FX Commentary – Another Setback In U.S.-China Trade Deal

Market Talk

– Risk sentiment suffered another setback on Thursday after sources close to the White House told Reuters that a U.S.-China trade deal is unlikely this year, which would could further slowdown both U.S. and China’s economies and complicate efforts to keep economic growth on track.

– Completion of a “phase one” U.S.-China trade deal could slide into next year, sources close to the White House told Reuters on Wednesday as Beijing presses for more extensive tariff rollbacks. Trump and Lighthizer however feel that rolling back tariffs for a deal that fails to address core intellectual property and technology transfer issues will not be seen as a good deal for U.S.

– U.S. House of Representatives on Wednesday passed two bills intended to support protesters in Hong Kong and send a warning to China about human rights. U.S. President Donald Trump can sign or veto. If Trump signs it could trigger a further worsening in U.S.-China relations

– FOMC minutes released last night showed that Fed policy makers are now more or less on the same page for what lies ahead and saw current rates as “well calibrated”. Most policy makers believe it would take a material change in outlook to alter their outlooks. Fed is likely to pause unless a significant downside risk emerges.

– Gold held steady in the wake of U.S-China tension on news of a delay in trade deal between the world’s two largest economies but its gains were capped by minutes of FOMC minutes which hinted of a pause in US interest rate cut.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation
2. Sell EUR/AUD at 1.6285. Stop at 1.6325 and target at 1.6200
3. Poor German data and interest rate differential are both in the Aussie dollar favour
4. Price may be forming a Double Top chart pattern and MACD is hinting of an impending bearish trend

Fundamental Comments
1. German data was lower than expected yesterday
2. Interest rate differential is in the Aussie dollar favour

Technical Comments
1. Price may be forming a Double Top chart pattern
2. MACD has shown a bearish divergence with price, hinting of an impending bearish trend

Key Levels

Support 1.62851.62451.6215
Resistance 1.63201.63501.6395

Technical Overview

USD/JPY – For 3 consecutive days, price had stayed within the previous week 100 pips range. Last night price tested the lower end of the range and this morning with Liu He’s comment, price has bounced off the low. Our view remains unchanged. Unless the range boundary is breached, price is likely to continue within this range. Momentum indicators are inconclusive at the moment.

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 rising but MACD is still bullish and rising.

Support 1.10551.10151.0990
Resistance 1.10901.11251.1145

GBP/USD – Our buy call was not filled yesterday as price only declined to a low of 1.2887. Price has moved higher above 1.29 and we believe price is likely to continue higher to 1.2970. Stochastic has turned up and there was also a bullish crossover. MACD is bullish. Only a move below 1.2850 will negate our bullish view.

Support 1.28851.28251.2770
Resistance 1.29351.29751.3015

XAU/USD – Our view is the same as yesterday. Price must break above 1475 if price is to move higher to 1483. However if price is unable to break above the resistance at 1475, price is likely to head back to 1455 again. Stochastic is turning down but MACD is bullish but may be forming a bearish divergence warning

Support 1465.201456.301445.50
Resistance 1478.701492.501500.65

USD/SGD – Price could be forming a saucer bottom with the low at 1.3590. Price could be heading higher to test the breakout point at 1.3635. A movement above could see price targeting 1.3680-85. Stochastic is rising and is only in the middle of its range. MACD is turning bullish. Both momentum indicators are supportive of a price advance.

Support 1.35901.35501.3505
Resistance 1.36351.36701.3705

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