Market Talk
The U.S. dollar fell on Friday, after data showed that manufacturing woes in the country have deepened. Industrial production slipped 0.8%, more than the -0.4% expectation while the Empire State Manufacturing Index tumbled to 2.9 from 5.0 expected. U.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing.
Major currencies were off to a cautious start on Monday as market players looked to whether Washington and Beijing can soon sign off on a deal to end their trade war that has been a drag on the global economic growth. Despite Larry Kudlow saying a deal was “getting close”, investors remain cautious.
China State media Xinhua said US and China had “constructive talks” on trade in a high-level phone call on Saturday. The two sides discussed each other’s core issues for the first phase of an initial trade agreement, and agreed to maintain close communication, according to Xinhua.
Gold prices slipped on Friday, as stock markets hit record highs following comments that progress was being made on the “phase one” trade agreement. A possible pause in US interest rate, as hinted by Fed Chair Powell, is also weighing on gold.
Sterling extended its slow recovery to reach its highest levels in two weeks after the Brexit Party said it would not stand in 43 non Tory seats where the Tory candidate came in 2nd best. UK election poll showed the Tory at 43% and Labour at 30%, raising hopes that there will not be a hung parliament situation but an eventual Brexit
Chart Focus GBP/USD
Key Points
1. Trading buy recommendation GBP/USD
2. Buy GBP/USD at 1.2920. Stop at 1.2890 and target at 1.2970
3. Election polls are pointing to a Conservatives majority in the new parliament and disappointing US data are both weighing on the US$
4. Price supported at Fibonacci 62% and MACD rising and bullish are pointing to a rising price trend.
Fundamental Comments
1. Election polls are pointing to a Conservatives majority in parliament which is good for Sterling
2. Friday’s US data was disappointing and could weigh on the US$
Technical Comments
1. Price had stayed above the Fibonacci 62% correction point and has been moving higher.
2. MACD is rising and bullish and is hinting of a rising price trend
Key Levels
| Support | 1.2895 | 1.2860 | 1.2820 |
| Resistance | 1.2935 | 1.2970 | 1.3010 |
Technical Overview
USD/JPY – Price has moved up to almost the Fibonacci 62% of the decline from 109.28 to the low of 108.23. Price should stay below 108.90 which is also the first decline’s low, if the downtrend is likely to persist. Stochastic is still rising but MACD is bearish and is starting to turn down again. Watch the resistance at 108.90 for clue to the next price direction.
| Support | 108.60 | 108.25 | 107.90 |
| Resistance | 108.95 | 109.20 | 109.50 |
EUR/USD – Price has reached our target of 1.1060 but while Stochastic is in the extreme overbought zone, MACD is bullish and is rising. There is a possibility of the rally continuing to 1.1090 but we think 1.1075 is more likely to end this rally. Above 1.1110, it could mean the recent decline to 1.0988 is a correction and the longer term picture is bullish.
| Support | 1.1035 | 1.0990 | 1.0960 |
| Resistance | 1.1065 | 1.1090 | 1.1130 |
AUD/USD – Price has failed to move above an important resistance at 0.6820 and if this resistance holds, price is likely to test the previous low of 0.6770 again. MACD is bearish and the faster line is turning lower but currently Stochastic is still rising. Both indicators are hinting of different direction at the moment. Wait for better trading idea.
| Support | 0.6795 | 0.6745 | 0.6715 |
| Resistance | 0.6820 | 0.6865 | 0.6900 |
XAU/USD – Our buy call on Friday was not filled as price only reached a low of 1461. A lack of upward traction is causing us concerns. There would be more downside movement before the correction ends especially if price break support at 1463.35. MACD is also moving towards the zero line while Stochastic is still moving down and not showing signs of a reversal as yet. Stay aside for the moment
| Support | 1463.35 | 1455.80 | 1445.50 |
| Resistance | 1474.50 | 1483.95 | 1492.50 |
USD/CAD – Price may have reached a high and is currently sitting on the edge of an Ichimoku reversal pattern. A price movement below 1.3210 is likely to send price lower to 1.3160. However MACD is still bullish and could be turning up while Stochastic is already into the oversold zone. Momentum indicators are warning of a price low at the moment.
| Support | 1.3210 | 1.3160 | 1.3130 |
| Resistance | 1.3240 | 1.3270 | 1.3310 |
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