Market Talk
– The dollar found broad support on Thursday as investors welcomed U.S. President Donald Trump’s hints of progress toward a trade deal with China and discounted the prospect of an impeachment probe making much headway in the short term.
– U.S. House of Representatives Speaker Nancy Pelosi said the Democratic-led chamber was launching an impeachment inquiry over Trump. Impeachment is seen as unlikely to succeed because it requires the approval of both chambers of Congress, something that seems unlikely in view of the Republicans’ control of the Senate.
– Trump stoked hopes for a trade deal by telling reporters in New York that the U.S. and China were having “good conversations” and that an agreement “could happen sooner than you think”. US imposed sanctions on Chinese entities for knowingly buying oil from Iran and this could derail progress of a deal.
– Signs of a rebound in the U.S. housing market on Wednesday, when data showed August sales of new single-family homes rose more than expected, bolstered the dollar but sent Gold lower to $1500.
– The pound fell against the dollar on Wednesday, pressured lower by the prospect of early U.K. elections with just five weeks to go before the Brexit deadline. With uncertainty over the next political direction, Sterling sank to one-and-a-half week lows.
Chart Focus gbp/USD
Key Points
1. Trading Sell GBP/USD recommendation
2. Sell GBP/USD at 1.2400. Stop at 1.2435 and target at 1.2290.
3. Brexit uncertainty and interest rate differential are both against the pound
4. 20EMA is hinting of a strong bearish trend and MACD is bearish and reinforced 20EMA bearish trend
Fundamental Comments
1. Brexit uncertainty is dragging the pound lower.
2. Interest rate differential is in the US$ favour.
Technical Comments
1. 20EMA is pointing lower and its gradient is steep, which is a hint of a strong bearish trend.
2. MACD is bearish with both its lines below the zero line.
Key Levels
| Support | 1.2340 | 1.2290 | 1.2240 |
| Resistance | 1.2380 | 1.2415 | 1.2460 |
Technical Overview
USD/JPY – Price declined to Fibonacci 50% correction point of the advance from 105.73 to the high at 108.47. We think this shows a bullish trend and if price is able to hold above the low of 106.95, we think price could be on its way to test the high of 108.47. A move below 107.50 would target the Fibonacci 62% correction point at 106.75.
| Support | 107.55 | 107.30 | 106.95 |
| Resistance | 107.90 | 108.15 | 108.45 |
EUR/USD – Price declined to a low of 1.0936 overnight but the down move may not be completed as yet as there was no divergence signal from both momentum indicators. We may see one more push to 1.0925 to test the low. 20EMA is pointing lower and its gradient steep. 20EMA lies at 1.0980 currently and this could provide the resistance to push price lower to 1.0925.
| Support | 1.0925 | 1.0880 | 1.0840 |
| Resistance | 1.0965 | 1.0990 | 1.1025 |
AUD/USD – We raised our stop higher to 0.6760 yesterday and this position was stopped out yesterday. We suffered a loss of 15 pips on this position. MACD is showing bullish divergence, which is a warning of a possible low. Stochastic is about to cross up. We could be close to a bottom or an end to this decline. Wait for bullish signal to get into a long position.
| Support | 0.6735 | 0.6705 | 0.6685 |
| Resistance | 0.6765 | 0.6790 | 0.6835 |
XAU/USD – We were saved by the divergence warning yesterday. Price had a sharp declined to 1500 but the trend remains bullish as price managed to hold above the Fibonacci 62% of the rally from 1480 low to the recent high at 1535. Stochastic is near to the oversold zone while MACD is still bullish. Wait for better confirmation
| Support | 1500.35 | 1493.85 | 1482.50 |
| Resistance | 1515.30 | 1527.60 | 1535.60 |
USD/CHF – Our trading sell yesterday was stop out at 0.9920 when price reached a high of 0.9923 this morning. We remains bearish on this pair and we are expected price to be capped around this level for another decline lower to 0.9850. MACD is still bearish despite the rally. Stochastic on the other hand is still climbing but could be about to turn around.
| Support | 0.9895 | 0.9875 | 0.9840 |
| Resistance | 0.9925 | 0.9965 | 0.9985 |
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