Market Talk
The dollar recovered from early weakness as better-than-expected U.S. retail sales data on Thursday eased fears that the U.S. economy could be headed for a recession, but cautions remained given the growing risks to the global economic outlook.
First inversion in the U.S. Treasury yield curve in 12 years had sparked heightened fears of an imminent end to the longest economic expansion in U.S. history and led to an equity market rout and weakness in the US$.
The recession fear is proving a boon for gold, which has managed to retain its own shine despite the US$ gain overnight. US bond yields’ decline, with 30-year yield hitting record lows and 10-year yield sinking to a three-year helped to bring out the glitter in Gold.
The Australian dollar gained to $0.6777 after data showed the Australian economy had added a forecast-busting 41,100 new jobs in July but China’s vow to counter the latest US tariffs is likely to weigh on the Aussie.
Sterling gained against the dollar and Euro, helped by better-than-expected retail sales and news that Britain’s opposition Labour Party has begun its bid to bring down Prime Minister Boris Johnson and stop him from taking Britain out of the European Union without a deal.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation
2. Buy USD/CHF at 0.9780. Stop at 0.9735 and target at 0.9850
3. Recovery in US bond yield has lower demand for CHF while interest rate differential is not in the CHF favour
4. Price has broken above a recent high and both momentum indicators are hinting of further price advance
Fundamental Comment
1. Recovery in US bond yields has led to less demand for safe haven CHF
2. Interest rate differential is in US$ favour
Technical Comments
1. Price has broken above a high resistance and could be heading to the Fibonacci 161.8% projection target.
2. MACD and Stochastic are both rising hinting of possible price advance
Key Levels
| Support | 0.9750 | 0.9705 | 0.9660 |
| Resistance | 0.9800 | 0.9840 | 0.9880 |
Technical Overview
USD/JPY – Price has managed to stay above 105.50 and our bullish view is still intact. However, price is not moving higher but sideway instead. As long as price stays above 107.50, we believe in a rally to 107.40. MACD is still bullish but Stochastic is in the middle of its range and not hinting much.
| Support | 106.00 | 105.65 | 105.20 |
| Resistance | 106.35 | 106.75 | 107.10 |
EUR/USD – Our sell order was filled at 1.1145 and price has declined lower to 1.1091. We recommend bringing stop lower to 1.1130 and bringing profit target higher to 1.1050. MACD is still bearish and could be turning down again. Stochastic is near to the oversold extreme but is still looking weak. Both momentum indicators are hinting of further price decline.
| Support | 1.1090 | 1.1065 | 1.1025 |
| Resistance | 1.1120 | 1.1160 | 1.1190 |
GBP/USD – Price managed to move above the range we prescribed yesterday but the rally was capped by the declining downtrend line. At the moment, price is still capped by this downtrend line with Stochastic turning lower but MACD still in bullish mode. If price can move above 1.2110, we see price going to 1.2190. Otherwise it is likely to re-test 1.2040 again.
| Support | 1.2080 | 1.2040 | 1.2005 |
| Resistance | 1.2120 | 1.2150 | 1.2190 |
XAU/USD – Gold reached a high of 1527.80 and could be heading lower in the next move. If price is above to stay above 1510, there is still hope for a test of the recent high at 1535 but a movement below 1510, is likely to call for a test of the support at 1499. This movement is part of a consolidation within a wide range bar on 13th of Aug. MACD is still bullish but Stochastic is near to overbought extreme.
| Support | 1512.90 | 1499.65 | 1485.85 |
| Resistance | 1527.85 | 1534.90 | 1544.65 |
NZD/USD – We had entered into a short position on 8th Aug and this position is still pending. Price has been moving sideways for the past 2 days. As weekend is approaching and this position has taken more days than anticipated, we are going to tighten the stop and profit in the hope of it getting filled. Place stop at 0.6475 and profit target at 0.6420
| Support | 0.6420 | 0.6400 | 0.6375 |
| Resistance | 0.6460 | 0.6495 | 0.6525 |
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