FX Commentary – US Economic Data Keeps US Dollar Strong

Market Talk

Conflicting commentary on the Sino-U.S. trade dispute, better-than-expected Markit PMI data and better Michigan consumer sentiment, gave the dollar a leg up on its peers on Friday after European Union PMI numbers disappointed earlier in the day.

The dollar rallied when U.S. manufacturing surveys beat forecasts. November preliminary Markit PMI data came in at 51.6 against forecast of 51.0. University of Michigan Final consumer sentiment was higher at 96.8 vs forecast of 95.7.

On Saturday, U.S. national security adviser Robert O’Brien said an initial trade agreement with China is still possible by the end of the year, but warned Washington would not turn a blind eye to what happens in Hong Kong. Trump said on Friday night that a deal was “potentially very close”.

Over the weekend, pro-democracy candidates in Hong Kong romped to a landslide and symbolic majority in district council elections. Ongoing riot in the embattled city adds to worries that a Chinese crackdown on anti-government protests in Hong Kong could further complicate the talks.

European Central Bank President Christine Lagarde on Friday called on euro zone governments to strengthen domestic demand after a global trade war brought a decade of export-driven growth to an abrupt end.

Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.2875. Stop at 1.2915 and target at 1.2800
3. Uncertainty over US-China talk and strong economic data are boosting the US$
4. A Double Top chart pattern and bearish MACD are both hinting of more price declines

Fundamental Comments
1. Uncertainty over US-China trade talk is weighing of risk appetites and riskier currencies
2. Strong US economic data is boosting the US$

Technical Comments
1. Price broke the neckline of a Double Top chart pattern which is a hint of a bearish trend
2. MACD is bearish and hinting of more price downside

Key Levels

Support 1.28351.28001.2770
Resistance 1.28801.29251.2970

Technical Overview

USD/JPY – For 5 consecutive days, price had stayed within the 100 pips range. Last Thursday price tested the lower end of the range but bounced higher. Price is likely to continue its rally to test the high at 109.00. Our view remains unchanged. Unless the range boundary is breached, price is likely to continue within the range from 108.20 to 109.30. Momentum indicators are inconclusive at the moment.

Support 108.50108.25107.90
Resistance 108.85109.05109.30

EUR/AUD – Our sell call from 21 Nov was not filled on Friday night at 1.6200 even as price breached 1.6200, due to the ask price being  just above 1.6200. Price is pulling back to the 20EMA at 1.6250 but MACD is still looking weak at the moment. If price is capped at 1.6250, there could be a final push lower to 1.6180. Bring stop lower to 1.6255 and profit target remains at 1.6200.

Support 1.62101.61651.6130
Resistance 1.62451.62851.6320

EUR/USD – Our sell call was filled at 1.1075 when price reached a high of 1.10845. Price reached a low of 1.1008 but has bounced up to 1.1030. We think the 20EMA resistance 1.1030 and the Fibonacci 38% correction point of the decline are likely to limit the price rally. Lower stop to 1.1055 and profit remains at 1.0990.  MACD is bearish but Stochastic is rising from oversold extreme.

Support 1.09901.09651.0930
Resistance 1.10301.10501.1090

XAU/USD – Price was capped by 1475 and on Friday, moved lower to 1462. This morning, price moved lower to 1457. Our target is 1456 but a break of this support could bring price lower to 1445. Stochastic is turning down from the oversold extreme and MACD is bearish.

Support 1456.551445.501438.20
Resistance 1463.801478.701486.15

EUR/GBP – Price made a higher high on Friday night but Stochastic did not make a higher high compared to the previous highs. This is a bearish warning of a potential price top. We think 0.8600 could be a temporary high and a possible decline to 0.8545 could be on the card. A price move above 0.8610 would negate our bearish view.

Support 0.85650.85450.8520
Resistance 0.85950.86200.8650

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