FX Commentary – $30 Drop In Gold Prices

Market Talk

– The Reserve Bank of Australia left its cash rate unchanged at 0.75% on Tuesday after concluding its monetary policy. RBA’s Governor Lowe reiterated the bank’s concern about consumer spending and hinted that rate will remain low for an extended period. The Aussie dollar rose to a high of 0.6927 but was unable to sustain its gains.

– The ISM Non-manufacturing sector index in October rose to 54.7 from 52.6 in September, beating market expectations. The survey showed that business sentiment had improved in October from a three-year low in September, leading to a stronger US dollar.

– Investors started to temper their optimism about progress in the US-Sino trade dispute after China is reportedly urging the U.S. to roll back on the September 1 tariffs as part of the “phase one” trade deal expected to be signed later this month.

– Gold prices inched up on Wednesday, after slipping US$30 in the previous session, as investors await further clarity on the US-Sino trade talks. Overnight a stronger US$ coupled with optimism of a trade deal had send Gold tumbling down.

– British Prime Minister Boris Johnson will formally announce a Dec 12 election on Wednesday, urging voters to back him and promising to “get Brexit done in the next few weeks.”

Chart Focus NZD/JPY
Key Points
1. Sell NZD/JPY recommendation.
2. Sell NZD/JPY at 69.35. Stop at 69.75 and target at 68.75
3. Higher NZ unemployment rate and China’s request to roll back tariffs are leading to demand for safe haven JPY
4. Double Top chart pattern with divergence warning of a high, is hinting of a price decline.

Fundamental Comments
1. China’s request to roll back tariffs could derail phrase one trade deal.
2. New Zealand Q3 unemployment rate at 4.2 against 4.1 expectations is leading to hopes for NZ rate cut

Technical Comments
1. Potential Double Top price pattern chart breakout
2. Divergence warning from both MACD and Stochastic hinting of a high

Key Levels

Support 69.1068.8568.50
Resistance 69.5069.9570.25

Technical Overview

USD/JPY – Price moved to a high of 109.23 overnight and this could be a possible high. Price has already declined below the 20EMA and the crossover candle was a long red candle. Stochastic is moving lower and MACD is also moving lower. However, MACD is still bullish

Support 108.95108.65108.30
Resistance 109.30109.60109.90

EUR/USD – Price is testing the neckline of a Double Top chart pattern on the 4-hourly chart at the moment. If price is unable to move above 1.1120, price is likely to 1.1000. MACD has turned bearish and both its lines are below the zero line. Stochastic is into the oversold extreme but is unable to rally, which is a weak sign.

Support 1.10551.10251.0990
Resistance 1.10801.11051.1150

GBP/USD – A break of 1.2920 has given rise to a test of 1.2840. Price reached a low of 1.2858 and we do not think this is the low and a further decline is likely. Resistance is likely at 1.2890 and MACD is bearish.  Stochastic is still weak in oversold extreme. We are expecting a test of 1.2840 to 1.2820.

Support 1.28401.28051.2750
Resistance 1.28901.29251.2960

XAU/USD – Price dropped $30 last night but stayed within a established range and we think it is likely to continue in this established range of 1480 to 1519 for more consolidation. Stochastic is into the oversold extreme but is about to cross higher. MACD has just turned bearish and is declining. We expect 1479 to hold and price to rise to 1500 again in the next couple of days.

Support 1481.951474.101463.20
Resistance 1490.201498.151514.05

NZD/USD – Our sell call was filled yesterday when price rose to a high of 0.6430 in the afternoon. This morning price declined to our profit target at 0.6370 when it reached a low of 0.6365. We are out with a 55 pips profit. MACD is still bearish but Stochastic has shown a bullish divergence and is rising from oversold extreme.  Stay aside for today.

Support 0.63650.63350.6330
Resistance 0.63900.64200.6440

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