FX Commentary – RBA Cuts Rate

Market Talk

– The euro fell to its lowest in two-and-a-half years against the U.S. dollar as concerns about euro zone economic growth weighed on the single currency after German annual inflation unexpectedly slowed for the third consecutive month in September, reinforcing expectations that monetary policy in the euro zone will remain accommodative for an extended period.

– The U.S. dollar traded near its highest in almost two weeks as seasonal demand and uncertainty arising from the U.S.-China trade war boosted the greenback. Uncertainty around the outcome of an impeachment inquiry into Trump may also provide safe-haven demand for the greenback.

– Growing accusations of impropriety against Prime Minister Boris Johnson weigh on Sterling.  Opposition lawmakers working on their plans for a “government of national unity” that would likely call a second referendum on Brexit if and when it topples Johnson’s minority government with a no-confidence vote adds to Sterling gloom.

– Bank of Japan’s Tankan showed business confidence in the third quarter slid to its lowest in six years. However JPY only experienced a small decline while Gold fell more. Gold fell to a 2-month low on the back of strong US$.

 – The Australian dollar edged lower after an expected interest rate cut from the Reserve Bank of Australia. RBA’s comment that of an extended period of low interest rate and further easing if needed did not help the Australian currency.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 72.70. Stop at 73.20 and target at 71.70.
3. RBA rate cut this afternoon and lingering uncertainty of Sino-US trade dispute are both against the Aussie dollar
4. 2 red candlesticks are hinting of a breakout of the rectangle consolidation with MACD also hinting of further price decline.

Fundamental Comments
1. RBA cut of interest rate is bad for Aussie dollar
2. Uncertainty from Sino-US trade dispute is in favour of safe haven yen

Technical Comments
1. Price is contained within a rectangle consolidation but 2 long red candlestick are hinting of further price decline
2. MACD has turned bearish and could be heading down, hinting of further price decline.

Key Levels

Support 72.4572.0571.70
Resistance 72.8573.3073.75

Technical Overview

USD/JPY – Our view remains the same as yesterday. We see this pair going higher to 108.45. A move above this resistance will opened up 109.00 as a target. MACD is still bullish and rising. Stochastic is also rising despite in the overbought extreme. 20EMA is also rising. A move below 107.75 would negate our bullish view.

Support 108.10107.75107.45
Resistance 108.45108.70109.00

EUR/USD – Price broke 1.0904 overnight and continued it decline to 1.0884. The decline has resumed after a rally failed at 1.0914. We see price going lower to 1.0840 or 1.0815 to test the gap created in May 2017. 20EMA is bearish and its gradient is steep. Stochastic is moving deeper into oversold extreme but MACD could be showing a divergence. Above 1.0940 would negate our bearish view.

Support 1.08801.08401.0815
Resistance 1.09201.09551.0990

GBP/USD – Price has been hanging around the Fibonacci 50% and 38% correction point of the rally from 1.1960 to 1.2582. MACD is still bullish but 20EMA is bearish and points down. We remain bearish unless price can go above 1.2345. We favour a move lower to 1.2195

Support 1.22701.22301.2195
Resistance 1.23101.23401.2380

XAU/USD – Gold reached a high of 1494 after London’s opening hours, missing our sell order at 1496.70. Price fell lower to 1462.30, which is also the Fibonacci 127% projection of the decline from 1556 to 18th Sep low of 1482.50. Stochastic is into oversold extreme but MACD is bearish. The decline may continue lower to 1452 over the next 48 hours.

Support 1462.501452.801445.90
Resistance 1474.701485.801494.25

USD/SGD – Price has reached 1.3850 but MACD is still strong and bullish and is still moving higher. Stochastic is in the overbought extreme but Stochastic still looks strong. 20EMA is also bullish and rising. We think price is likely to continue higher to 1.3910.

Support 1.38301.37901.3745
Resistance 1.38651.38951.3915

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