Market Talk
– The dollar was supported on Monday, with the market’s risk appetite delicately balanced after talks in Washington between U.S. and Chinese trade deputies were described as “productive.” However, investors were still jittery as Beijing officials cancelled a visit to U.S. farms in Montana and headed back to China earlier than planned, dampening expectations of a trade deal being reached
– President Donald Trump told reporters on Friday he was “not looking” for a partial deal, and Chinese officials then cancelled goodwill visits to U.S. farms. China and US officials said over the weekend that economic and trade teams from the two economic powerhouses held “constructive” discussions in Washington late last week and both the U.S. and China agreed to maintain in contact
– The British pound pulled back from a two-month high as Ireland Foreign Minister Simon Coveney warned a Brexit deal is not close, saying there is still “quite a wide gap” between the U.K. and European Union reversing a rally sparked by optimism from EC Juncker.
– Sterling could rise 5% if a deal is clinched, or tumble to parity with both the dollar and the euro if the U.K. crashes out of the bloc, according to Shamik Dhar, chief economist at BNY Mellon Investment Management.
– September manufacturers’ surveys in Europe and the United States due later today are also likely to provide the latest insight into the state of a world economy hit by slowing global demand and the trade war.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation
2. Buy AUD/USD at 0.6775. Stop at 0.6745 and target at 0.6830
3. Optimism of a US-Sino trade deal after a 2-week price decline is hinting of a price reversal
4. Price reversal at Fibonacci 62% correction point and momentum indicators are hinting of a further price advance
Fundamental Comments
1. Optimism of a US-Sino trade deal is in the Aussie favour
2. A 2-week price decline could have ended with a reversal on Friday
Technical Comments
1. A candlestick price reversal at the Fibonacci 62% point of the price rally from 0.6687 to the high of 0.6893 is hinting of further price advance.
2. MACD has a bullish divergence warning and Stochastic is moving up from oversold extreme
Key Levels
| Support | 0.6760 | 0.6730 | 0.6705 |
| Resistance | 0.6800 | 0.6835 | 0.6865 |
Technical Overview
USD/JPY – Our sell call from Thursday is still pending. Our view is the same as Friday. Price came down to 107.51 and has moved higher to 107.75. We are expecting this resistance to hold and provoke a price decline lower to 107.15. Stochastic is into oversold zone and MACD could be about to turn higher. Lower stop to cost at 108.00 and bring profit target higher to 107.20.
| Support | 107.50 | 107.15 | 106.80 |
| Resistance | 107.80 | 108.10 | 108.50 |
EUR/USD – Our buy call on Friday was wrong. We were stopped out for a loss of 40 pips. Price declined was halted above 1.0995, which was also the previous low in the consolidation. MACD could be turning up again. Stochastic could also be turning up again near the oversold zone. If price is supported above 1.0990, we think it can go higher to 1.1108 again. Below 1.0990 will target 1.0925.
| Support | 1.0990 | 1.0955 | 1.0925 |
| Resistance | 1.1035 | 1.1070 | 1.1110 |
GBP/USD – Against our expectation, price fell on new worries over Irish backstop. Currently, price is supported by the 20EMA. MACD is bullish but is flat at the moment but there was a divergence warning with price earlier on. Stochastic is near the oversold zone and could be turning up. We are looking for a price move to 1.2390 in the next 24 hours.
| Support | 1.2460 | 1.2425 | 1.2390 |
| Resistance | 1.2515 | 1.2555 | 1.2585 |
XAU/USD – Price has moved above 1512 which could be the first sign of a potential up move. A move above 1530 would confirm the bullish trend. MACD is still bullish and rising. Stochastic is still strong and has not turned down despite it being in the overbought zone. Watch 1530 for confirmation
| Support | 1509.50 | 1498.20 | 1488.90 |
| Resistance | 1519.20 | 1527.90 | 1540.70 |
AUD/JPY – Price is likely heading lower to the Fibonacci 62% of the rally from 71.08 to the high of 74.48, which lies at 72.40. Price is likely to face stiff resistance at 73.20. MACD is still bearish but Stochastic is turning up from oversold extreme. If price stays below 73.20, we think it will likely test 72.40.
| Support | 72.65 | 72.35 | 71.85 |
| Resistance | 73.10 | 73.50 | 73.90 |
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