FX Commentary – Yuan Fixed At A 11.5-Year Low

Market Talk

– The yen rose on Tuesday as investors tempered their optimism about the chances for a quick resolution to the U.S.-China trade war, after Chinese Foreign Ministry spokesman denied contact between the 2 sides.  U.S. President Donald Trump on Monday flagged the possibility of a trade deal with China, saying Chinese officials had contacted U.S. trade counterparts overnight and offered to return to the negotiating table.

– While Washington and Beijing have shown a willingness to return to the negotiating table to resolve their trade row, there are lingering concerns and doubts that both sides could resolved a dispute that has dragged on for more than a year and hurt global growth.

– The currency market also took some relief from a stronger-than-expected daily Yuan fixing by the People’s Bank of China, which many traders considered an attempt to slow the yuan’s decline versus the dollar.  PBOC fixed the Yuan mid-rate at 7.0810, which was a fresh 11.5-year low.

– Johnson said on Monday he was prepared to take Brexit talks with the European Union down to the very last minute before the Oct. 31 exit deadline, and if necessary to take a decision to leave without a deal on that day. Uncertainty on Brexit sent Sterling lower, falling 0.5% on Monday to 1.2215.

– US Consumer Confidence and Richmond Manufacturing Index are scheduled at 10pm tonight. Data will show if trade war has affected US consumers’ confidence or manufacturing activities.

Chart Focus XAU/USDGold
Key Points

1. Buy Gold recommendation
2. Buy Gold at 1525.00. Stop at 1514.40 and target at 1554.80
3. Risk sentiment deteriorated and expectation of a US rate cut at Sep 17-18 FOMC meeting are both supportive of Gold
4. Price is supported by a previous high as well as 20EMA with MACD hinting of a price advance.

Fundamental Comment

1. Risk sentiment deteriorated as optimism over a U.S.-China trade deal faded
2. Expectation of a US rate cut at Sep 17-18 FOMC meeting is supporting Gold

Technical Comments

1. Price is supported by a previous price high and 20EMA
2. MACD is still bullish and could be turning higher

Key Levels

Support 1521.351508.651497.95
Resistance 1534.901543.851554.90

Technical Overview

USD/JPY – Price bounced higher to 106.40 after touching a low of 104.40 on early Monday morning. MACD failed to turn bullish and Stochastic is about to have a bearish crossover. We are expecting a price pullback 105.30 if 20EMA continues to cap price advance.

Support 105.50105.10104.80
Resistance 105.95106.30106.65

EUR/USD – Price is currently sitting on the 20EMA. MACD is still bullish and could be turning higher. Stochastic is still moving lower but could also be turning up again. If price can stay above 1.1080, there is a good chance price can test the 1.1145 resistance again in the next 24 hours. A move below 1.1180 would negate our bullish view

Support 1.10801.10501.1025
Resistance 1.11151.11401.1170

GBP/USD – Price reached a high of 1.2293 and has declined lower to 1.2198 this morning. If price can stay above 1.2195, there is a chance of another test to 1.2295 as MACD is still bullish and the fast line could be rising again. 20EMA is also supporting price. A move below 1.2190 would negate our bullish view.

Support 1.21951.21551.2105
Resistance 1.22301.22651.2295

NZD/USD – Our buy call was filled yesterday and last night, price broke above the trendline and reached a high of 0.6402. However this morning, price declined lower to 0.6365. Stochastic has a bearish crossover and MACD has not turned bullish. Keep stop at 0.6335 and target at 0.6470. We will evaluate again tomorrow.

Support 0.63600.63400.6300
Resistance 0.63950.64200.6450

EUR/AUD – Yesterday we recommended a buy on dip strategy and we think the dip to 1.6360 could be the low and price could now be rising towards 1.6535 again. MACD is still bullish and the fast line is starting to turn up. Stochastic has dropped into the oversold extreme and could be about to move up again. A move below 1.6340 would negate our bullish view.

Support 1.64001.63601.6305
Resistance 1.64501.65101.6550

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