FX Commentary – Fading Hopes Of A Sino-U.S Trade Deal

Market Talk

– The US dollar had gained on Monday as risk aversion and low expectations for a breakthrough trade deal from Sino-U.S. trade talks in Washington as neither side showed any signs of giving ground at the negotiations.

– President Donald Trump on Monday sounded an optimistic note about this week’s negotiations with China to end the trade war between the two global economic super powers, but adding that he would not be satisfied with a partial deal.

– The White House confirmed that high-level talks involving Chinese Vice-Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would start on Thursday. Talks will not get a good start as Washington blacklisted Chinese companies on Monday, dimming hopes of a trade deal.

– The Euro dollar managed to shake off another disappointing factory data from Germany. Orders fell 0.6% on the month in August, keeping the region’s largest economy on track to enter recession in the third quarter.

– Sterling slipped slightly as investors grow increasingly concerned about a lack of progress between Britain and the European Union to agree a Brexit withdrawal deal. Reports over the weekend suggested that there is little chance of the EU and U.K. bridging their differences on a revised withdrawal agreement by the summit due next week.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.0975. Stop at 1.0935 and target at 1.1060
3. Expectations of a possible rate cut and impeachment talks are both weighing on the US dollar
4. Support at the 20EMA and momentum indicators hinting of a bullish price movement are signs of a price rally.

Fundamental Comments
1. Expectation of US rate cut next week is weighing on the US$
2. Talks of impeachment on Trump is also weighing on the US$

Technical Comments
1. Price is supported by the 20EMA.
2. Both MACD and Stochastic are moving lower but price has not followed which is a hint of a bullish price movement

Key Levels

Support 1.09601.09251.0885
Resistance 1.10001.10251.1060

Technical Overview

USD/JPY – Last Friday, we had a sell recommendation on this pair. Yesterday, we had lowered the stop loss to 107.15. Our stop was triggered this morning. The rally may continue higher to 107.65. Stochastic and MACD are both rising although MACD is still bearish. 20EMA has also turned bullish.

Support 107.05106.75106.45
Resistance 107.45107.75108.05

NZDUSD – Price is likely to test the high of 0.6335 and we are expecting price to break above it to 0.6370 to complete the rally from the low of 0.6200. Stochastic is about to have a bullish crossover and MACD is bullish and rising, both are pointing to further price upside.

Support 0.63050.62800.6245
Resistance 0.63350.63750.6405

GBP/USD – Price has been caught in a range. The low on Oct 1 at 1.2200 is the base while Oct 3 high of 1.2412 is providing the resistance, ahead of news on Brexit withdrawal agreement. Stochastic is near to the oversold extreme and MACD is flat at the moment. We expect price to move within this range until there is a break out of this range.

Support 1.22801.22301.2200
Resistance 1.23101.23551.2385

XAU/USD – Yesterday we had call for a test of 1489 to end the correction. Price reached a low of 1486.60 and this could be the end of the corrective decline. Stochastic is into the oversold extreme and could be turning up. MACD line is also turning up from below the zero line, while the signal line is still bullish. A move above 1495 could confirm the bullish reversal.

Support 1486.601474.301458.95
Resistance 1495.201504.451519.45

AUD/JPY – This morning our sell call on this pair from yesterday was filled at 72.20. Price is near to our stop at 72.55. The rally is showing no signs of reversal as yet, as MACD has turned bullish and is still rising. Stochastic is also rising. A move above 72.50 would accelerate the rally.

Support 72.1571.7071.45
Resistance 72.5072.8573.15

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