FX Commentary – EUR/USD & GBP/USD At A Crossroad

Market Talk

– The dollar rose to a three-week high against a basket of currencies on Thursday, helped by continued tightness in U.S. money markets, while heightened political tensions and a gloomy economic outlook weighed on the euro and sterling.

– The US dollar drew support from mounting political tensions as an effort by Democrats to impeach President Donald Trump as well as risk aversion driven by trade war fears. A resilient U.S. economy and increasingly less-dovish-than-expected language from U.S. Federal Reserve board members were supporting the greenback.

– The euro slipped to a fresh two-year low below 1.0904, its weakest since May 2017, pressured by an increasingly bleak euro zone economic outlook for the euro zone. A strong greenback also adds to the gloom for the single currency.

– Sterling fell to a 2-week low as investors waited for the British parliament’s next step to break the Brexit impasse and as opposition leaders gathered to discuss tactics while EU’s negotiators wait for Britain to provide “legal and operational” proposals for to reach an agreement on exiting the bloc.

– Optimism over U.S.-China trade relations lingered on Thursday after China’s top diplomat said that China was willing to buy more U.S. products. Wang Yi said trade talks would yield results if both sides “take more enthusiastic measures” to show goodwill and reduce “pessimistic language” in their trade dispute.

Chart Focus USD/SGD
Key Points
1. Buy USD/SGD recommendation
2. Buy USD/SGD at 1.3790. Stop at 1.3745 and target at 1.3850
3. US political tension, a resilient US economy and a tumble in Singapore Factory Output are all weighing on the SGD
4. A strong support at a previous high turned support and 20EMA coupled with a bullish MACD is hinting of further price upside

Fundamental Comments
1. US political tension, resilient US economy is keeping the US dollar strong
2. Singapore Factory Output tumbled by 8% which is reigniting fears of a technical recession

Technical Comments
1. A previous high turned support and 20EMA are both providing a support
2. MACD is bullish and hinting of further price upside

Key Levels

Support 1.37901.37451.3710
Resistance 1.38251.38501.3895

Technical Overview

USD/JPY – Price managed to stay above 107.40 and we think there is a possibility of another price push to 108.45 in the next couple of days. MACD is still bullish and could be moving higher. However, Stochastic is into overbought zone. A move below 107.40 would target 106.75.

Support 107.55107.30106.95
Resistance 107.95108.15108.45

EUR/USD – Price reached a low of 1.0904 last night and this could be a temporary low. Stochastic is into oversold extreme but MACD is still bearish at the moment. 20EMA is also bearish and its gradient is steep, which is a hint of a strong bearish trend. For today, we think there would be a correction back to test the 20EMA resistance at 1.0960 before another decline.

Support 1.09051.08801.0840
Resistance 1.09601.09901.1025

GBP/USD – Our sell order yesterday was not triggered as price reached only a high of 1.2381. Price declined to a low of 1.2301 overnight and both MACD and Stochastic have given divergence warnings. There is likely to be a price pullback towards the 20EMA around 1.2370. Another decline is possible after this price pullback. Watch out for the development.

Support 1.23051.22701.2230
Resistance 1.23651.24151.2460

XAU/USD – Price declined to 1500.30 again for a second time last night but the decline may not be completed as yet. MACD is still bearish and Stochastic is into oversold extreme but 20EMA is still hinting of a bearish trend. If price stays below 1512.30, we think price is likely to test the low of 1480 again. Above 1513 would negate our bearish view

Support 1500.201493.851482.50
Resistance 1515.301527.601535.60

EUR/GBP – Price may have reached a temporary low at 0.8785. Stochastic and MACD have both shown bullish divergence hinting of a potential low. MACD has turned bullish now and 20EMA has also turned bullish. Price has also crossed above the 20EMA. Price is likely to target the Fibonacci 127% projection target at 0.8890

Support 0.88550.88300.8800
Resistance 0.88850.89050.8935

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