FX Commentary – Safe Havens Declines Ahead Of Sino-US Trade Deal

Market Talk

Gold prices fell on Monday as low as $1536 as risk-on sentiment, bolstered by the upcoming signing of a preliminary U.S.-China deal and signs of de-escalation in the Middle East, dampened demand for safe-haven bullion.

Falling demand for safe-haven as sentiment on U.S.-China relations continued to improve ahead of the conclusion of their phase one trade deal later tomorrow sent the Japanese yen to a 7-1/2-month low against the US dollar.

The offshore Chinese Yuan reached a 5-1/2-month high after Trump administration announced that the United States will lift its designation of China as a currency manipulator ahead of the trade deal. The administration praised China for making “enforceable commitments” not to devalue the Yuan.

The pound pared some of its losses from Monday against the dollar on Tuesday after falling to two-and-a-half-week lows as tepid.UK economic data strengthened expectations for a Bank of England rate cut.

China’s export and import both rose in 2019, according to an announcement this morning from the General Administration of Customs. In Yuan terms, 2019 exports rose 5% from a year ago while imports rose 1.6% in the same period.

Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation
2. Buy EUR/JPY at 122.50. Stop at 122.10 and target at 123.90
3. De-escalation in the Middle East and optimism in Sino-U.S. trade deal are both leading to a reduction in risk sentiment and bad for safe haven Yen
4. Breakout of a Double Top chart pattern resistance and bullish MACD are both hinting of further price advancement

Fundamental Comments
1. De-escalation in the Middle East is not favourable for safe haven Yen
2. Optimism in Sino-U.S. trade deal is not favour for safe haven Yen

Technical Comments
1. Breakout of a Double Top chart pattern resistance can lead price higher
2. MACD is bullish and rising and hinting of further price advance.

Key Levels

Support	122.50	122.10	121.75
Resistance	122.85	123.15	123.60

Technical Overview

USD/JPY – Price broke above resistance at 109.70 yesterday and has moved higher to 110.20. Our target of 111.00 may not be attainable as both MACD and Stochastic are warning with divergence warnings. We set 110.65 as our rally target for now. A price move below 109.70 would negate our bullish view.

Support	109.90	109.65	109.20
Resistance	110.20	110.85	110.90

EUR/USD – Price has made a bottom at 1.1085 last Friday and has moved higher to 1.1145. The movement higher may not be over as yet. We think price can move higher to 1.1165 or 1.1180 as Stochastic has not yet reached the overbought extreme and MACD is still rising. 20EMA is also bullish and rising and not turning around as yet.

Support	1.1110	1.1080	1.1065
Resistance	1.1145	1.1180	1.1205

GBP/USD – Price broke below support 1.3050 and went to a low of 1.2960. Price is likely to pullback towards the 20EMA at 1.3040 and we are likely to see another decline from that resistance. MACD is showing the trend direction is down. Stochastic is near to the oversold extreme and a pullback is likely before any decline.

Support	1.2965	1.2905	1.2860
Resistance	1.3000	1.3035	1.3080

XAU/USD – Price failed to hold above $1540 support and fell to a low of 1535.80. We do not think the decline is over as yet. We think price is likely to decline to 1525.50 or even to 1520.50. MACD is bearish with both its lines now below the zero line. MACD is turning down as well. Stochastic is also moving lower.

Support	1535.50	1525.40	1516.40
Resistance	1545.10	1554.95	1563.00

USD/CAD – Price reached a low of 1.30305 on the bid side, missing our buy order. Our view remained unchanged. We are expecting support at 1.3030 to hold and price to test the high of 1.3105 again in the next couple of days. MACD is still bullish and is expecting to rise soon. Stochastic is also rising.