FX Commentary – Caution Favours Safe Havens

Market Talk

– The dollar and the safe-haven yen found support on Wednesday as a lack of clarity on U.S.-China trade talks kept investors cautious ahead of the release of minutes from the U.S. Federal Reserve’s last policy meeting.

– While saying talks were “moving along fine”, U.S. President Donald Trump delivered yet another warning of more tariffs if the two countries failed to strike a deal. The currency most sensitive to the trade dispute, China’s Yuan, dropped to a two-week low of 7.0335 per dollar in offshore trade early in the Asian day

– US Senate passed a bill in support of Hong Kong protests. China said the US should stop interfering in Hong Kong and China affairs and threatened to retaliate against the US over Hong Kong bill. This could also derail trade deal.

– The Japanese Yen touched 108.37 per dollar, its highest since Friday on ongoing impeachment inquiry against President Donald Trump and fading hopes for a U.S.-China trade deal. Gold scaled a one-week peak while waiting for more cues on the Federal Reserve’s monetary policy.

– Elsewhere, the British pound fell slightly overnight after an inconclusive election debate between Conservative Prime Minister Boris Johnson and Labour leader Jeremy Corbyn. Opinion polls have placed the Tories in a leading position to capture a majority in the new parliament.

Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation
2. Buy GBP/USD at 1.2875. Stop at 1.2835 and target at 1.2970
3. Tory majority in the upcoming poll and trouble on trade front and impeachment is bad for the US dollar
4. Price pullback to the Fibonacci 50% correction point with MACD bullish is a good opportunity to get into the uptrend

Fundamental Comments
1. Election polls are pointing to a Tory majority in parliament which is good for Brexit and Sterling
2. Trade talks and impeachment are weighing on the US dollar

Technical Comments
1. Pullback to Fibonacci 50% correction point in an uptrend is a good buying opportunity.
2. MACD is bullish which confirms the uptrend

Key Levels

Support 1.28951.28651.2825
Resistance 1.29351.29751.3015

Technical Overview

USD/JPY – Our view remains the same as yesterday. Despite some negative news on the U.S.-China 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 108.25107.90107.55
Resistance 108.65109.05109.30

EUR/USD – Our view remains the same as yesterday as price barely moved yesterday. Price has moved to a high that is close to 1.1090. This important resistance needs to break for price to advance towards 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 broke above an important resistance at 0.6825 last night but there was little traction. Price fell back on negative news on the US-China trade front and is currently sitting on the 20EMA. Stochastic is turning down from the overbought zone while MACD is neutral and near to the zero line. A move below the 20EMA could be a sign of a false breakout and price going to 0.6770.

Support 0.67950.67450.6715
Resistance 0.68250.68650.6900

XAU/USD – Our view is the same as yesterday. Price is above 1475 again and if price can stay above this level, we can expect price to move higher to 1483. However if price is unable to hold 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.

Support 1469.301459.551445.50
Resistance 1480.901492.501500.65

USD/CAD – Our sell call was stopped out last night when Canadian data came out weaker than expectation. Price reached a high of 1.3280 and could continue towards 1.3310 as Stochastic is still rising. MACD is also rising strongly. 20EMA has also turned up. These are all pointing to more price advance for the pair.

Support 1.32701.32451.3190
Resistance 1.33101.33451.3380

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