FX Commentary – Data Showed US Economy On Firm Footing

Market Talk

The US dollar drifted lower on the yen and against the Australian and New Zealand dollars, but still hit its highest weekly close since May 31, as data showed the U.S. economy was on a firm footing and investors scaling back rate-cut bets with FOMC scheduled for next week.

– The Federal Reserve also flagged an upbeat outlook amid signs of labour market strength and a possible turnaround in business investment, that prompted a pullback on rate cut bets for next week, with the market now pricing in only a 5% chance the Fed will hike rates next week with most expecting Fed to hold steady.

– The dollar’s strength this week was drawn on hopes that the United States and China are making progress in negotiating a cease-fire in their damaging tariff war, but Trump’s approval of a bill backing Hong Kong’s pro-democracy protesters could have an adverse effect on relations and could derail a trade deal.

– Gold prices moved sideways on Friday, with markets awaiting further developments on how U.S.-China trade talks would proceed after Beijing said it would take retaliatory measures against Washington for passing a law in support of Hong Kong protesters.

– The British pound has been the week’s other main beneficiary, adding half a percentage point as Prime Minister Boris Johnson’s Conservative Party has firmed in opinion polls ahead of the Dec. 12 election.

Chart Focus NZD/USD
Key Points
1. Trading Buy NZD/USD
2. Buy NZD/USD at 0.6440. Stop at 0.6395 and target at 0.6500
3. Optimism of a trade deal and better than expected Chinese PMI data have increased demand for NZ dollar
4. An Ascending Triangle chart pattern and rising momentum indicators are hinting of further price advance

Fundamental Comments
1. Optimism of a trade resolution has increased demand for riskier currencies like NZD
2. A better than expected China’s PMI data has increased hopes of a turnaround in Chinese economy, which could benefit the NZD dollar

Technical Comments
1. An Ascending Triangle chart pattern with a breakout has called for further price increase for the NZD against the US$
2. Rising MACD and Stochastic are both hinting of further price advance

Key Levels

Support 0.64350.64050.6370
Resistance 0.64650.65050.6520

Technical Overview

USD/JPY – After a breakout of a range consolidation at 109.30, price has moved to a high of 109.72. The rally may continue towards 109.95 but MACD and Stochastic are both showing bearish divergence warnings. This is a warning that price could be making a potential high. We would prefer to stay on their short side and would be looking for a reversal signal for confirmation.

Support 109.60109.30108.95
Resistance 109.95110.25110.60

EUR/USD -Price has made a low of 1.0980 and has bounced up. If price can move above 1.1030, it could confirm 1.0980 as the low but if price is unable to move this resistance, it could continue to move lower to 1.0965.  Both MACD and Stochastic has been moving higher, hinting of a possible price low. We would watch 1.1030 for a bullish reversal.

Support 1.09801.09651.0930
Resistance 1.10301.10501.1090

GBP/USD – Last week’s range was within the range of the week before it. This has resulted in an Inside Day based on the weekly chart, which is a sign of a consolidation. We think the consolidation would continue with UK election around the corner. MACD is bullish but both its lines are near to the zero line. Stochastic is in the middle of its range. Both momentum indicators are inconclusive at the moment.

Support 1.29051.28601.2835
Resistance 1.29501.29851.3015

XAU/USD – Price is currently trading within Friday’s range and we think price will stay within this range till there is a breakout of either boundary. This Inside Day chart pattern is hinting of a price consolidation. Momentum indicators are inconclusive at the moment. Stochastic is about to turn lower but MACD is still rising although MACD trend is bearish. Wait for better trading idea.

Support 1458.201445.501438.20
Resistance 1466.301478.701486.15

AUD/USD – Price made a lower low on Friday at 0.6752 but MACD did not make a lower low. This is a warning of a possible price low in the making. Price moved above a downtrend line this morning, which could be a hint of a possible change in trend and a possible low in place. If price can stay above 0.6760, we think price is likely to move higher to 0.6820.

Support 0.67500.67200.6700
Resistance 0.67800.68050.6820

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