Market Talk
Safe-haven currencies such as the Yen and Swiss franc were under pressure on Monday as expectations that policy makers in China and Germany would unleash new stimulus eased immediate concerns about a slowing global economy.
The People’s Bank of China unveiled a key interest rate reform on Saturday to help steer borrowing costs lower for companies and support a slowing economy that has been hurt by the trade war with the United States. German media reported that the German government may be opened to running a fiscal deficit by issuing more debt to boost German economic growth.
A rebound in U.S. Treasury yields on Friday after plunging last week to historical lows helped to lift global equity markets and lower risk sentiment. Inversion of 2-year and 10-year bond yields had flashed warning of recession early last week, weakening the US$.
Gold fell on Friday as stocks and the dollar firmed, but fears of a slowing global economy and lack of clarity on the U.S.-China trade war kept bullion on track for a third straight weekly gain.
Sterling advanced broadly on Friday, notching up its biggest daily rise versus the euro and against the US$ in nearly five months, as a growing opposition from political parties to PM Johnson’s promise to take UK out of European Union with or without a deal and decent data provided enough ammunition to speculators to buy Sterling.
Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation
2. Sell EUR/AUD at 1.6390. Stop at 1.6430 and target at 1.6160
3. Talk of Germany issuing more debt to fund fiscal spending and interest rate differential are both in the Aussie dollar favour
4. Price advance is capped by strong resistance and MACD is bearish and hinting of more price declines.
Fundamental Comment
1. Talk of Germany issuing more debt to fund fiscal spending is likely to weaken the Euro currency
2. Interest rate differential is in Aussie dollar favour
Technical Comments
1. Price is capped by a strong price resistance as well as the 20EMA point
2. MACD is bearish and both lines are below the zero line, hinting of a strong bearish trend.
Key Levels
| Support | 1.6335 | 1.6290 | 1.6250 |
| Resistance | 1.6395 | 1.6425 | 1.6480 |
Technical Overview
USD/JPY – Price is caught in a range consolidation at the moment. The range boundaries are at 107.00 to 105.50. Stochastic is flat but near to the overbought extreme. MACD while bullish is flat and neutral at the moment. 20EMA is still bullish. Play the range or trade with the breakout direction.
| Support | 106.15 | 105.85 | 105.50 |
| Resistance | 106.50 | 106.75 | 107.10 |
EUR/USD – Price has declined to a low of 1.1065 but the decline may not be over as yet. We think there could be one more decline to 1.1045 to complete the movement. We see resistance at the 20EMA point of 1.1115. Stochastic is rising from oversold extreme but MACD is still bearish with both its line below the zero line. A move above 1.1145 could negate our bearish view.
| Support | 1.1080 | 1.1065 | 1.1025 |
| Resistance | 1.1115 | 1.1140 | 1.1170 |
GBP/USD – Price is likely to continue from last week strong rally as MACD is still bullish and Stochastic is still rising. Stochastic has not yet reached the overbought extreme, hinting there could be more room for price advancement. 20EMA is also rising. We see price rising to test the 1.2210 resistance. Below 1.2100 would negate our bullish view.
| Support | 1.2115 | 1.2070 | 1.2040 |
| Resistance | 1.2175 | 1.2210 | 1.2245 |
XAU/USD – Our view is the same as last week. We see price moving in a wide sideways range. We see price moving lower to 1499 as Stochastic is still declining. This is a hint the current correction is not completed as yet. MACD is bullish but both lines of MACD are on different side of the zero line. Wait for better buying opportunities
| Support | 1499.65 | 1486.90 | 1477.90 |
| Resistance | 1515.35 | 1523.85 | 1534.90 |
USD/CHF – Our buy call was triggered on Friday and our view remains unchanged. Keep stop at 0.9735 and target at 0.9850. MACD is still bullish and moving higher. Stochastic may have more into overbought extreme but is still strong. 20EMA is still rising and point higher, indicating a bullish trend.
| Support | 0.9780 | 0.9750 | 0.9705 |
| Resistance | 0.9810 | 0.9840 | 0.9880 |
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