Market Talk
– Major currencies started Monday in a quiet mood with a holiday in Tokyo making for thin trading conditions. Investors are waiting to hear the first official speech from the new head of the European Central Bank later in the session and awaiting news on Sino-US trade deal signing.
– The new head of the European Central Bank (ECB) Christine Lagarde gives her first speech in the role later on Monday and markets assume she will stick with the easy policy script left by Mario Draghi.
– The dollar had tried to rally on Friday after US payrolls beat expectations, but was undone by a soft manufacturing survey which left it looking heavy after FOMC rates cut last Wednesday and left the door open to more cuts if needed, while all but ruling out the risk of a tightening.
– The single currency started the week firm at $1.1168 as bulls looked to test the October peak of $1.1179 and the 200-day moving average at $1.1195. Sterling remained well bid at $1.2931, after last month’s rally from $1.2200, as investors wagered there was less risk of a hard Brexit now that an election campaign was underway.
– Markets are also looking towards Sino-U.S. trade talks after both sides said they had made progress toward a Phase-1 deal which might be signed sometime this month. However, caution reigns after Kudlow said tariffs set to kick in on Dec 15 will, unless Trump makes a decision to cancel them.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 108.35. Stop at 108.70 and target at 107.70
3. Soft US data is weighing on the US$ as well as leading to the possibility of more Fed rate cut
4. Price is capped at Fibonacci 38% correction point and MACD is hinting that current price rally is just a correction
Fundamental Comments
1. Soft manufacturing data out from last Friday is weighing on the US$
2. A poor ISM tonight could lead to possibility of another rate cut after the Fed ruled out a rate hike but left the door open to cut if needed
Technical Comments
1. Price rally is looking corrective and is capped at the Fibonacci 38% correction point
2. MACD is bullish and hinting that the current price rally is corrective in nature
Key Levels
| Support | 108.10 | 107.85 | 107.50 |
| Resistance | 108.35 | 108.65 | 109.05 |
Technical Overview
AUD/USD – We had a buy call on Friday but price only reached a low of 0.6885, missing out on our buy order at 0.6880. Price is near to the high of 0.6930 and a break of this high is likely to lead to a test of 0.6980. Stochastic remains bullish and is rising into the overbought extreme. MACD is bullish and rising as well. A move below 0.6870 will negate our bullish view.
| Support | 0.6900 | 0.6870 | 0.6845 |
| Resistance | 0.6930 | 0.6975 | 0.7000 |
EUR/USD – We are still waiting for price to test the high of 1.1180. A break of this point is likely to lead to a test of 1.1250. However, inability to break above this point is likely to see a decline back to 1.1075. Stochastic is into the overbought extreme at the moment. MACD is still bullish and rising at the moment.
| Support | 1.1150 | 1.1105 | 1.1075 |
| Resistance | 1.1180 | 1.1215 | 1.1250 |
GBP/USD – Price was capped by resistance at 1.2970 and had been unable to cross above, resulting in a decline to 1.2930. Stochastic has declined near to oversold extreme but MACD is still bearish. We would recommend watching 1.2920. A break will lead price to 1.2840. A break of 1.2970 will lead to a test of 1.3015
| Support | 1.2925 | 1.2880 | 1.2840 |
| Resistance | 1.2975 | 1.3010 | 1.3045 |
XAU/USD – Our view remains similarly to last Friday. We think price is likely to test the high of 1518 or 1519.50 with the current support at 1504. Last Friday slight breach of both upper and lower points tends to complicate things. We continue to favour a test of 1519.50 as 20EMA is rising and MACD is bullish. While Stochastic is into overbought extreme, it could be due to a strong bullish trend.
| Support | 1504.80 | 1494.70 | 1486.35 |
| Resistance | 1514.05 | 1519.50 | 1524.30 |
USD/CAD -Our view is the same as last Friday. We think 1.3120 is a likely support which could propel price higher to 1.3210 again in the next few days. A move below 1.3080 would negate our bullish view. MACD is still bullish but Stochastic is still declining. 20EMA is currently supporting price but 20EMA has turned flat.
| Support | 1.3120 | 1.3095 | 1.3045 |
| Resistance | 1.3170 | 1.3210 | 1.3240 |
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