FX Commentary – Weak US Data Send US Dollar Lower

Market Talk

– The dollar traded near a one-week low versus the yen on Tuesday and near the lowest in almost two weeks against the euro, on concerns about weak U.S. manufacturing data and signs of new fronts in the U.S. trade war as U.S. President Donald Trump said he will restore tariffs on Brazil and Argentina metal imports.

– The Institute for Supply Management (ISM) reported that American manufacturing activity contracted in November for the fourth consecutive month, stoking concerns that the longest period of economic expansion in U.S. history could be losing steam.

– Trump tweeted on Monday that he would restore tariffs on steel imported from Brazil and Argentina, boosting fears that Trump is going to increase tariffs against China on December 15 if phase one trade deal with China cannot be concluded by that date.

– PMI from around the world ticked up in an apparent sign that the world economy is stabilizing after a sharp slowdown this year in the shadow of the U.S.-China trade war and Brexit. European PMI manufacturing data was also better than estimates but still remain below the 50 level.

– RBA kept its rates unchanged after its monetary policy meeting this morning. Cash rate remains at 0.75%, boosting the Aussie dollar against most other currencies. Aussie gained against the US$ to a 2-week high of 0.6846.

Chart Focus EUR/USD
Key Points
1. Trading Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1055. Stop at 1.1025 and target at 1.1110
3. US dollar is likely to be weakened as a result of poor economic data and a new trade tariffs war front.
4. Price breakout of the Bollinger Bands and MACD is bullish. Both are signs of another price rally.

Fundamental Comments
1. Poor US economic data overnight has weakened the US dollar
2. New trade tariffs war front is likely to weaken the US dollar

Technical Comments
1. Price has a breakout of the Bollinger Bands and is likely to pull back to the middle band before another rally
2. MACD is bullish and is pulling towards the zero line in a sign of a corrective decline

Key Levels

Support 0.64350.64050.6370
Resistance 0.64650.65050.6520

Technical Overview

USD/JPY – Yesterday’s divergence warning from MACD and Stochastic proved useful as price tumbled to a 1-week low against the yen. Both momentum indicators have reached extreme reading and we are likely to see a price correction to 20EMA at 109.30. If price is unable to move above 109.40, we are likely to see a decline to Ichimoku 3E price target at 108.75.

Support 108.95108.70108.45
Resistance 109.30109.60109.95

NZD/USD – Price has moved higher to our target of 0.6505 this morning but our order was not filled last night. The upside could be limited to 0.6520 as Stochastic is into the overbought extreme. MACD is bullish but seems to be heading lower. We would prefer to sit out this pair for the moment until a better trade opportunity appears

Support 0.64950.64650.6435
Resistance 0.65200.65450.6590

GBP/USD – Price has broken above an 8-day Triangle chart pattern. As long as price stays above 1.2930 we are likely to see a rally to 1.3015 in the next few days. MACD is bullish with both its lines above the zero line. Stochastic is rising and has not yet reached the overbought extreme. A mover below 1.2910 would negate our bullish view.

Support 1.29151.28801.2845
Resistance 1.29501.29851.3015

XAU/USD – Overnight, price stayed within last Friday’s range of 1452 to 1466. Our view remains unchanged. Price is likely to stay within this range until there is a breakout. MACD is neutral and flat at the moment. Stochastic is weak but is still rising towards the overbought zone. 20EMA is flat and is inconclusive at the moment

Support 1458.201445.501438.20
Resistance 1466.301478.701486.15

AUD/USD – Price had moved above a downtrend line yesterday after bullish divergence warning from MACD. Today, after RBA did not cut its cash rate, Aussie has rallied to a high of 0.6846. MACD is still bullish and rising and although Stochastic is in the overbought zone, Stochastic is still strong. The next resistance lies at 0.6585.

Support 0.68150.67900.6750
Resistance 0.68550.68850.6915

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