Market Talk
The dollar held gains on Thursday after minutes from the Federal Reserve’s last policy meeting tempered down some aggressive expectations the central bank would embark on a series of deep interest rate cuts. However market is expecting further rate cuts as economic growth slows.
– Meeting from July’s FOMC minutes showed Fed policy makers were deeply divided over whether to cut interest rates last month but were united in wanting to signal they were not on a preset path to more cuts.
– Boris Johnson is due to meet Macron in Paris on Thursday. German Chancellor Angela Merkel challenged Britain to come up with alternatives to the Irish border backstop within 30 days after meeting Johnson on Wednesday and Macron reminded him, the withdrawal deal is not going to be renegotiated. Uncertainty about Britain’s divorce from the European Union continued to weigh on the pound.
– People’s Bank of China set the mid-rate for onshore Yuan today at 7.0490. While it was stronger than market’s expectation, it was the weakest level since China let the Yuan slipped past the important 7-yuan per dollar mark.
– Currency markets are expected to trade in tight ranges on Thursday ahead of U.S. Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole on Friday as a preview for a September Fed rate cut. The Fed next meets Sept. 17-18.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.2115. Stop at 1.2165 and target at 1.2005
3. Worries over a no-deal Brexit and interest rate differential are both against the Sterling
4. Price was capped at the upper trend channel boundary and momentum indicators are bearish
Fundamental Comment
1. Worries over a no-deal Brexit is likely to weigh on Sterling
2. Interest rate differential is not in the US$ favour
Technical Comments
1. Price was capped by the top of an uptrend channel
2. MACD is turning bearish while Stochastic is still declining
Key Levels
| Support | 1.2090 | 1.2045 | 1.2005 |
| Resistance | 1.2135 | 1.2180 | 1.2210 |
Technical Overview
AUD/USD – We had a buy call on this pair 2 days ago but after the breakout, price has decline back below the downtrend line. There is a of a false breakout especially since price made a lower low today compared to yesterday 0.6769 low. . We would recommend keeping stop at 0.6740 and to bring profit target lower to 0.6820
| Support | 0.6760 | 0.6730 | 0.6700 |
| Resistance | 0.6795 | 0.6820 | 0.6865 |
EUR/USD – Our sell call was filled and our view remains unchanged. We are looking at price going to 1.1025. We would recommend bring stop lower to cost at 1.1090. MACD is turning bearish and Stochastic is turning down. Both momentum indicators are hinting of further price decline.
| Support | 1.1065 | 1.1025 | 1.0995 |
| Resistance | 1.1090 | 1.1130 | 1.1190 |
USD/JPY – Price is moving in a sideways consolidation for the past 3 days. The boundaries are at 106.70 and 106.15. Stochastic is near to the oversold extreme but MACD is starting to turn bearish. We would suggest going with the downside breakout in line with the trend of MACD.
| Support | 106.25 | 105.90 | 105.60 |
| Resistance | 106.45 | 106.75 | 107.10 |
XAU/USD – Price is consolidating and moving in a sideways manner for the past 2 days. However MACD is still bearish and Stochastic is about to turn down. Price is also capped by the 20EMA. There is a high chance of another decline to test the low at 1492.75. A movement below this support will target the previous low of 1485.95. Above 1510 would negate our bearish view
| Support | 1497.80 | 1485.90 | 1477.90 |
| Resistance | 1507.90 | 1519.10 | 1527.75 |
EUR/AUD – Yesterday, we had lower stop to our cost at 1.6390. Our stop was taken out this morning. Price is back to the high again but is still capped by the 20EMA. MACD is neutral at the moment but Stochastic is still moving higher. We would prefer to step aside and wait for better trading opportunity
| Support | 1.6375 | 1.6345 | 1.6305 |
| Resistance | 1.6405 | 1.6440 | 1.6480 |
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