, Sterling was capped at 1.2520 and price is now near to 1.2420 price low support. A break of this support is likely to send price to test the low of 1.2380. MACD is turning bearish at the moment and Stochastic is falling. Momentum indicators are both hinting of price declining. Only a move above 1.2525 would change the bearish trend.

Support 1.2420 1.2380 1.2330
Resistance 1.2460 1.2490 1.2520

XAU/USD – Yesterday, we had raised our stop to 1411 and it was triggered when price reached a low of 1410.75. We see price moving in a sideways manner in a consolidation for the next few days. MACD is neutral but Stochastic is close to the oversold zone

Support 1409.65 1399.95 1385.90
Resistance 1419.90 1429.20 1438.90

USD/CAD – We had a buy call on this pair on the 24th of July. Price is starting to move up and our view remains the same. We would recommend bringing stop higher to 1.3105 and keep profit target unchanged at 1.3240. Stochastic is rising and into the overbought zone. MACD is bullish and there was a bullish crossover as well.

Support 1.3135 1.3105 1.3080
Resistance 1.3170 1.3195 1.3240

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