FX Commentary – Trump Takes Markets For A Ride

Market Talk

– Markets were taken for a ride on Wednesday with safe havens initially gaining as China warned against retaliation over the HK and Xinjiang bills. The flight to safety seen on Wednesday reversed after Trump said trade talks with China were going “very well,” a day after warning that a deal might be delayed until after the 2020 presidential election. Bloomberg reported that the US and China are moving closer to a “Phase One” deal despite growing tensions recently.

– Sterling reached the highest level in 6 months, crossing above the $1.31 mark as traders bet on a win for the Conservatives in next week’s UK election that would allow Johnson to push his Brexit deal through Parliament in time for next month’s deadline.

– US ISM November’s Services PMI revealed that business activity growth strengthened thanks to an increase in new business. However, optimism remained historically subdued and new business from abroad fell for the fourth month in a row. The data was a bit disappointing but remains above the 50 level.

 – New Zealand’s softer-than-expected banking reforms pushed the kiwi to a four-month high of $0.6555. The RBNZ lifted bank capital requirements, but not as much as some investors had feared, and with a long lead time, reducing expectations that monetary easing might be needed to offset the hike in tightening effects.

– The Canadian dollar hit a one-month high of $1.3203 per greenback after the country’s central bank kept interest rates unchanged and said there were signs the global economy was stabilizing.

– There will be no Daily FX Commentary tomorrow.

Chart Focus CAD/SGD
Key Points
1. Buy CAD/SGD recommendation
2. Buy CAD/SGD at 1.0310. Stop at 1.0270 and target at 1.0375
3. A higher interest rate differential couple with a stronger economy is aiding the Canadian dollar against the Singapore dollar
4. Trend is bullish and price is likely to be supported at the previous resistance turned support.

Fundamental Comments
1. Bank of Canada kept interest rate unchanged and hinted there could be no cut in the near future as the bank saw positives in the Canadian economy
2. Interest rate differential is in the Canadian dollar favour

Technical Comments
1. Price is likely to be supported by the previous resistance turned support at 1.0310
2. MACD is bullish and rising.

Key Levels

Support 120.15119.80119.25
Resistance 120.45120.75121.00

Technical Overview

USD/JPY – Price has recovered to 108.90 as in our view from yesterday, to a high of 108.96. Price will need to move above this level in order to advance higher. If price is unable to move above this resistance, price is likely to test the low of 108.45 again. MACD is still bearish at the moment but Stochastic is rising. Watch the resistance for clues

Support 108.70108.30107.90
Resistance 108.95109.20109.50

EUR/USD – Price stayed above 1.1065 overnight and managed to move to a high of 1.1115 but price is back to yesterday’s London opening level. MACD has a bearish divergence warning and currently MACD is flat and is hinting of a sideways movement. Stochastic is rising. We may have seen a high at 1.1115. Watch the support at 1.1065 for bearish clue.

Support 1.10651.10301.0990
Resistance 1.10901.11301.1175

GBP/USD – Price has gone up 200 pips since breaking the Triangle chart pattern at 1.2940. Recent candles are getting smaller in size and we take this as a loss in momentum and a possible top in the process of being formed. MACD is still bullish but Stochastic is into overbought extreme and needs an unwinding. If 1.3080 holds, price may test 1.3150-1.3170 in a final rally.

Support 1.30951.30501.3010
Resistance 1.31201.31501.3180

XAU/USD – Gold has declined to 1471.25 overnight, which was above the 20EMA support. This is a sign of a possible bullish trend. If price can stay above 1470, we think price can move higher again to 1492 in the next few days. MACD is still bullish and both its line could be turning up again. Stochastic is just below the overbought extreme and could also be turning up again.

Support 1471.201460.901449.65
Resistance 1483.901492.151502.55

EUR/JPY – Our sell call was stopped out yesterday. We lost 30 pips as a result of this trade call. Price is still trading within the rising trend channel but we remain bearish on this pair with a target of 119.65. MACD is still bearish but Stochastic continues to rise. 20EMA is currently flat and indicating a consolidation.

Support 120.45120.10119.80
Resistance 120.80121.05121.45

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