FX Commentary – Back To Safe Haven

– Pressure was back on the US$ on Wednesday, as nagging fears the Sino-U.S. trade war will drag on and severely hurt US economic growth led to yet another slide in U.S. bond yields. US data did not help either. U.S. consumer confidence inched down in August and growth in home prices hit its slowest pace in nearly seven years.

– Safe-haven Yen, Swiss Franc and Gold got a boost as falls in long-term Treasury yields deepened the inversion of the U.S. yield curve, a phenomenon that has presaged several past U.S. recessions. Gold rose more than 1% as fears of a possible recession gripped investors following an inversion of the yield curve and disappointing U.S. economic data as well as an ongoing U.S.-China trade dispute.

– The euro was flat at $1.1091 after inching down 0.1% on Tuesday when it had managed to recoup some of the intraday losses on hopes that a snap election in Italy could be avoided. Italian turmoil and euro zone dim economic views are likely to weigh on the single currency.

– The British pound rose on Tuesday as opposition parties vowed to try and pass a law to prevent a no-deal Brexit at the end of October, encouraging traders to buy sterling even though most fear the country is headed for a disorderly exit from the EU.

– No major data for tonight. Tomorrow morning at 9am and 9.30am there are ANZ Business Confidence and Australia Private Capital Expenditure data respectively.

Chart Focus GBP/USD
Key Points

1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.2275. Stop at 1.2325 and target 1.2205
3. Fear of a disorderly exit from EU and interest rate differential are in the US$ favour
4. Price has made a Double Top chart pattern with MACD divergence warning

Fundamental Comment

1. Fear of a disorderly exit from the EU is weighing on the Sterling
2. Interest rate differential is in favour of the US$

Technical Comments

1. Price has made a double top
2. Stochastic and MACD are both warning of a divergence

Key Levels

Support 1.22451.21951.2145
Resistance 1.22751.23101.2365

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 has stabilized but still looks weak. Price could slide lower to 1.1080. MACD is still bearish but the histogram is weak and neutral at the moment. Stochastic is still moving lower. 20EMA is pointing lower.  A break of 1.1080 would see price test the low of 1.1050 again.

Support 1.10801.10501.1025
Resistance 1.11151.11401.1170

AUD/USD – After reaching a high of 0.6788, price has been on a decline. The decline has brought price to 0.6738 but we think it can continue to move lower to 0.6695. Stochastic is moving lower and MACD has turned bearish. Both momentum indicators are hinting of more price decline. A move above 0.6790 would negate our bearish view

Support 0.67200.66900.6675
Resistance 0.67450.67750.6810

NZD/USD – Our buy call on Monday was stopped out at 0.6335 when price reached a low of 0.6325 this morning. A possible bullish divergence could be forming on both the Stochastic indicator as well as the MACD indicator. Price is also at the lower end of its trend channel. We will wait for confirmation signals

Support 0.63250.63000.6285
Resistance 0.63500.63700.6395

XAU/USD – Yesterday, we had a buy call but the price dip missed our entry price by $0.60. Price is now higher but we do not think the uptrend could continue. This rally may be part of a 3 parts correction process and we are expecting another decline to 1526. MACD is bullish but is weaker than yesterday. Stochastic is moving higher but also weaker than yesterday

Support 1531.451520.101509.10
Resistance 1540.701554.901561.30

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