Market Talk
– The dollar held near a two and a half month high against the yen on Monday after Washington and Beijing announced progress toward a partial trade deal that will defer an increase in trade tariffs schedule for tomorrow but Dec 15 tariffs plans are still on schedule.
– U.S. President Donald Trump said the United States and China had reached a ‘Phase 1’ trade deal which essentially boiled down to soybeans purchase for a tariff delay. Currency and some aspects of intellectual property protections were also agreed in a trade war truce. However, the Dec 15 tariffs are still scheduled to be implemented.
– The British pound surged on Friday to as high as $1.2708, its strongest level since 1st July 2019 , and a five-month peak of 0.8695 against the Euro on optimism of an orderly British exit from the European Union at the end of this month.
– The EU and the UK have agreed to intensify discussions over “a pathway” in the coming days for a withdrawal agreement. However DUP’s Nigel Dodds has rejected the proposed “double customs” Brexit solution. This could potentially unwind GBP gains as there are many Conservative MPs who have said they won’t support a Brexit deal unless the DUP is on board.
– USD/CAD fell after yet-another strong Canadian jobs report. The headline was coupled with strong full-time numbers and wages. Heavy government hiring was a bit of a caveat but with the US dollar weak and crude oil price up 2.5%, Canadian made strong gains out of its job data.
Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation
2. Buy AUD/JPY at 73.15. Stop at 72.80 and target at 74.40
3. Trade truce is likely to be good for Aussie while also reducing demand for safe haven JPY
4. Price supported at Fibonacci 62% correction point hint of a bullish trend with MACD bullish and hinting of further price upside
Fundamental Comments
1. Trade truce between U.S. and China is good for Aussie
2. Trade truce is likely to reduce demand for safe haven JPY
Technical Comments
1. Price was supported at the Fibonacci 62% correction point indicating the bullish trend is intact
2. MACD is bullish and a pullback would offer a good buying opportunity
Key Levels
| Support | 73.15 | 72.85 | 72.50 |
| Resistance | 73.60 | 73.95 | 74.25 |
Technical Overview
USD/JPY – Price broke above 108.45 resistance point and moved to a high of 108.60. However price was unable to sustain and is now likely to move lower to test the support base at 107.75. Stochastic is turning down from overbought extreme. MACD is also turning down. We see price moving down to the bullish 20EMA support at 107.80.
| Support | 108.15 | 107.80 | 107.30 |
| Resistance | 108.60 | 108.95 | 109.30 |
EUR/USD – Price reached a high of 1.1062 on Friday but has retreated today to 1.1025. There is another support at 1.1005 and if price can hold above this support zone, price is likely to test the high of 1.1060 again. Stochastic is turning down from overbought extreme but MACD is still bullish and there are no signs of divergence from MACD.
| Support | 1.1025 | 1.0995 | 1.0965 |
| Resistance | 1.1060 | 1.1085 | 1.1110 |
GBP/USD – Price reached a high of 1.2707 on optimism of a Brexit deal. Price was also supported by the Fibonacci 62% correction point. The uptrend is likely to continue but with Stochastic at the overbought extreme and MACD fully stretched, price can only go higher after a pullback. The Fibonacci 38% correction point of the rally from 1.2195 to 1.2707 at 1.2510 offers a good buying opportunity
| Support | 1.2580 | 1.2515 | 1.2450 |
| Resistance | 1.2615 | 1.2660 | 1.2705 |
XAU/USD – We are still bullish on a longer term basis but for the short term, there could be another correction lower if price is unable to move above 1504 over the next few days. Stochastic is into the oversold extreme but MACD is still bearish. 20EMA is also pointing down and bearish at the moment.
| Support | 1482.10 | 1474.10 | 1462.30 |
| Resistance | 1493.60 | 1502.95 | 1516.90 |
USD/SGD – Our buy call on Friday was stopped out with the conclusion of a partial trade deal between the U.S. and China causing US$ to lose its safe haven buying. 20EMA is trending strongly lower. Stochastic is into oversold extreme and MACD is also strongly bearish. However, there is support at 1.3670 and if this support holds, there is chance of a corrective rally to 1.3750.
| Support | 1.3670 | 1.3630 | 1.3600 |
| Resistance | 1.3705 | 1.3745 | 1.3785 |
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