Market Talk
The yen stood near a seven-month high against the dollar on Tuesday as unrest in Hong Kong and weakness in Argentina’s currency heightened investor risk aversion and fanned demand for the safe-haven Japanese currency.
Safe haven were also supported by factors such as U.S.-China trade tensions and the worries over a declining global economic growth and a declining global equity market. Gold was a beneficiary as price climbed above $1500 again to another new high.
U.S. Treasury yields were sharply lower on Monday dropping below 1.7% to 1.63% amid trade tensions between the world’s two largest economies and concerns of slowing global economic growth. The drop in US yields weighed on the US dollar.
The Chinese central bank, PBOC, set the daily midpoint for Yuan at 7.0326 per dollar on Tuesday which was the fourth consecutive day below the psychological level of 7 per dollar. Worries over Yuan depreciation is likely to keep investor risk sentiment on the high side.
Sterling clawed back some ground on Monday against the single currency Euro, benefiting from political turmoil in Italy that hit the euro, but concerns over Brexit kept the UK currency within sight of multi-year lows against the US$, despite the US$ weakness.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation
2. Buy AUD/USD at 0.6760. Stop at 0.6720 and target at 0.6860
3. A drop in US 10-Year Treasury yields and expectation of a Fed rate cut are both weighing on the US$
4. Price rebound from a support area and MACD’s warning of a possible low could be a sign of a price rally ahead
Fundamental Comment
1. Expectation of US interest rate cut is likely to weigh on the US$
2. US 10-Year Treasury yields has been declining and this is likely to weigh on the US$
Technical Comments
1. Price has rebounded from a support area and the correction had stay above the Fibonacci 62% correction point
2. MACD has given bullish divergence warning of a possible price low.
Key Levels
| Support | 0.6730 | 0.6700 | 0.6675 |
| Resistance | 0.6765 | 0.6795 | 0.6825 |
Technical Overview
USD/JPY – Price reached a low of 105.05 on Monday but with divergence warnings from MACD. However, 20EMA is still bearish. Price will need to move above 105.65 to confirm a trend reversal. There is also a strong resistance at 105.55-105.60. Stochastic is near to the oversold zone but MACD is still bearish with both its lines below the zero line.
| Support | 105.25 | 105.05 | 104.65 |
| Resistance | 105.60 | 106.05 | 10630 |
EUR/USD – Price does not show any trend at the moment but is drifting lower since the 6th of Aug. Support and range low are at 1.1160. We are expecting price to stay within this 90 pips range going forward until there is a breakout. Stochastic is moving towards the oversold extreme but MACD is flat and neutral at the moment.
| Support | 1.1180 | 1.1150 | 1.1115 |
| Resistance | 1.1200 | 1.1225 | 1.1250 |
GBP/USD – Price reached a 30-month low at 1.2011 on Friday. Price managed to recover to 1.2106 yesterday but the rally was capped by the 20EMA and looks weak. Our view is price is likely to decline and test the previous low of 1.2011 again within the next 48 hours. Stochastic has moved above the oversold extreme but could be about to turn lower.
| Support | 1.2045 | 1.2010 | 1.1985 |
| Resistance | 1.2085 | 1.2115 | 1.2150 |
XAU/USD – Our view remains unchanged from the previous update. We are looking at price going to 1526-1530 in this current rally. We should see price going into this resistance zone within the next 48 hours. If there is no divergence warning from MACD, we may upgrade our target but if MACD shows a bearish divergence, price is likely to see a correction. Watch the resistance at 1530.
| Support | 1517.50 | 1510.30 | 1495.20 |
| Resistance | 1530.00 | 1539.40 | 1544.90 |
NZD/USD- In our previous update, we had a sell recommendation on NZD/USD. Our sell was filled at 0.6485 when price moved to a high of 0.6498. Our view remains unchanged. We would recommend bringing stop lower to 0.6505 and keeping profit target at 0.6370. Stochastic is moving into the oversold extreme but MACD is still bearish at the moment.
| Support | 0.6430 | 0.6400 | 0.6375 |
| Resistance | 0.6465 | 0.6495 | 0.6525 |
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