FX Commentary – Trump Sent Safe Havens Higher

Market Talk

– The British pound jumped to six-month high above the key 1.30 psychological mark. A poll by Kantar has shown a widening lead for Conservatives over Labour to win December’s election, which would secure a Brexit deal. UK PMI came in at 45.3 in November; up from 44.2 recorded in October and beating the consensus estimates reading of 44.5, helped Sterling on the way higher.

– Safe-havens were in demand on Tuesday as trade jitters started to creep in after Trump warned a trade deal with China may come after next year’s 2020 US presidential election, which is a contrast to his earlier statements. Gold jumped more than 1% on Tuesday on fading optimism surrounding a U.S.-China trade deal touching $1,481.80, its highest since Nov. 7.

– Further dampening risk sentiment, Washington also threatened duties on French goods because of a digital services tax that could harm U.S. tech companies, to which France and the European Union said they are ready to retaliate, if those threats were to materialize.

– Aussie was doing well against a weak US dollar, after RBA stays on hold and kept interest rate unchanged at its monetary policy meeting, climbing to a high of 0.6860 until trade jitters pull the Aussie lower. US-China tensions together with a weak GDP after Australian GDP grew 0.4% against a forecast of 0.5% dragged the Aussie lower.

– Tonight, there two important data to monitor. Bank of Canada will issue its rate statement at 11pm. No change in interest rate is expected. US ISM Non-manufacturing PMI is also scheduled at this time slot.

Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation
2. Sell EUR/JPY at 120.35. Stop at 120.65 and target at 119.30
3. Fading hopes of a U.S-China trade deal and new tariffs threat on French goods have increased demand for safe haven yen
4. Price was capped by the Fibonacci 127% projection point and MACD is bearish and hinting of more price declines.

Fundamental Comments
1. Washington’s threat to impose tariffs on French goods and EU counter threat to response could lead to a trade war and weigh on the Euro
2. Fading optimism of a U.S.-China trade deal has increased market risk and demand for safe haven yen

Technical Comments
1. Price was capped by the Fibonacci 127% projection point and has declined, hinting of more price declines
2. MACD has turned bearish and is hinting of a price decline.

Key Levels

Support 120.15119.80119.25
Resistance 120.45120.75121.00

Technical Overview

USD/JPY – The decline has exceeded the Ichimoku 3E price projection of 108.75 to reach a low of 108.47. Stochastic is into the oversold extreme and is turning around. MACD is also at its extreme and is turning around. Both indicators are hinting of a possible price low. If the low at 108.47 holds, we think price can recover to 108.90 to 109.05.

Support 108.45108.20107.90
Resistance 108.70109.05109.40

EUR/USD – Our buy call for yesterday was not filled as price only reached a low of 1.1065. Price reached a high of 1.1093 overnight and that may have ended the rally. There was a Evening Star candlestick price pattern at the price high. MACD and Stochastic both showed bearish divergence warning. A price decline below 1.1065 would confirm the high and signal a price decline to 1.1025.

Support 1.10651.10301.0990
Resistance 1.10901.11301.1175

GBP/USD – Price broke above a Triangle chart pattern yesterday to reach a high of 1.3011. 20EMA is rising and looking strong. MACD is also bullish and rising but Stochastic is turning down from overbought extreme. We think there may be a price correction to 1.2955 before another attempt to test the high at 1.3011.

Support 1.29851.29501.2915
Resistance 1.30151.30501.3095

XAU/USD – Price broke out of its Inside Day pattern overnight and reached a price high of 1481.70 20EMA is rising and its gradient is steep, which is a hint of a strong bullish trend.  MACD is still bullish and rising but Stochastic is in its extreme. We remain bullish for 1495, if price can stay above 1474

Support 1475.701466.501452.90
Resistance 1481.651491.701496.85

AUD/USD – Price reached a high of 0.6862 and has declined lower to 0.6820. Price is currently above the Fibonacci 50% correction point. Stochastic has already reached its oversold extreme and MACD has turned bearish. However we think this decline could be a corrective decline and could be halted at 0.6800.

Support 0.68100.67850.6750
Resistance 0.68350.68650.6885

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