FX Commentary – UK Election & Trade Resolution Boosted Market

Market Talk

  • The pound rose to a three-and-a-half year high versus the euro and the highest in more than a year versus the dollar after exit polls suggested the Conservative party running away with a big majority in parliament, which should help ensure the UK’s smooth exit from the EU and end Brexit impasse.
  • Safe haven retreated in a volatile session on Thursday after U.S. President Donald Trump said the U.S. was “very close” to nailing down a deal with China. CNBC reported that Washington and Beijing have agreed to a trade deal in principle, pending U.S. President Donald Trump’s approval.
  • The White House has offered to scrap the next round of tariffs on Chinese exports to the U.S. that are set to take effect on Sunday, sources told CNBC on Thursday. Washington has also proposed slashing existing duties on $360 billion in Chinese products by 50%.
  • After the U.S. equity market closed, news broke citing unnamed sources familiar with the matter that Trump had signed off a trade agreement with China to avert fresh tariffs set for 15-Dec.
  • As part of the trade deal, China has also agreed to purchase $50 billion of U.S. agricultural goods next year, sources familiar with the talks told Reuters. The Chinese Yuan rose in offshore trade and dipped below $7.0. Avoiding new tariffs should be a boost to China’s slowing economy.
  • This will be the last commentary for 2019. Our next issue will be on 6 Jan 2020.

Chart Focus AUD/USD
Key Points
1. Trading sell AUD/USD recommendation
2. Sell AUD/USD at 0.6930. Stop at 0.6960 and target at 0.6865
3. Trade deal induced rally may have run its course and interest rate differential are both against the Aussie dollar.
4. Price has reached its target with MACD warning of a possible top formed is a hint of a price decline.

Fundamental Comments
1. The price rally from a possible trade deal could have reached its limit and a correction is due
2. Interest rate differential is in the US dollar’s favour.

Technical Comments
1. Price has reached the Fibonacci 161.8% projection target.
2. MACD divergence is a warning of a possible price high

Key Levels

Support 0.69100.68800.6840
Resistance 0.69400.69750.7000

Technical Overview

USD/JPY – Price managed to stay above the important support at 108.40 and has jumped up to 109.60, after news of a trade deal resolution. The next resistance is at 109.75 and a break above would target 110.40. MACD is bullish and rising. Stochastic is also rising but is close to the overbought extreme.

Support 109.40109.05108.80
Resistance 109.70110.05110.45

EUR/USD – Dragged higher by the rally in Sterling, price has reached a high of 1.1198 but candlestick price pattern of a Shooting Star is warning of a price decline back to 1.1150. While MACD is bullish and trending higher, Stochastic had reached the overbought extreme and is declining from the high. However 20EMA is bullish and its gradient is steep. This is a hint of a strong bullish trend. Look to buy dip to 1.1120.

Support 1.11451.11101.1070
Resistance 1.11801.12151.1245

GBP/USD – Price has jumped higher to 1.3515 after exit polls showed a big majority for Boris Johnson’s party. Price is likely to be supported around 1.3450 and we could see another push to test the high at 1.3515 again. MACD is showing the trend is strong but Stochastic is showing an overbought situation at the moment.

Support 1.34601.34251.3385
Resistance 1.34901.35201.3565

XAU/USD – Price reached a high of 1486.50 but was unable to sustain and has declined to 1461.85. MACD is showing bearish divergence. Stochastic is also warning of a possible price high and a possible downtrend. With a trade deal agreement and Brexit in store, the demand for Gold should be lower. We see price going lower to test the support at 1449.35

Support 1462.151453.301445.50
Resistance 1470.151479.401491.10

USD/CAD – Our order was not filled last night as price only reached a high of 1.31935, just ahead of our selling price at 1.3195. Price has breached a previous low at 1.3158 and price is likely to continue lower to 1.3120. MACD is still bearish but Stochastic has reached the oversold extreme.

Support 1.31451.31051.3075
Resistance 1.31701.31951.3230

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