FX Commentary – US$ Weaker After Rate Cut

– Bank of England unanimous left interest rate unchanged at 0.75% and kept asset purchase target unchanged at 435 billion pound. The central bank still expects to raise rate gradually and assumes a smooth Brexit but warns against US-Sino trade war and Brexit uncertainty.

– Oil prices rose again as tweets by Iran’s foreign minister revived fears of military conflict in the Gulf, only hours after Saudi Arabia and the U.S. had appeared to play down the near-term risk of war. Gold also witnessed some safe-haven demand.

– Investors looked for clarity on future U.S. interest rates after the Federal Reserve on Wednesday signaled a higher bar to further monetary easing. Fed Chairman Jerome Powell indicated that the central bank didn’t expect a slowdown in the economy anytime soon. Powell noted that “if the economy does turn down, then a more extensive sequence of rate cuts could be appropriate.”

– U.S. and Chinese deputy trade negotiators were set to resume talks for the first time in nearly two months on Thursday. Hopes of a trade resolution were dashed with Hu Xijin stating that China is “not as anxious to reach a deal as the US side thought.”

– The U.S. dollar was lower on Thursday, as it gave up prior gains after the Federal Reserve cut rates as expected while central banks in Switzerland, England and Japan refrained from cutting interest rate. Sterling gained after EC’s Juncker said a deal could be reached with UK to leave the EU.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1050. Stop at 1.1010 and target at 1.1160
3. A reduction in tension in the Middle East and interest rate differential are against the US$
4. Triangle chart pattern is hinting of further upside price movement with MACD bullish.

Fundamental Comment
1. FOMC rate cut has reduced the interest rate differential between Euro and US dollar.
2. A reduction in tension in the Middle East is shifting capital away from the US$

Technical Comments
1. A Triangle chart pattern is hinting of more upside movement.
2. MACD is still bullish

Key Levels

Support 1.10351.09951.0955
Resistance 1.10701.11151.1160

Technical Overview

USD/JPY – Yesterday, we had a sell call on this pair. Our sell order was filled and price has broken below a short term consolidation. As long as price is below 108.00, it should be on its way to 107.50 before heading lower to 106.75. Stochastic is moving lower and MACD is bearish and moving lower as well.

Support 107.75107.45107.15
Resistance 108.10108.50108.90

USD/CAD – For the past 2 days, price has been capped at 1.3310. This is also a gap resistance and with gap resistance, if it cannot be closed, it is going to decline in the next 2 days. If price is unable to move above 1.3310, price could be on its way to 1.3190. Stochastic is moving lower and MACD is still bullish but the faster line has already moved below the zero line.

Support 1.32401.32051.3175
Resistance 1.32751.33151.3355

GBP/USD – Price made a new high at 1.2582, sparked by EC Juncker’s remark of a possible Brexit deal with UK. MACD is bullish and rising. Stochastic is rising and has not yet reached the overbought extreme. Price still has room to continue higher.

Support 1.25551.25151.2475
Resistance 1.26001.26451.2690

XAU/USD – Price consolidation continues within the range of 1480 to 1512. MACD is flat and neutral at the moment. Stochastic is in the middle of its range and its movement limited. 20EMA is also flat. We are expecting this consolidation to continue. Wait for better trading opportunities.

Support 1496.601485.601478.05
Resistance 1512.251524.151529.30

AUD/USD – Price declined to a low of 0.6767 yesterday on the back of a poor employment data. Price could be moving higher to 0.6810 to 0.6830 but we think this could be a correction and there could be another decline 0.6760 to complete the decline from 0.6893. Stochastic is in oversold extreme but MACD is still bearish.

Support 0.67750.67300.6705
Resistance 0.68150.68300.6865

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