– Gold prices eased on Friday, heading for a third straight weekly fall, as positive U.S. retail sales data and renewed hopes for a thaw in Sino-U.S. trade tensions lifted equities and yields to multi-week highs but depressed Gold and safe haven currencies.
– The dollar rose overnight against the Japanese yen after Donald Trump said he would not rule out an interim trade pact with China and then gave back some of those gains. The offshore Yuan strengthened to a four-week high of 7.0330 on the back of Sino-U.S. trade optimism.
– Investors pounced on a media report that Northern Ireland’s largest political party had agreed to accept some European Union rules after Brexit sending the pound to a seven-week high of $1.2435 on Friday on receding fears of a no-deal Brexit and dollar weakness. This report was denied by DUP but Sterling was able to maintain its gains.
– The EUR/USD rocketed to a 17-day high on Friday as German government bond yields surged on the back of investors thinking the European Central Bank was done stimulating the ailing euro zone economy after cutting rates on Thursday and exempting euro zone banks from a penalty charge, which analysts say will reduce the currency impact of new stimulus.
– Investors are now awaiting the U.S. central bank meeting later this week, when it is expected to cut its benchmark interest rate by at least 25 basis points for the second consecutive time.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation
2. Buy EUR/JPY at 119.30. Stop at 118.90 and target at 120.05
3. Euro zone banks are exempted from a negative rate penalty charge, which analysts say will reduce the currency impact of new stimulus.
4. Price is supported by the 20EMA with MACD bullish and hinting of further price upside
Fundamental Comment
1. Euro may have a negative interest rate but ECB has exempted Euro banks from a penalty charge which is good for the single currency.
2. JPY has gained on attack on Saudi oil facility but this could have been priced into JPY strength and discounted into price.
Technical Comments
1. Price is supported by the 20EMA
2. MACD is bullish and could be turning up again
Key Levels
| Support | 119.20 | 118.85 | 118.55 |
| Resistance | 119.60 | 120.05 | 120.35 |
Technical Overview
USD/JPY – Price gapped lower this morning on news of attack on Saudi oil production facility. Price is moving up again but could find resistance at 107.95 to 108.05. If price is unable to move above this resistance zone, price is likely to head lower to 107.00 in the next couple of days. Stochastic is moving lower but MACD is still bullish.
| Support | 107.65 | 107.45 | 107.10 |
| Resistance | 107.95 | 108.25 | 108.55 |
EUR/USD – Price reached a high of 1.1109 on Friday but has been drifting lower this morning. Support is located at 1.1055 and if this area can hold, price is likely to move higher to test the recent high of 1.1109. Stochastic is into the overbought zone but is still strong. MACD is bullish and is rising.
| Support | 1.1055 | 1.1025 | 1.0985 |
| Resistance | 1.1085 | 1.1110 | 1.1160 |
GBP/USD – Price has been rising since 3 Sep and we could be coming to the end of the rally. Price reached a high of 1.25 this morning but we are seeing bearish divergence warnings from both Stochastic and MACD. If price is capped at 1.2500, we could see a fall back to 1.2360 in the next few days
| Support | 1.2460 | 1.2400 | 1.2350 |
| Resistance | 1.2505 | 1.2555 | 1.2585 |
XAU/USD – Gold dipped to a low of 1480 but has bounced higher as a result of attack on Saudi oil facility. Our view remains the same. We viewed 1556 as a top and we are looking for a price correction to 1463 in the next few days. However a movement above 1530 would negate our bearish view.
| Support | 1500.75 | 1491.65 | 1480.45 |
| Resistance | 1512.40 | 1524.40 | 1533.65 |
GBP/JPY – Our sell call on Thursday was stopped out for a loss of 40 pips. Price dropped to a low of 132.14 but quickly reversed to a high of 135.20. Stochastic is in overbought zone but MACD is bullish at the moment. 20EMA is also bullish and support is likely at 20EMA point of 133.70. .
| Support | 134.25 | 133.70 | 133.10 |
| Resistance | 134.65 | 135.20 | 135.65 |
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