FX Commentary – Hopes Faded With Sep 1st Deadline

Market Talk

– The dollar held firm against the yen as comments from Beijing sparked renewed hopes that China and the United States could get full-fledged negotiations back on track to resolve their protracted trade dispute. Safe haven JPY, CHF and Gold declined as a result.

– China’s commerce ministry said on Thursday, Beijing and Washington were discussing the next round of face-to-face talks scheduled for September, ahead of a looming deadline for additional U.S. tariffs on Sept 1.

– German inflation slowed in August and unemployment rose, data showed on Thursday, adding to signs that Europe’s largest economy is running out of steam and cementing expectations of a new ECB stimulus package next month just as Italian political turmoil is resolved.

– The Aussie dollar slipped towards a 10-year low and safe haven recovered as renewed hope that China and the U.S. could get their negotiations back on track began to face as the Sep 1 dead line for increased tariffs looms over the horizon.

– There are a few important US economic data tonight.  Starting from 8.30 pm we have Personal Sending and at 9.45pm there is Chicago PMI. Consumer Sentiment is at 10pm. China PMI is on Sat 9am in the morning.

Chart Focus AUD/JPY
Key Points

1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 71.40. Stop at 71.80 and target at 70.80
3. Implementation of additional tariffs could kill already fading hopes of a Sino-US trade deal
4. Price was capped by the Fibonacci 62% correction and MACD has turned bearish, hinting of further price decline

Fundamental Comment

1. Increased tariffs by US and likely retaliation by China is likely to increase risk sentiment
2. Hopes are fading over a trade deal between the US and China

Technical Comments

1. Price is capped by the Fibonacci 62% correction point
2. MACD is turning bearish and could continue to decline

Key Levels

Support 71.2570.8070.60
Resistance 71.5071.8072.05

Technical Overview

USD/JPY – Price moved higher to 106.68 after breaking above its recent 3 days of range consolidation. MACD is still bullish but Stochastic has reached the overbought extreme. 20EMA is still rising and price needs to find support around the 20EMA for the bullish trend to continue. A move below 106.20 would negate the bullish view.

Support 106.20105.85105.50
Resistance 106.65106.95107.20

EUR/USD – Yesterday, we had continued to favour a down move 1.1050 and currently, price has moved below this point. Stochastic is in the oversold extreme but MACD is still bearish and moving lower. We think price can continue lower to 1.1025 in the next 24 hours. A move above 1.1080 would negate our bearish view and hint of a bottom being made.

Support 1.10251.09951.0950
Resistance 1.10501.10801.1115

GBP/USD – Price continues to trend lower and price is currently below 1.22. The first support lies at 1.2155 and a break of this support is likely to bring price lower to 1.2065 in the next couple of days. Stochastic is moving lower but has yet to reach the oversold extreme. MACD is bearish and still moving lower. A move above 1.2235 would negate our bearish view.

Support 1.21551.21101.2080
Resistance 1.21951.22351.2265

XAU/USD – Gold had declined on renewed hope of negotiation between the U.S. and China towards a trade deal but with increased tariffs set to kick in over the weekend, we think price is likely to be higher again on Monday. For the moment the correction may not be over as yet. Stochastic has room to decline before reaching the oversold extreme while MACD is still correcting with the fast line yet to cross back above the zero line.

Support 1526.151516.401509.10
Resistance 1533.501542.101544.90

AUD/USD – Yesterday, we had a sell call at 0.6725. Price rose to high of 0.6752, almost hitting our stop at 0.6755. Price is now lower and we are expecting price to decline to 0.6675 within the next 48 hours. Stochastic is moving into oversold extreme but MACD is still bearish and moving lower.

Support 0.66950.66750.6630
Resistance 0.67200.67500.6795

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