FX Commentary – Doubts Of A U.S.-Sino Deal Sent Safe Havens Higher

Market Talk

– Doubts that a trade agreement between the United States and China can be concluded helped to lift safe-haven Yen and Swiss Francs on Thursday. Gold was little changed while the Yuan was lower.

– The Wall Street Journal reported on Wednesday, citing people familiar with the matter that U.S.-China trade negotiations have ‘hit a snag’ over farm purchases, with Beijing not wanting a deal that looks one-sided in favour of the United States.

– The U.S. dollar was little changed after Federal Reserve Chairman Jerome Powell said that while the “economy is on track right, there are risk to the current economic expansion”. Powell said the path of the central bank’s interest rates is unlikely to change as long as the economy keeps growing.

– China’s retail sales and industrial production both missed expectations, raising worries about the world’s second largest economy. The Australian dollar shed a half percentage point to one-month low of $0.6802 after weak Australian employment data showing the first fall in payrolls in three years. Chinese data sent it below 0.68 handle.

– A poll carried out for the Daily Telegraph newspaper showed British Prime Minister Boris Johnson’s Conservatives have a healthy 10-point lead over main opposition Labour Party. Sterling was little moved at $1.2857, stuck in a tight range this week, in a limbo ahead of a Dec. 12 election.

Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation
2. Sell NZD/USD at 0.6395. Stop at 0.6425 and target at 0.6345
3. Soft inflation data and interest rate differential are both against the US dollar
4. Price forming a Double Top chart pattern with MACD divergence is a warning of a potential high

Fundamental Comments
1. Soft inflation data is likely to lead to RBNZ to cut rate again
2. Interest rate differential is in the US dollar favour

Technical Comments
1. Price has formed a Double Top chart formation on the price chart
2. MACD is warning with divergence of a possible high

Key Levels

Support 0.63800.63550.6320
Resistance 0.64000.64300.6465

Technical Overview

USD/JPY – Price has dropped below 108.90 and could be heading towards 108.10. MACD is bearish but not really that strong. Stochastic is near to the oversold zone. 20EMA is bearish and its gradient steep, which is a sign of a strong bearish trend. Above 109.30 would negate our bearish view.

Support 108.50108.25107.90
Resistance 108.85109.20109.50

EUR/USD – Our view remains the same as yesterday. We think the downside is limited and price is now near to our critical support at 1.0990. A break of this support would cause us to review our stance. If price can hold above this support level, we are likely to see a move up to 1.1060. MACD is warning with divergence but Stochastic is still weak.

Support 1.09901.09651.0935
Resistance 1.10251.10601.1090

GBP/USD – Price is still trading within Monday’s range of 1.2785 to 1.2897. We are expecting price to continue within this range. This range could persist till Dec. 12 election. As we are bullish on a longer term basis, we are expecting price to be supported at 1.2815 and for a price push above 1.2900 in the next few days. MACD is neutral but Stochastic is declining.

Support 1.28201.27701.2735
Resistance 1.28601.28951.2930

XAU/USD – Our view is the same as yesterday. We think a High Wave candlestick pattern is the reversal and warning of a low and price is likely to proceed higher to 1481. Price has moved above the 20EMA at 1462 and we are expecting the rally to continue for today. MACD is still bearish but is rising. Stochastic is also rising towards the overbought zone.

Support 1461.851456.951445.50
Resistance 1470.151481.601492.50

AUD/USD – We got a second consecutive trade wrong yesterday. We lost 30 pips on this pair. Aussie has gone down due to poor an Australian job data and below expectation Chinese industrial data. Price has now dropped below a strong support line at 0.6810. While Stochastic is turning up, MACD is still strongly bearish. 20EMA is also bearish. Price could continue lower to 0.6760

Support 0.67750.67450.6715
Resistance 0.68100.68600.6885

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