FX Commentary – Yen Gained On Fear Of Sino-US Trades Talk Failure

Market Talk

– The yen gained slightly and the Yuan slipped a tad in early Asian trade on Monday on a Bloomberg report that Chinese officials are increasingly reluctant to agree to a broad trade deal pursued by U.S. President Donald Trump. Rhetoric from China has hardened as protest in HK showed no signs of abatement, decreasing risk appetite.

– Investors will be watching the U.S.-China trade talks which resume with deputy-level meetings on Monday and Tuesday, with minister-level meetings scheduled for Thursday and Friday. Trump had said a good deal with China could happen.

– Bets that the U.S. Federal Reserve would cut interest rates aggressively this year were tempered after a decent U.S. jobs data on Friday eased concerns the slowing US economy was on the brink of a recession.

– U.S. job growth increased moderately in September while August data was revised higher to 168K from 130K. Unemployment rate dropped to near a 50-year low of 3.5%, easing hopes the Fed will cut rates aggressively to avoid the possibility of a US recession.

– Sterling declined from a high of 1.2412 reached on Brexit proposal from Boris Johnson but The European Union and Ireland said last week that the proposals were unlikely to yield a deal. Sterling remained in limbo with Oct 31 deadline looming.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 72.20. Stop at 72.55 and target at 71.25
3. JPY could gain with China’s hardened rhetoric over HK’s riot and Sino-U.S. trades talk failure
4. Price’s failure to crack above a resistance point with bearish momentum indicators also hinting of more price declines.

Fundamental Comments
1. China’s rhetoric has hardened and there is a risk of China’s taking actions to end HK’s riot.
2. Trade talk between China and US could run into trouble according to a Bloomberg report that China is not keen on a broad trade deal pursued by the U.S.

Technical Comments
1. Price’s failure to crack the previous support turned resistance point is a hint of a possible price decline.
2. Both Stochastic and MACD have turned down, hinting of more price decline.

Key Levels

Support 72.1071.7071.45
Resistance 72.4572.7073.05

Technical Overview

USD/JPY – Last Friday, we had a sell recommendation for this pair, which was triggered when price reached a high of 107.12. Price has declined to 106.65 but has climbed higher to 106.90 this morning. We would recommend bringing stop lower to 107.15 while keeping profit target unchanged at 106.00. MACD is neutral and flat at the moment

Support 106.65106.45106.05
Resistance 106.95107.25107.60

EUR/USD – Our view remains the same as last Friday. We think price may have reached a high at 1.0998 and could be headed lower. Our target is 1.0885. MACD is currently bullish and Stochastic is still bullish.20EMA is also bullish. A move above 1.1025 could negate our bearish view and call for a price move higher to 1.1100.

Support 1.09601.09151.0885
Resistance 1.09951.10251.1045

GBP/USD – The Evening Doji Star candlestick pattern has moved price lower to 1.2273, just above our targeted point. MACD is still bullish and Stochastic is still declining while 20EMA is neutral and flat at the moment. If price moves below 1.2270, it is likely to head lower to 1.2195. If price can move above 1.2330, we are likely to see a test of 1.2412 again.

Support 1.23151.22701.2230
Resistance 1.23551.23801.2415

XAU/USD – Price tested 1495 on Friday and has moved higher to 1510 this morning. The correction may not be over as yet and we may see another decline to 1489 if price is unable to move above 1514. Stochastic is still declining but MACD is currently bullish with both its lines above the zero line. Wait for better trading opportunities.

Support 1500.801488.451474.30
Resistance 1510.251519.451535.10

AUD/USD – Price has reached the Double Bottom’s target at 0.6770, when price reached a high of 0.6773 on Friday. Stochastic is turning down from overbought zone but MACD is still bullish at the moment. If price is capped at 0.6770, there is a risk of a decline to 0.6720 again. Above 0.6770, price is likely to target 0.6830.

Support 0.67350.67000.6670
Resistance 0.67700.68000.6830

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