FX Commentary – ISM Data Hints Of Further Interest Rate Cuts

Market Talk
– Worries about a slowing U.S. economy and the possibility of further interest rate cuts in the wake of weak U.S. manufacturing data kept the dollar pinned down on Wednesday. US Treasuries fell across maturities, reacting to the possibility of further rate cuts by the Fed.

– An apparent early-morning North Korean missile test only reinforced the flight to safe havens, nudging the Japanese yen, Swiss franc and gold higher, as investors sought safety elsewhere.

– The Institute for Supply Management had said its index of U.S. factory activity fell to 47.8, the lowest reading since June 2009 and below expectation, increasing tensions that the impact of the trade war with China is spilling over into the domestic economy.

– Sterling managed to climb higher but a leaked report surfaced that the U.K. government plans to put in customs checks between the border of Northern Ireland and the Irish Republic, which the EU and DUP have rejected. Prime Minister Boris Johnson will unveil his final Brexit offer to the European Union on Wednesday and make clear that Britain intends to leave the EU on Oct. 31.

– The Australian dollar hit its lowest in a decade on Tuesday after the Reserve Bank of Australia (RBA) cut interest rates and kept the possibility of further easing alive, but managed to bounced higher due to a weak US$ later in the night. But few are expecting a sustained rise.

Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation
2. Sell NZD/USD at 0.6250. Stop at 0.6280 and target at 0.6200
3. New Zealand business confidence was poor and below expectation and interest rate differential are both against the NZ dollar.
4. Strong price resistance point provided by 20EMA and a previous low point with a bearish MACD are both hinting of further price decline

Fundamental Comments
1. NZD business confidence was below expectation
2. Interest rate differential is against the NZ dollar

Technical Comments
1. Strong price resistance with 20EMA and a previous low turned resistance point are both capping price rally
2. MACD is bearish and could be turning lower, hinting of further price decline

Key Levels

Support 0.62200.61950.6170
Resistance 0.62550.62800.6310

Technical Overview

USD/JPY – Price reached a high of 108.47 overnight, forming a possible Double Top chart pattern formation. Price declined below 107.75, negating our bullish view and is currently capped by the 20EMA at 107.90. We see a price decline to 107.30 as Stochastic is still falling. MACD is still bullish which may complicate thing.

Support 107.60107.30106.95
Resistance 107.90108.15108.45

EUR/USD – Price rose to a high of 1.0943 overnight but price was capped by a trend channel. Price is currently moving lower from the overnight high and price could be declining to test the low of 1.0888 again in the next 48 hours. While MACD is still bearish, MACD is hinting of a potential low and Stochastic is rising. A move above 1.0960 would negate our bearish view.

Support 1.09151.08851.0840
Resistance 1.09551.09901.1025

GBP/USD – Price broke the Fibonacci 50% support level and moved to the Fibonacci 62% level overnight. Price managed to bounce higher on the back of a poor US ISM data to the Fibonacci 38% point at 1.2345. While Stochastic is rising, MACD is still bearish, although MACD has given a bullish divergence warning. If price is capped by the 20EMA at 1.2300, price is likely to test 1.2195 again.

Support 1.22601.22301.2195
Resistance 1.23001.23401.2380

XAU/USD – Price had bounced off the low of 1458.95 to a high of 1487.25 overnight. We think there could be another decline to test the low of 1458.95 initially and ultimately to 1452 to complete the correction decline. MACD is still bearish. 20EMA is also bearish. A move beyond 1490 would negate our bearish view.

Support 1466.951458.951452.80
Resistance 1477.951487.251496.35

AUD/JPY – Our sell call was triggered at 72.70 and overnight price declined lower to 72.03. This morning, price has managed to climb back up to 72.40 again. Our view remains unchanged. We think price should be capped at 72.60 for a test of 72.03 again and later 71.70. Bring stop lower to cost at 72.70 and profit target higher to 72.05.

Support 72.0571.7071.45
Resistance 72.4572.7073.05

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