FX Commentary – Will RBA Cut Rate Tomorrow?

Market Talk

The dollar was supported on Monday in cautious trade as worries of an immediate widening of the Sino-U.S. trade war eased despite talks of stock market listing restrictions while latest Chinese PMI data eased worries of a drastic economic slowdown in China.

– The official Purchasing Managers’ Index (PMI) was 49.8 in September while analysts polled by Reuters had expected the data to come in at 50.2 for September. The official PMI data for August came in at 49.5. Caixin PMI data came out at 51.4 which was above analysts’ expectation of 50.2 and August’s reading of 50.4

– The euro stayed near its lowest level in more than two years as quarter-end rebalancing flows boosted demand for the dollar, with investors unfazed by the latest political impeachment news out of the United States. Worries about the health of the euro zone economy had weighed on the single currency.

– The pound was the other big loser after Bank of England policy maker Michael Saunders hinted at looser monetary policy if Brexit uncertainty remained prolonged against a backdrop of disappointing global growth. Sterling stayed weak near to Friday’s low in trading on Monday.

– Financial markets are now pricing in a better-than 70% chance of the Reserve Bank of Australia reducing the cash rate for the third time this year to 0.75% at its Oct. 1 board meeting. Decision will be announced at 12.30pm on Tuesday.

Chart Focus XAU/USDGold
Key Points
1. Sell Gold recommendation
2. Sell Gold at 1496.70. Stop at 1504.00 and target at 1482.50
3. Easing of Sino-US trade worries, a resilient US economy and less dovish language from Fed policy makers are supportive of the US$
4. Price was capped by a bearish 20EMA with MACD bearish and hinting of further price decline.

Fundamental Comments
1. Easing of Sino-US trade worries is lifting the US$
2. A resilient US economy and less dovish language from Fed policy makers are supportive of US$

Technical Comments
1. Price was capped at the 20EMA, which is hinting of a bearish trend
2. MACD is bearish and weak which is hinting of further price declines

Key Levels

Support 1486.751478.051462.25
Resistance 1496.301504.801515.95

Technical Overview

USD/JPY – Price moved higher to 108.18 last Friday and we may see a continuation of this move to 108.45. MACD is still bullish but Stochastic is turning down from overbought extreme. 20EMA is currently providing support at 107.75. Price will need to stay above 107.40 if the uptrend is to persist.

Support 107.75107.45106.95
Resistance 108.15108.45108.70

EUR/USD -Price reached a low of 1.0904 in pre-London trade and managed to move higher in late New York to 1.0958. While Stochastic is rising, MACD is still bearish and we think price is likely to move lower again in the next 48 hours. We are expecting one more test to 1.0880. A move above 1.0960 would negate our bearish view.

Support 1.09251.09051.0880
Resistance 1.09601.09901.1025

GBP/USD – Price reached a low of 1.2270 which is also the Fibonacci 50% of the rally from 1.1960 to the recent high of 1.2582. Stochastic is moving up from oversold extreme and MACD is also moving higher. However MACD is still bearish. Price will need to move above 1.2345 to regain its bullish stance. We remain bearish.

Support 1.22701.22301.2195
Resistance 1.23101.23401.2380

NZD/USD -Price broke the recent low of 0.6255 which could bring price lower to 0.6200. MACD is bearish and there could be more downside movement.  Stochastic is weak and has turned down after barely moving above the oversold extreme. 20EMA is bearish and its slope is steep, which is a hint of a strong bearish trend.

Support 0.62550.62300.6200
Resistance 0.62850.63050.6345

USD/SGD – Price reached a low of 1.3786 on Friday but our buy recommendation was not filled at 1.3790 due to ask price being higher than 1.3790. MACD is bullish and trending higher in line with Stochastic indicator. We are expecting the uptrend to continue and price to move higher to 1.3850

Support 1.37851.37451.3710
Resistance 1.38301.38501.3895

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