Market Talk
– Signs that U.S. and China were making progress in efforts to resolve their trade dispute supported the dollar while Prime Minister Boris Johnson faces a potentially perilous ratification of his Brexit divorce deal in the UK parliament on Tuesday.
– With just 9 days left until the United Kingdom is due to leave the European Union on Oct. 31, Boris Johnson resolved to press on with seeking to pass his Brexit agreement in parliament on Tuesday. EU’s Moscovici said all the talk of the EU blocking an extension was nonsense and UK will either exit with a deal on 31 Oct or a delay helps to keep the pound strong.
– Investor sentiment improved after positive talks by US President Trump and economic advisor Larry Kudlow. Talks are going well that Kudlow sees a possibility that scheduled December tariffs hike could be taken off. The trade exposed Australian and New Zealand dollars drifted higher and remained marginally below one-month peaks that both currencies touched overnight.
– The Canadian dollar climbed to a three-month high of 1.3082 per dollar overnight as voters turned out in an election expected to be too close to call. It held near that level as the first polls closed, with Prime Minister Justin Trudeau seeking to cling to power against a strong challenge from opposition Conservatives.
– US data scheduled for tonight includes Richmond Fed manufacturing index for October and September’s existing home sales. Brexit remains the key focus with UK parliament expected to vote on Brexit deal tonight.
Chart Focus USD/CAD
Key Points
1. Sell NZD/USD recommendation
2. Sell NZD/USD at 0.6450. Stop at 0.6485 and target at 0.6360
3. NZD strength from trade talk optimism have been priced in and interest rate differential is against the NZD
4. Price is approaching the Fibonacci 161.8% price projection with Stochastic overbought and MACD showing a divergence warning hinting of a top.
Fundamental Comments
1. NZD had rallied on trade talk optimism and this could have been priced into the NZD strength
2. Interest rate differential is still in the US dollar favour
Technical Comments
1. Price is approaching the Fibonacci 161.8% price projection and also a previous price high
2. Stochastic is in overbought extreme and MACD’s divergence is hinting of a price top
Key Levels
| Support | 0.6395 | 0.6360 | 0.6330 |
| Resistance | 0.6435 | 0.6455 | 0.6490 |
Technical Overview
USD/JPY – Price rally has been capped at 108.75 which as a previous high and just above the Fibonacci 62% of the decline from 108.93 to the low of 108.21. Stochastic is declining but MACD is rather flat and neutral. We think price is likely to consolidate within the range of 108.20 to 108.92 till there is a break out of either boundary
| Support | 108.45 | 108.15 | 107.95 |
| Resistance | 108.75 | 108.95 | 109.60 |
EUR/USD – Price support lies at 1.1130 and if this level is supported, there is a chance we will see another price push higher to 1.1190. Stochastic is declining but MACD is still bullish with both its lines above the zero line. 20EMA is also rising and strong and price is still contained within a rising trend channel. A move below 1.1095 will negate our bullish view.
| Support | 1.1130 | 1.1095 | 1.1060 |
| Resistance | 1.1165 | 1.1195 | 1.1230 |
GBP/USD – With chances of a hard Brexit low, Sterling is likely to stay support above the 20EMA at 1.2905. However Stochastic is declining from overbought extreme. MACD is still bullish but has given a divergence warning of a possible price high. Price’s direction will likely be decided by tonight UK parliament vote
| Support | 1.2940 | 1.2895 | 1.2840 |
| Resistance | 1.2985 | 1.3015 | 1.3015 |
XAU/USD – Price has been trapped in a range for the past 7 days. The upper range boundary is at 1504 while the lower range boundary is at 1474. Stochastic is rising but MACD on the short term basis is bearish. We are expecting price to stay in a range of 1480 to 1492 for today.
| Support | 1485.75 | 1474.10 | 1462.30 |
| Resistance | 1495.60 | 1504.10 | 1516.85 |
USD/CAD – Price is close to the Fibonacci 161.8% price projection of the decline from 1.3345 to the low of 1.3170 at 1.3063. Stochastic is in the oversold extreme and MACD has given bullish divergence warning. We think USD/CAD is close to a bottom at 1.3062 and there could be a pullback in price to 1.3170 in the next few days.
| Support | 1.3065 | 1.3015 | 1.2990 |
| Resistance | 1.3095 | 1.3120 | 1.3145 |
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