FX Commentary – ECB Kept Rates & Policy Unchanged

Market Talk

– The European Central Bank kept key interest rate and policy unchanged. ECB kept its forward guidance that suggested the bank’s main interest rates will remain at their current or lower levels until there’s strong evidence of a pick-up in prices.

– The euro fell against the dollar earlier in the day, pulled down by business surveys which pointed to stagnating economic momentum in the euro zone. The Euro had initially rallied on a better than expected French PMI but pared gains on a poor German PMI data.

– Sterling weakened as the prospect of a UK election added fresh uncertainty to Brexit dramas. Prime Minister Boris Johnson’s call for a national election on Dec. 12 in an effort to break the political deadlock over Brexit and ensure the UK leaves the European Union. The EU is currently deciding how long an extension it wants to give the U.K.

– New orders for U.S.-made capital goods fell more than expected in September and shipments also declined, in a sign that business investment remains soft. Investors are widely expecting the U.S. Federal Reserve to cut interest rates for a third time this year at its monetary policy meeting next week.

– A Reuters poll of economists in recent weeks showed that most think a steeper decline in global growth is more likely than a synchronized recovery, despite central bank easing.

Chart Focus NZD/JPY
Key Points
1. Sell NZD/JPY recommendation
2. Sell NZD/JPY at 69.15. Stop at 69.50 and target at 68.45
3. Brexit uncertainty and worries of a steeper decline in global growth are likely to increase demand for JPY
4. A possible Double Top chart formation with bearish momentum is hinting of further price declines.

Fundamental Comments
1. Brexit uncertainty has increased demand for safe haven JPY
2. Worries about a steeper decline in global growth is likely to increase demand for safe haven JPY

Technical Comments
1. A possible Double Top chart formation is warning of a reversal in the uptrend
2. Stochastic is declining and MACD has turned bearish

Key Levels

Support 69.1568.8568.45
Resistance 69.5069.9070.20

Technical Overview

USD/JPY – Price range for yesterday was small and narrow. Price moved only 26 pips yesterday.  We had called for a test of 109.15 yesterday but it seems that price is starting a range consolidation. MACD is showing a flat line just above the zero line although Stochastic is rising. Stay aside and wait for better trading idea.

Support 108.45108.20107.95
Resistance 108.75108.95109.20

EUR/USD – Price only reached a high of 1.1165 and disappointing European PMI dragged the Euro below 1.11. Price is likely to test the rising trend channel support at 1.1085. A break will likely lead price to 1.10 again. If price can hold above 1.1085, another test of 1.1165 is possible. MACD has turned bearish and Stochastic is declining. We favour a break of 1.1085.

Support 1.10851.10451.0995
Resistance 1.11201.11651.1180

USD/CAD – Price dropped to a low of 1.3051 last night, filling our buy call at 1.3075. Our view remains unchanged. Keep stop at 1.3040 and profit target at 1.3170. MACD is rising but is still bearish below the zero line. However, Stochastic is rising above the oversold extreme

Support 1.30601.30201.2995
Resistance 1.30951.31351.3170

XAU/USD – Price finally moved to 1504 this morning but is hanging around this level. Stochastic is into overbought extreme but still looks strong. MACD is bullish and rising. 20EMA is rising as well. We think price can continue to move higher to test the next resistance at 1509 and 1516.

Support 1500.501485.751474.10
Resistance 1509.701518.901534.80

EUR/AUD – Price rose to a high of 1.6307 last night and has retreated lower to 1.6280. Our view remains unchanged. Yesterday, we had recommended bringing stop higher to cost at 1.6245 while keeping profit target at 1.6315. We will keep our orders as per the day before. Stochastic is declining but MACD is still rising. 20EMA is also bullish.

Support 1.62551.62251.6200
Resistance 1.62951.63201.6365

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