FX Commentary -EU Extends Brexit, MPs Block Election, Sterling In Limbo

Market Talk

– Both the dollar and riskier Asian currencies held on to modest overnight gains on Tuesday, amid hopes for an easing in Sino-US trade tensions and as investors waited for direction from this week’s FOMC meeting, starting tonight.

– China’s Yuan rose to its strongest level in two weeks after Beijing and Washington said they were “close to finalizing” a first-stage agreement to scale back their trade war, but some traders tempered their optimism because US tariffs remained unresolved and talks could easily fail if a compromise cannot be reached.

– US President Trump said a trade agreement looked to be ahead of schedule on Monday, without detailing the timing, while the U.S. also said it was studying whether to extend tariff suspensions due to expire in December.

– The European Union has agreed to delay Britain’s exit for up to three months, but the country is politically paralyzed and overnight parliament rejected Prime Minister Boris Johnson’s third attempt to schedule a Dec. 12 election. Sterling was lower with Brexit hanging in the balance.

– At this weekly U.S. Federal Reserve meeting, market are expecting FOMC  policy makers to cut interest rates for a third time this year but emphasize their reluctance to ease policy further.

Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.1090. Stop at 1.1125 and target at 1.1030
3. Brexit uncertainty and interest rate differential are against the Euro dollar.
4. Price is capped by the 20EMA resistance in a bearish trend with MACD bearish and hinting of another price decline

Fundamental Comments
1. Brexit uncertainty is weighing on the Euro dollar
2. Interest rate differential is in the US dollar favour

Technical Comments
1. Price is capped by the 20EMA resistance in a downtrend channel
2. MACD is bearish with both its lines below the zero line

Key Levels

Support 1.10751.10301.0995
Resistance 1.11201.11601.1180

Technical Overview

USD/JPY – Price moved above 109.00 today with a reduction of risk with Sino-US trade talks progressing well. However as price progresses higher, Stochastic is warning with a divergence of a potential price high. However, MACD is still bullish and price could test the high of 109.30. A move below 108.85 could turn the trend bearish again.

Support 108.90108.65108.20
Resistance 109.30109.65109.90

NZD/JPY – We had a buy call on this pair on Friday which as filled when price dropped to a low of 68.92. However this morning price has moved higher, triggering our stop at 69.50. We are out with a loss of 35 pips. Price may have made a low at 68.92 and could be moving towards 69.80.

Support 69.2068.8568.45
Resistance 69.5069.9070.20

GBP/USD – Price had dropped below 1.28 on Thursday but had bounced higher to 1.2875 on Monday. MACD is still bullish and Stochastic is turning up after a bullish crossover. We are expecting price to move higher 1.2950. Political proceeding in UK parliament will have a big bearing on Sterling’s price direction

Support 1.28401.28101.2785
Resistance 1.28751.29051.2940

XAU/USD – Price reached a high of 1517.90 on Friday and has declined lower to 1489.90 last night. Price looks like it has reached the top of its consolidation range and the decline may not be completed as yet. We think there will be another push lower today to 1480. Look for a correction to 1495 to get into a short position with stop above 1504.

Support 1485.751474.101462.30
Resistance 1495.501508.151517.90

USD/CAD – We had a buy call on this pair on Thursday which was filled. Price has declined close to our stop at 1.3040 after reaching a low last night at 1.3048. Stochastic is still weak and MACD is still bearish and below the zero line. We are not too hopeful on this pair at the moment. Keep stop at 1.3040 and profit target at 1.3170.

Support 1.30201.29951.2955
Resistance 1.30601.30951.3135

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