Market Talk
- The safe-haven Japanese yen jumped and gold shot higher on Wednesday after a rocket attack on al Asad airbase hosting U.S. troops in Iraq by Islamic Revolutionary Guard Corp renewed fears of a broader conflict breaking out in the Middle East and sent investors rushing to safety.
- Safety flows also buoyed the Swiss franc higher to 0.9674 francs per dollar, and supported the greenback which had also revived overnight on the back of strong U.S. data. US dollar had grinded higher earlier in the day after ISM Non-manufacturing index came in at 55.0 above expectation of 54.5.
- Gold jumped to $1611.30 per ounce, its highest since 2013. Oil erased recent losses on fears any conflict in the region could disrupt global supplies. Market is now watching Trump’s response to the Iranian attack.
- The dollar rose 0.3% on the New Zealand dollar and hit a three-month high against the Aussie as the Aussie currency extended its fall amid worries about the domestic outlook, with RBA rate cut odds increasing alongside talk about QE and pessimism surrounding recent economic data.
- On the trade front, in a move that would make it tough for Beijing to meet import commitments in its ‘Phase 1’ trade deal with the United States, China will not increase its annual low-tariff import quotas for corn, wheat and rice to accommodate additional purchases of U.S. farm goods.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation
2. Buy at 6.9400. Stop at 6.9320 and target at 6.9745
3. Middle East tensions and rumour of China’s unwillingness to increase import quota are likely to be supportive of the US dollar
4. Price support at Fibonacci 62% with MACD showing a bullish divergence is a hint of a price rally.
Fundamental Comments
1. Rumour that China is not keen to increase import quota to accommodate additional purchases of US farm good could derail trade deal with US.
2. Middle East tensions are likely to be supportive of the US dollar
Technical Comments
1. Price pullback after a rally has managed to hold above a Fibonacci 62% support
2. MACD has a bullish divergence warning of a possible price low
Key Levels
| Support | 6.9390 | 6.9335 | 6.9285 |
| Resistance | 6.9475 | 6.9530 | 6.9600 |
Technical Overview
USD/JPY – Price reached 107.75 earlier than our expectation and price could be about to move higher again as both Stochastic and MACD have given bullish divergence warning of a possible bottom in price. There may be another test of 107.65 low but we would prefer to buy dip to 107.75 for the corrective rally higher.
| Support | 108.20 | 107.75 | 107.35 |
| Resistance | 108.50 | 108.85 | 109.10 |
EUR/USD – Yesterday, price reached a low at 1.1135, just ahead of our expectation and we think price is now likely to test the upper boundary at 1.1190. As long as price holds above 1.1135, we are likely to see a test of 1.1190. MACD is still bearish at the moment. Stochastic is declining from the middle range. Both momentum indicators are hinting of a correction.
| Support | 1.1150 | 1.1125 | 1.1095 |
| Resistance | 1.1180 | 1.1205 | 1.1240 |
GBP/USD – Price move higher to 1.3215 but was unable to sustain. Price declined but managed to stay above 1.3100 overnight and today has managed to move to 1.3140. If price can stay above 1.3100, price is likely to test the resistance at 1.3190. Stochastic is rising and MACD is also rising, giving hope that price can test 1.3190 resistance point. Overall price is in a range consolidation at the moment
| Support | 1.3105 | 1.3050 | 1.3010 |
| Resistance | 1.3150 | 1.3190 | 1.3215 |
XAU/USD – Our buy call from yesterday was not filled as price did not decline to our level. Price has shot up after Iranian attack. While price if off the high at 1611.30, we are expecting price to find support at 1585 and move higher in view of tensions in the Middle East. Stochastic and MACD are both supporting this bullish view. Stay on the long side for Gold.
| Support | 1585.30 | 1577.10 | 1569.50 |
| Resistance | 1594.60 | 1611.30 | 1623.75 |
USD/CAD – Yesterday, we had lowered stop for a 2nd time to 1.2990 while keeping profit objective at 1.2950. Price reached a low of 1.2956 and rebounded, taking out our stop at 1.2990. We are out with a reduced 15 pips profit. Stochastic and MACD are both turning up with bullish divergence. Price moved to a high of 1.3029 but with Crude oil price rising, we are looking at another decline to 1.2950.
| Support | 1.2975 | 1.2950 | 1.2915 |
| Resistance | 1.3015 | 1.3045 | 1.3080 |
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