FX Commentary – FED To Pause?

Market Talk

–  The dollar dipped against a basket of major currencies on Thursday, reversing earlier gains, after the Federal Reserve cut interest rates by 25 basis points for the third time this year but indicated the possibility of a pause in easing monetary policy, as was broadly expected.

– Chile has withdrawn as host of an APEC trade summit in November where the United States and China had been expected to take major steps toward ending a 15-month-old trade war. Optimism that the Trump and Xi Jin Ping will sign a deal has faded the day before with Reuters’ report of a possible delay in trade agreement.         

– Sterling edged up after British Prime Minister Boris Johnson won parliamentary approval on Wednesday to hold a general election in December, though moves were limited as large currency options expiring this week curbed volatility.

– The Canadian dollar slumped against the U.S. dollar on Wednesday after the Bank of Canada left rates unchanged at 1.75%, but cited trade conflicts as the resilience of the local economy “will be increasingly tested”.

– China’s official Purchasing Managers’ Index manufacturing data for October came in at 49.3 against an expectation of 49.8. Non-manufacturing number was 52.8 against expectation of 53.6, Data showed a weaker economy but Aussie dollar still managed to move higher against a weaker US dollar.

Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 108.80. Stop at 109.10 and target at 108.10
3. FOMC rate cut and a delay in Sino-US trade deal are both likely to weigh on the US$
4. A Shooting Star candlestick price pattern and MACD are both warning of a possible price peak

Fundamental Comments
1. FOMC rate cut is likely to weigh on the US$
2. A delay in Sino-US trade deal is likely to benefit safe haven JPY

Technical Comments
1. A Shooting Star candlestick price pattern is warning of a possible price top
2. MACD has a divergence warning of a possible price high

Key Levels

Support 108.50108.20107.95
Resistance 108.85109.05109.30

Technical Overview

NZD/CHF – We had a sell call yesterday on this pair which was filled. Price went to a low of 0.6283 last night but price move above our stop at 0.6340 this morning. We are out with a 35 pips loss. The rally may not be over as yet. The decline is likely to be halted around 0.6315 and another push to 0.6370 is likely. MACD is still bullish but Stochastic is in the overbought extreme.

Support 0.63150.62800.6250
Resistance 0.63450.63650.6400

EUR/USD – Our sell call from Tuesday was stopped out last night. We lost 35 pips on that trade. Price is likely to continue its rally to test the resistance at 1.1180. Stochastic is into the overbought extreme but MACD is still bullish and we think there is still hope for a test of 1.1180

Support 1.11501.11201.1075
Resistance 1.11801.12151.1250

GBP/USD – We are looking at price testing 1.2950 and currently price has reached a high of 1.2935. There is no reversal clue at the moment and we presume price will continue on its way to 1.2950. A break of 1.2950 could lead to a test of 1.3010. An inability to surmount 1.2950 could lead to a decline back to 1.2800. MACD is bullish but Stochastic in into the overbought extreme.

Support 1.28951.28401.2805
Resistance 1.29501.29851.3010

XAU/USD – Price make a dip to 1481 on the announcement of FOMC decision last night but this does not distract us from our view of a low being formed and a likely movement to test 1504 in the next couple of days. Stochastic is rising but MACD is still bearish at the moment with both its line in opposite half of the zero line. A move below 1480 will negate our bullish view for 1504.

Support 1494.701486.351474.10
Resistance 1504.801517.901524.30

USD/CAD – Our buy call survived when price moved to a low of 1.3041 on Tuesday and last night price moved above our profit target at 1.3170. We are out with a profit of 95 pips. The price rally may not be completed. We think there will be another push above 1.3200. MACD is still bullish although Stochastic is declining.

Support 1.31501.31201.3085
Resistance 1.31801.32101.3240

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