FX Commentary – Can Sterling Continue To Rise

– The yen slid to a five-week low against the dollar on Tuesday after Reuters reported that BoJ policy makers were opened to discussing the possibility of expanding stimulus at their board meeting on Sep 18-19, as fallout from the U.S.-China trade war spread.

– The British pound was hovering near one-and-a-half month highs amid diminishing chances of a no-deal Brexit after Britain’s parliament voted, as expected, to stymie Prime Minister Boris Johnson’s bid for an early election, which prompted him to vow that he would secure a Brexit deal at an EU summit next month. 

– The Euro remained subdued ahead of a key European Central Bank meeting on Thursday, where policy makers are widely expected to cut interest rate and deliver a package stimulus measures to offset the effects of an ongoing U.S.-Sino trade war and a global economic slowdown.

– The U.S. Federal Reserve is also widely expected to cut interest rates next week at its policy meeting as policy makers race to shield the global economy from risks, which also include Brexit.

– Demand for the safe-haven currency declined since China and the United States on Thursday agreed to hold high-level talks in early October, boosting risk sentiment. Gold prices fell to their lowest in nearly a month as rising bond yields and a better risk sentiment dented the allure of safe haven assets.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation
2. Buy NZD/USD at 0.6420. Stop at 0.6380 and target at 0.6490
3. Expectation of a US interest rate cut and thawing of trade tension between US and China is benefiting the NZ$
4. A bullish Engulfing candlestick pattern at the 20EMA support is hinting of further price upside.

Fundamental Comment
1. Expectation of a cut in US interest rate is weighing on the US dollar
2. A thawing of trade tension between US and China is shifting demand into riskier currency benefiting NZ$

Technical Comments
1. Price is supported by the 20EMA and a bullish Engulfing candlestick pattern is hinting of further price upside
2. MACD is still bullish and could be turning up again

Key Levels

Support 0.64050.63850.6335
Resistance 0.64450.64700.6500

Technical Overview

USD/JPY – Our buy order at 107.20 was filled when price reached a low of 107.17. Price is racing towards our target at 107.95. Stochastic has reached the overbought extreme but MACD is still rising. 20EMA is also rising and bullish. Keep our profit target at 107.95 but raised stop to 107.45.

Support 107.50107.20106.90
Resistance 107.95108.25108.55

EUR/USD – We have a buy call on 9 Sep and currently the position is still pending. As ECB meeting is just tomorrow, we do not see big movement till the announcement tomorrow. We remain bullish on this pair. We would like to raise stop to cost at 1.1025 and lower profit target to 1.1080. Stochastic is rising and MACD is still bullish.

Support 1.10151.10851.0945
Resistance 1.10551.10851.1120

GBP/USD – With UK parliament in recess, we think Sterling is likely to move according to the technical in the absence of Brexit news. Stochastic and MACD are both showing divergence warning of a potential high. If price is unable to move above 1.2385, price could be poised to decline lower to 1.2230.

Support 1.23351.22901.2255
Resistance 1.23851.24201.2465

XAU/USD – Price reached a low of 1484.35 overnight and both MACD and Stochastic are warning with divergence. We believe there could be a possible turnaround with a move higher to 1501 again. 20EMA is flat at the moment and price has crossed over the 20EMA and this could be the start of a new possible up move to 1501

Support 1488.601484.101474.25
Resistance 1500.751510.101521.65

USD/CAD – Price made a marginal new low last night at 1.3133 and we think this could be the low. MACD and Stochastic are both showing divergence and warning of a possible price low. Price is about to cross above the 20EMA and this could be a sign of a possible reversal

Support 1.31301.31001.3070
Resistance 1.31551.31901.3220

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