FX Commentary – Optimism Of Sino-US Deal Lifted US Dollar

  • The US dollar was firm on Monday morning as investors await the signing of a phase-one trade deal between the U.S. and China. China’s Commerce ministry said Vice Premier Liu He, head of the Chinese negotiation team in the trade talks, is set to visit Washington today till Jan. 15.
  • The U.S. economy created 145,000 jobs last month, undershooting economists’ forecast of 164,000. The unemployment rate remained unchanged at 3.5%, but wage growth slowed to a pace of 0.1% last month, missing expectations of 0.3%.
  • Despite the weaker-than-expected jobs report, market saw no reasons for the Fed to move from the side-line as the trend of steady job growth, low joblessness and still-subdued wage inflation continued.
  • Cable took a drubbing earlier this week and remains under pressure after a Bank of England governor hinted at more monetary stimulus. The pound drops to 1.3028 this morning and stayed near a 2-week low on dovish comment from BOE’s policy maker Gertjan Vlieghe.
  • The Canadian dollar was unchanged at C$1.3050 as a firmer job report from Canada jobs report trimmed expectations that the Bank of Canada will cut this year, but RBC said it believes the central bank will still be forced to act to support the economy.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3030. Stop at 1.2995 and target at 1.3130
3. Easing of Middle East tensions and optimism of a Sino-US trade deal are both favouring the US dollar.
4. Double Bottom chart pattern is hinting of a price rally and MACD is bullish and supportive of another rally.

Fundamental Comments
1. Optimism of a Sino-US trade deal is favouring the US dollar.
2. Easing of Middle East tensions have send crude oil price lower, weighing on the Canadian dollar

Technical Comments
1. Price had a Double Bottom chart pattern and could be testing the high at 1.3105 again
2. MACD is bullish and the fast line is turning up again hinting of another price rally.

Key Levels

Support 1.30251.30001.2975
Resistance 1.30501.30751.3105

Technical Overview

USD/JPY – Price is now near to a 2-week high at 109.70. If price can move above this level, it is likely to test 111.00. However if price is unable to move above this resistance, price could fall back to 108.75. Stochastic is turning down from overbought extreme but MACD is still bullish and rising. We favour a break of 109.70.

Support 109.35109.00108.65
Resistance 109.70110.20110.65

EUR/USD – Price may have made a base at 1.1085 and price is likely to move higher to test the resistance at 1.1070 in the next move. Stochastic is rising and turning up which should support this move. MACD is rising but is still bearish but could support a price rally. A move below 1.1080 would abort our bullish view.

Support 1.11201.10851.1065
Resistance 1.11451.11701.1205

GBP/USD – Price broke below 1.3050 and we are inclined to believe the downtrend is the more likely route for this pair. A break of 1.3000 would confirm and is likely to lead price down to 1.2905 over the next few days. MACD is bearish while Stochastic is turning down again without reaching the mid-point of its range. This could be a bearish sign from Stochastic.

Support 1.30151.29651.2905
Resistance 1.30701.31201.3145

XAU/USD – After the decline from the high of 1611, price is now moving higher from 1540 low. This rally could be part of a correction process. Support is at 1546 and if this support can hold, price may push higher to 1574 later in the week. If price fails to hold 1546, it is like to test 1540 and may test 1520.50 later in the week. The scenario is not clear at the moment.

Support 1552.801543.901531.30
Resistance 1562.951573.101583.95

USD/CNH – The decline continues and is now likely to continue towards 6.8890. MACD is bearish with both its lines below the zero line. Stochastic has tried a few times but was unable to move above the oversold extreme, hinting of strong selling pressure. 20EMA is bearish and its gradient steep, which is another hint of a strong bearish trend.

Support 6.89806.89406.8870
Resistance 6.90356.90956.9155

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