FX Commentary – UK Election Will Decide Sterling Direction

Market Talk

  • The U.S. dollar slipped on Thursday in Asia after the Federal Reserve kept interest rates on hold at 1.75%, suggesting that the current path of monetary policy was “appropriate” to support sustained expansion of economic activity and would likely remain in place through next year.
  • Reuters reported that Trump will meet with top advisers to discuss tariffs that are scheduled to take effect on Dec. 15. China is reported to want Dec 15 tariffs scrapped to continue talks and will retaliate if tariffs are imposed. Global Time reported Trump can’t force China to yield on trade like Mexico.
  • Britain’s election will start at 0700 GMT. Exit poll will provide a glimpse of voting trend around 2200 GMT. Opinion polls show the Conservatives’ lead shrinking ahead of an election starting later today, which could jeopardize chances of a smooth Brexit.
  • Gold rose on Wednesday after the Federal Reserve kept interest rates on hold. UK’s election coming up later today and a looming trade tariffs deadline are both likely to keep Gold prices on the bid.
  • Investors’ focus now shifts to Christine Lagarde’s first meeting at the helm of the ECB. Investors will be curious to tune in to her first post-meeting press conference to seek clues about a broader policy revamp that could become the cornerstone of her tenure.

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation
2. Sell USD/CAD at 1.3195. Stop at 1.3225 and target at 1.3120
3. Overhaul of NAFTA agreement and trade tariffs with China are like to weigh on the US dollar
4. Price has failed to move above a support turned resistance and MACD has turned bearish, hinting of a bearish trend.

Fundamental Comments
1. Overhaul of NAFTA agreement between Canada, US and Mexico could benefit the Canadian dollar
2. Trade dispute between U.S. and China could weigh on the US dollar

Technical Comments
1. Price has been unable to move above an important support turned resistance.

2. MACD has turned bearish

Key Levels

Support 1.31601.31351.3105
Resistance 1.32001.32301.3270

Technical Overview

USD/JPY – Price range is getting lower as price consolidated within a Triangle chart pattern. MACD is flat and neutral at the moment. 20EMA is also flat and not hinting of a direction. Stochastic is moving lower after a bearish crossover. We are expecting a range of 108.85 to 108.40 for today.

Support 108.40107.95107.60
Resistance 108.80109.20109.40

EUR/USD – Price broke above the critical resistance at 1.1095 to reach a high of 1.1144. Price could go higher to 1.1180 to test the previous high if price can moved above 1.1150. However our EUR/AUD recommendation was stopped out as Aussie gained more than the Euro in the aftermath of FOMC. We lost 30 pips on the EUR/AUD trade

Support 1.11151.10951.1050
Resistance 1.11451.11801.1215

GBP/USD – Price managed to stay above its critical support at 1.3100 and has bounced above its previous high of 1.3215 to a new high at 1.3225. However both Stochastic and MACD are starting to show bearish divergence and hinting of a possible high. Sterling next movement will depend on the outcome of UK election. Expected higher volatility at around 4am Singapore time

Support 1.31951.31651.3130
Resistance 1.32251.32651.3300

XAU/USD – Price has risen to 1479 high with 20EMA bullish and pointing higher but Stochastic is almost at the overbought extreme level. However MACD has turned bullish. We are expecting support at 1468.90 to keep price in a bullish trend. Volatility is expected to be higher with UK election today and tariffs deadline looming. Trend will depend on the outcome of both events

Support 1468.901458.501445.50
Resistance 1479.401491.101503.80

NZD/USD – Yesterday, we had lowered the stop price as price declined but our stop was triggered on FOMC’s decision and we are out with a loss of just 10 pips. We still think price is near to a top. MACD is starting to show bearish divergence while Stochastic is into the overbought extreme.

Support 0.65700.65400.6515
Resistance 0.66000.66300.6670

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