FX Commentary – Trump Confounds FX Market

Market Talk

– The dollar held near multi-week highs on Monday as U.S. President Donald Trump confirmed that he plans to sign a trade deal with China, but had not yet decided if he would roll back tariffs.  Against the Japanese yen, the US$ was slightly weaker, reflecting investors’ caution that the deal could still unwind.

– Officials from both countries said late last week that a rollback of some tit-for-tat tariffs had been agreed, even though that was subsequently denied by U.S. President Donald Trump on Friday, he did not completely rule out a deal. Analysts said even if some of the tariffs are rolled back, friction between the U.S. and China will still remain.

– Trump said negotiations are moving along “very nicely” and that “a lot of positive things are happening.” The president is due to give a speech at the Economic Club of New York on Tuesday. Investors will be watching this event and news front on US-Sino trade deal.

– Gold extended losses to hit a three-month low on Friday as positive developments around the U.S.-China trade deal tarnished the metal’s safe-haven appeal, putting the metal on track for its biggest weekly decline in three years.

– The British pound whose fate is closely tied to the outcome of an election set for Dec. 12, edged higher to $1.2795 in Asian trade. The latest poll shows the Conservative party’s lead is widening.  PM Johnson’s Brexit deal could lead the UK out of EU after the election.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 74.75. Stop at 75.05 and target at 73.95.
3. Rollback of tariffs and political turmoil in Hong Kong could lead to demand for safe haven yen
4. Price has broken below an 11-day uptrend channel with bearish MACD.

Fundamental Comments
1. Rollback of tariffs could delay or derail a trade deal, leading to demand for safe haven yen
2. Political turmoil in Hong Kong could lead to demand for safe haven yen

Technical Comments
1. Price has broken below an 11-day uptrend channel, hinting of a trend reversal
2. MACD has turned bearish and is hinting of more downside

Key Levels

Support 74.5574.2573.90
Resistance 74.8075.2075.65

Technical Overview

USD/JPY – MACD has turned bearish and price has broken below a support at 109.10-109.20. We think the trend may have reversed. We are looking at a price decline to 108.65 as the next movement. Stochastic is into oversold extreme but there is no sign of a reversal as yet from Stochastic. A move above 109.30 would negate our bearish view.

Support 108.90108.65108.25
Resistance 109.15109.50109.90

EUR/USD – Our sell recommendation on Friday was not filled as price only reached a high of 1.1055, missing our sell order at 1.1060. Price fell to 1.1017 and this could be a temporary low as MACD is warning of a divergence and Stochastic is deep into oversold extreme. We are expecting a price recovery towards 1.1050.

Support 1.10151.09901.0965
Resistance 1.10551.10951.1130

GBP/USD – Price reached a low of 1.2765 and price has recovered to the 20EMA resistance at 1.2800. While Stochastic is moving higher, MACD is still bearish at the moment. If price is capped at the 20EMA, it is likely to test the low of 1.2765 again. However a move above 1.2800 would target the 1.2840. Wait for better trading idea.

Support 1.27851.27451.2705
Resistance 1.28051.28401.2875

XAU/USD – Our view remains the same as last Friday. The low on Friday at 1456.10 could be a temporary low and price could be moving higher to test the resistance at 1473. However, Stochastic is still declining and has yet to reach the oversold extreme, hinting of more downside. MACD is still bearish and is not turning up as yet, again hinting of more downside. Wait for better trading idea.

Support 1456.101447.401439.40
Resistance 1465.401473.101486.80

USD/CAD – Price has come up to a strong resistance point at 1.3240. Price will need to move above this point to advance further. However, MACD is showing signs of weakness although there is no divergence warning at the moment. Stochastic seems to have peak as well. If price is unable to move above 1.3240, it can go lower to 1.3115. Watch the reaction at 1.3240 for clue.

Support 1.31951.31601.3115
Resistance 1.32401.32801.3315

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