FX Commentary – Tariffs War Widened To European Arena

Market Talk
– The dollar nursed losses on Thursday, hitting near one-week lows against the euro and yen, as employment and manufacturing data suggested that the U.S.-China trade war is taking an increasing toll on the U.S. economy.

– Hiring by U.S. private employers slowed further in September, suggesting that trade tensions, which have pressured manufacturing, could be spilling over to the labor market. The ADP National Employment Report showed “businesses have turned more cautious in their hiring,” with small enterprises becoming “especially hesitant.”

– The United States on Wednesday said it would enact 10% tariffs on European-made Airbus planes and 25% duties on French wine, Scotch and Irish whiskies and cheese from across the continent as punishment for illegal EU Airbus subsidies after the US won approval from WTO to levy import tariffs on $7.5 billion worth of European goods over illegal EU subsidies handed to Airbus

– British Prime Minister Boris Johnson proposed an all-island regulatory zone in Ireland in his final pitch for a Brexit deal but after a cool response to the proposal from Brussels, chances of a hard Brexit is a real possibility with Johnson adamant on leaving on Oct. 31.

– After ISM manufacturing activity hit a decade low, all eyes will be on ISM Non-manufacturing PMI scheduled for release tonight at 10pm.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.0940. Stop at 1.0910 and target at 1.0985
3. Sino-U.S. trade war and ADP employment data are suggesting the US economy is slowing down
4. Price has broken above a downtrend channel with MACD turning bullish, suggesting an end of the decline and a reversal.

Fundamental Comments
1. ADP employment data suggests the US economy is slowing down
2. Sino-U.S. trade war is also weighing on the US economy

Technical Comments
1. Price has broken out above a 2-week downtrend channel, suggesting an end of the decline.
2. MACD has turned bullish, suggesting price could be moving higher.

Key Levels

Support 1.09401.09151.0885
Resistance 1.09801.10251.1045

Technical Overview

USD/JPY – Price declined to the Double Top neckline’s low of 106.96 overnight but managed to hold above it. The Double Top chart pattern is not confirmed as yet. Stochastic is turning up but MACD is still bearish. 20EMA is also bearish and its slope steep. The bounce off 106.95 was also not strong. Watch the reaction at 106.95. A break of this neckline is likely to lead to more declines.

Support 106.95106.55106.20
Resistance 107.20107.60107.90

NZD/USD – Our sell call was triggered yesterday but price only reached a low of 0.6218 and has moved up higher to 0.6274. MACD has turned bullish although Stochastic is still falling.  Price has also managed to stay above the 20EMA. Our call could be wrong. Keep stop at 0.6280 and profit target unchanged at 0.6200

Support 0.62550.62200.6195
Resistance 0.62800.63100.6330

GBP/USD – Price is currently capped by the upper channel line of a 2-week downtrend channel. If price cannot move above 1.2320, price could be heading lower to 1.2200 again. However MACD and Stochastic have both given bullish divergence warnings. We prefer to see a break to the upside of the channel.

Support 1.22601.22301.2195
Resistance 1.23001.23401.2380

XAU/USD – The decline to 1459 could be the end of the correction process. Price has moved above its 20EMA and also an 8-day downtrend channel. MACD is about to turn bullish but Stochastic is near to the overbought extreme. We should see a price movement to 1512. A more bullish price movement can bring price higher to 1527. A more below 1486 would negate our bullish view.

Support 1494.401483.701474.15
Resistance 1504.951512.251525.30

AUD/JPY – Our sell call was opened on Tuesday and yesterday we had recommended changing stop to 72.70 and profit target to 72.05. Our profit target was triggered last night when price dropped to a low of 71.72. MACD, while still bearish is turning up and Stochastic has a bullish crossover in the oversold extreme. The bearish trend may not be over as yet.

Support 71.7071.4571.05
Resistance 72.0572.4572.70

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