FX Commentary – AUD/USD Breakout In Sight

Market Talk

  • The dollar held near a three-week high on Tuesday, as expectations global economies would unleash fresh stimulus and an improvement in appetite for riskier assets lifted yields on U.S. government bonds and dampened demand for safe havens
  • U.S. government debt yields climbed on Monday as a more positive market and economic outlook goaded investors back into riskier assets. Spread between the 10-year and 2-year has also return to a normal positive 8 basis points from last week inversion.
  • More stimulus from China and Germany soothed investors’ concerns about a global economic downturn. US decision to extend license that allowed Huawei to continue business with US companies despite the White House’s concerns over national security also helped to ease trade tensions between the 2 largest economies.
  • EUR/USD hovered near last week low of 1.1065 as Bundesbank Monthly Report warned of an economic slump and a weakening outlook for the Euro area. The single currency is likely to test the year’s low at 1.1025 in the near future.
  • Market participants are likely to closely monitor the Fed’s Jackson Hole symposium this week in order to get greater clarity on the future path of interest rates. U.S. central bank officials cut interest rates in July and indicated at the time that they’d be open to future easing if warranted. Market sees about a 74% chance of a quarter-point rate cut next month

Chart Focus AUD/USD

Key Points

  1. Buy AUD/USD recommendation
  2. Buy AUD/USD at 0.6775. Stop at 0.6740 and target at 0.6860
  3. An increase in risk appetite and expectation of a cut in US interest rate are against the US$
  4. Price is about to break above a sideway consolidation with both momentum indicators bullish.

Fundamental Comment

  1. An increase in risk appetite has resulted in a movement into riskier currency like the Aussie.
  2. An expectation of a cut in US interest rate is against the US$

Technical Comments

  1. A sideway correction pattern has stayed above the Fibonacci 62% and is about to break above a downtrend line.
  2. MACD has turned bullish and Stochastic has a bullish crossover, hinting of a price uptrend

Key Levels

Support 0.67600.67300.6695
Resistance 0.67950.68200.6865

Technical Overview

USD/JPY – Price is caught in a range consolidation at the moment. The range boundaries are at 107.00 and 105.50. Stochastic is into the overbought extreme and MACD while bullish, has a bearish crossover hinting of price decline. Price is likely to have reached a peak at 106.70 and could be about to test the downside at 105.80.

Support 106.35105.95105.60
Resistance 106.75 107.10107.55

EUR/USD – Price was capped by the 20EMA as well a previous price high resistance and has declined lower. We think the decline could continue lower to either 1.1065 or 1.1025. MACD is still bearish and Stochastic has a bearish crossover without moving far away from the oversold extreme. Only a move above 1.1145 could negate our bearish view.

Support 1.10651.10251.0995
Resistance 1.10851.11151.1145

EUR/AUD – Our sell call was filled yesterday at 1.6390 when price reached a high of 1.6405. Our view remains the unchanged but we would recommend bringing stop lower to 1.6410 while keeping profit target at 1.6160. MACD is turning down and Stochastic may have a bearish crossover in the coming session.

Support 1.63051.62751.6235
Resistance 1.6340 1.6370 1.6425

XAU/USD – Our view is the same as yesterday. Price is in a consolidation and the correction send price to a lower of 1492.80 last night. There is a possibility that price could be about to head higher. We are waiting for confirmation of a reversal. Stochastic is in the oversold extreme and MACD is still bearish but both momentum indicators could be about to turn higher in the coming sessions.

Support 1492.801485.951477.90
Resistance 1503.251509.051519.10

USD/CHF – Our buy call from 16th Aug is still opened and pending. Stochastic is still rising but has given a bearish divergence warning. Similarly, MACD has also given a bearish divergence warning. MACD is still bullish but is getting weaker. We recommend bringing stop higher to 0.9790 and target at 0.9835.

Support 0.98000.97800.9750
Resistance 0.98400.98650.9900

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