FX Commentary – Eyes On Trump’s Speech For Rollback Of Tariffs Clues

– The dollar slid on Monday as investors remained cautious after U.S. President Donald Trump denied he would roll back  tariffs which dashed investors optimism that Washington and Beijing would soon reach a phase one deal to end their trade war.

– Trump said on Friday he had not agreed to roll back tariffs on China. That conflicted with comments from the Chinese commerce ministry, which said both sides had agreed to cancel existing levies in phases. An US official had also said both sides agreed to roll back the tariffs in trenches.

– The NZ dollar was dragged lower after NZ data disappointed ahead of RBNZ monetary policy decision tomorrow. Inflation Expectation Q/Q was 1.8% against 1.86% previously. Data has increased the odd of a RBNZ 25bp rate cut to 76%.

– Gold fell on Monday to its lowest price in more than three months, dragged below technical support as upbeat risk sentiment kept U.S. stock indexes close to record levels, while investors awaited news on the U.S.-China trade.

– Sterling surged overnight after Brexit Party leader Nigel Farage said his party would not contest seats contested by the Conservative Party in the previous election. His comments increase the chances of the Tories winning a majority during the U.K. general election on Dec. 12. That would secure the EU withdrawal agreement made last month by Prime Minister Boris Johnson.

Chart Focus GBP/JPY
Key Points
1. Buy GBP/JPY recommendation
2. Buy GBP/JPY at 140.40. Stop at 140.10 and target at 141.40
3. Brexit Party’s decision and optimism over a Sino-US trade deal are likely to benefit Sterling.
4. An Ascending Triangle chart pattern and bullish momentum indicators are hinting of further price advancement.

Fundamental Comments
1. Nigel Farage’s Brexit Party decision not to contest against the Conservative Party could benefit Boris Johnson’s Brexit agreement with EU
2. Optimism of a US-Sino trade deal is likely to decrease demand for safe haven yen

Technical Comments
1. Price is in an Ascending Triangle chart pattern, which is a hint of another rally in the making
2. MACD is turning bullish while Stochastic continues to rise, hinting of further price upside

Key Levels

Support 140.30140.00139.65
Resistance 140.65141.00141.35

Technical Overview

USD/JPY – Price was supported at 108.90 overnight and has bounced up again to 109.20. We think the rally can continue towards 109.50. Stochastic has a bullish crossover and is rising. MACD is bullish and the faster line has moved above the zero line. 20EMA is also rising. A move below 108.920 would negate our bullish view.

Support 108.90108.65108.25
Resistance 109.20109.50109.90

EUR/USD – Price may have reached a correction low at 1.1018. MACD has given bullish divergence warning of a potential low while Stochastic is rising from the oversold extreme. 20EMA is currently providing resistance at 1.1045. A break of this resistance would open up 1.1090

Support 1.10151.09901.0965
Resistance 1.10501.10951.1130

GBP/USD – Price rallied overnight on easing worries of a hung UK parliament and increased hopes of a Brexit, rising to a high of 1.2897. Yesterday’s low of 1.2770 could be a correction bottom and price could be moving above 1.3010 in the next couple of weeks. Stochastic is rising and MACD is also rising.

Support 1.28401.28001.2750
Resistance 1.28951.29251.2970

XAU/USD – Yesterday, price reached a 3-month low at 1448.10. However, Stochastic is into oversold extreme and MACD while still bearish, has shown a bullish divergence warning, hinting of a possible low. 20EMA, on the other hand is still bearish and its gradient is steep, which is a hint of a strong bearish trend. Wait for better trading idea.

Support 1447.851439.401430.80
Resistance 1456.951465.401473.10

AUD/JPY – Our sell recommendation was filled yesterday, but price range was not large yesterday. Price, supported at 74.55 overnight was a concern. We would recommend bringing stop lower to 74.90 while keep profit target at 73.95. Stochastic and MACD are both turning around. Both momentum indicators are hinting of further price upside.

Support 74.5574.2573.90
Resistance 74.8575.2075.65

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