FX Commentary – All Eyes On Sterling Today

Market Talk

– Growing investor worries about a hard Brexit as rival British lawmakers fought for control over negotiations to leave the European Union saw Sterling tumbled 0.8% on Monday, its biggest decline in more than three weeks.

– The pound is likely to remain under pressure ahead of a vote in Britain’s parliament about Brexit later on Tuesday, the outcome of which could trigger an early election and Britain’s exit from the EU without trading agreements.

– The euro fell to the lowest in more than two years as weak PMI economic data from the EU underscored expectations for the European Central Bank to ease monetary policy at a meeting next week. Most EU member states’ PMI reading were below 50.

– The Yuan will come into focus during Asian trading after it slipped to a record low versus the dollar in offshore trade due to fading hopes for a resolution to the U.S.-China trade war, after reports that Chinese and US officials are struggling to agree a schedule of talks.

-Data released today showed the Australian economy remains soft with little sign of retail picking up. Australian Retail Sales for July declined 0.1% on a month-on-month, lower than expectations of a 0.2% increase in a Reuters’ poll. The Reserve Bank of Australia as expected, kept its cash rate at a record low of 1% on Tuesday.

Chart Focus XAU/USD – Gold
Key Points

1. Buy Gold recommendation
2. Buy Gold at 1524.40. Stop at 1516.90 and target at 1550.20
3. Brexit, Sino-US trade tensions and US rate cut expectation are supportive of Gold
4. Price has halted at the Fibonacci 62% correction point with Stochastic pointing and moving higher.

Fundamental Comment

1. Brexit and trade tensions between US and China has increased risk sentiment
2. Expectation of a US rate cut at Sep 17-18 FOMC is weighing on the US$

Technical Comments

1. Price correction has stayed above the Fibonacci 62% correction point.
2. Stochastic is point and moving higher, hinting of further price upward movement

Key Levels

Support 1516.751507.801493.50
Resistance 1527.851537.801550.25

Technical Overview

USD/JPY – Price is likely to stay within the range of 106.60 to 105.60. MACD histogram is getting short while Stochastic is moving within the overbought and oversold extreme over the past few days. 20EMA is flat at the moment. Stay aside for the moment till we see a break out of range boundaries

Support 105.90105.60105.30
Resistance 106.35106.65106.95

EUR/USD – Price continues its decline to 1.0930 and looks poise to continue its decline further. Stochastic is in the oversold extreme but MACD is bearish. 20EMA is bearish and hinting of further downside. Price is likely to be capped at the resistance of 1.0995 for a test of support at 1.0900 handle.

Support 1.09101.08801.0835
Resistance 1.09451.09701.0995

GBP/USD – The corrective rally we forecast did not happened. Instead price continues its downward movement and is currently near to an important support at 1.1985. A test of this support is likely later today. While Stochastic is in oversold extreme, MACD is strongly bearish. 20EMA is pointing downward and its gradient is steep, hinting of a strong bearish trend.

Support 1.19851.19351.1875
Resistance 1.20401.20801.2120

AUD/USD – Our sell call from 29th Aug is still pending. Price reached a low of 0.6688, missing our profit target at 0.6680, but has bounced higher to 0.6720. On the 4-hourly chart, a long legged Doji is warning of a price low. We would recommend bringing stop lower to 0.6740 while keeping profit target at 0.6680.

Support 0.67050.66850.6630
Resistance 0.67350.67600.6795

AUD/JPY – Our sell call from 30th Aug is still pending. Price has dropped lower to 71.08 but has recovered higher to 71.45. We would suggest bringing stop lower to 71.55 while keeping profit target at 71.08. Stochastic could be above to turn up from the oversold zone

Support 71.2570.8570.60
Resistance 71.5571.8072.05

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