FX Commentary – Receding Hopes Of A Trade Resolution

Market Talk

– The dollar nursed losses against major currencies on Tuesday as receding hopes for a preliminary trade deal between the United States and China hurt demand for the greenback. Uncertainty kept volume light, as market awaits more concrete news.

– CNBC, citing a government source, reported that China is pessimistic about agreeing a deal, troubled by Trump’s comments that there was no agreement on phasing out tariffs, which suggests an elusive trade resolution is perhaps the biggest risk to the global economy.

– Gold firmed on Monday to a high of $1471, erasing losses from earlier in the session when it fell to a low of $1455.80, on fresh doubts over a U.S.-China trade deal owing to Trump’s reluctance to roll back tariffs.

– Sterling hit a one-month high of 1.2984 overnight as four polls showed Prime Minister Boris Johnson’s Conservative Party tracking toward victory at the Dec. 12 election. Victory for the Tories could lead to an eventual Brexit.

– The Australian dollar fell after minutes from RBA monetary policy meeting in Oct published on Tuesday showed RBA decided to hold steady, in part because of worries that further easing would harm savers and confidence. RBA “agreed a case could be made” for another cut at its November meeting given unwelcome weakness in wages growth and inflation.

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation
2. Sell USD/CAD at 1.3210. Stop at 1.3240 and target at 1.3130
3. Fading hopes of a US-Sino trade resolution and poor US data are likely to weigh on the US$
4. Rising Wedge reversal chart pattern and weak MACD and Stochastic are both hinting of more price declines

Fundamental Comments
1. Fading hopes of a U.S.-Sino trade deal is bad for the US dollar
2. Friday’s US data was poor and could weigh on the US dollar

Technical Comments
1. Price has formed a Rising Wedge chart pattern and price could be heading back towards the base at 1.3115.
2. MACD is bearish and Stochastic has remained weak in the oversold extreme

Key Levels

Support 1.31901.31601.3125
Resistance 1.32151.32451.3270

Technical Overview

USD/JPY – Despite some negative news on the U.S.-Sino trade front, price is still within last week’s price range of 109.28 to 108.23. We think price is likely to stay within this range until there is a breakout of the range boundaries. MACD is bearish and just below the zero line while Stochastic is hinting of more price declines.

Support 108.45108.20107.90
Resistance 108.70109.05109.30

EUR/USD – Price has moved to a high that is close to 1.1090. This important resistance needs to break for price to advance to 1.1175. However if price is unable to break above this resistance, price is likely to fall back lower to 1.1045. Stochastic is into overbought extreme but MACD is still strongly bullish and rising.

Support 1.10601.10351.0990
Resistance 1.10901.11251.1145

AUD/USD – Price was capped by resistance at 0.6820 and has fallen back to 0.6785.  Stochastic has turned down and is moving lower. MACD is bearish but has a bullish crossover and could be moving higher. Both momentum indicators are giving conflicting signals. Watch the resistance at 0.6820 for a bullish break and the support at 0.6765 for a bearish break.

Support 0.67950.67450.6715
Resistance 0.68200.68650.6900

XAU/USD – Price is back to 1475 high again and if price can move above this level, we can expect price to move higher to 1483. However if price is unable to move above this resistance, price is likely to head back to 1455 again. Stochastic is rising and approaching the overbought extreme. MACD is bullish but may be forming a bearish divergence warning. Watch the reaction at 1475.

Support 1463.351455.801445.50
Resistance 1475.201483.951492.50

GBP/USD – Price exceeded our price target but only reached a low of 1.2827. Price reached a low of 1.2935 this morning and there is still potential for price to advance higher as MACD is still bullish and the faster line is turning up. Stochastic is in the overbought extreme but is still strong. We think price can test the previous high of 1.3011 again in the next 24 hours.

Support 1.29351.28951.2860
Resistance 1.29751.30151.3040

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.