FX Commentary – Worries Over Trade Tariffs

Market Talk

  • Safe-havens held firm while riskier currencies softened a little on Wednesday, as currency investors awaited the signing of the U.S.-China trade deal with trepidation. Overnight news that U.S. will maintain tariffs on Chinese goods until the completion of a second phase of a U.S.-China trade agreement is keeping market on its edge.
  • There are no oral or written agreements between Washington and Beijing on further tariff reductions and any rumours to the contrary are categorically false, Mnuchin and U.S. Trade Representative Robert Lighthizer said.
  • Markets were also absorbing news that U.S. government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to China’s Huawei, as it seeks to squeeze the blacklisted telecoms company, two sources said.
  • Lower risk tolerance sent China’s Yuan lower from a six-month peak and lifted the yen from a seven-month trough ahead of a deal signing later today. U.S. President Donald Trump is slated to sign the trade agreement with Chinese Vice-Premier Liu He at the White House at 1630 GMT.
  • Data on Tuesday showed that U.S. consumer prices rose slightly in December and monthly underlying inflation pressures retreated, which could allow the Federal Reserve to keep interest rates unchanged at least through this year.

Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation
2. Buy EUR/AUD at 1.6120. Stop at 1.6090 and target at 1.6210
3. Worries over tariffs, trade relations and Huawei are likely to weigh on Aussie dollar
4. A Double Bottom and rising Stochastic are hinting of further price rally

Fundamental Comments
1. Worries over tariffs that could derail trade deal between U.S. and China is likely to weigh on Aussie dollar
2. Pressure over Huawei could derail relationship between US and China which is likely to weigh on Aussie dollar

Technical Comments
1.  A possible Double Bottom is hinting of a price bottom and a price rally
2. Stochastic is turning up, hinting of further price rally

Key Levels

Support 1.61151.60801.6035
Resistance 1.61601.62101.6250

Technical Overview

USD/JPY -Price pullback from 110.20 overnight but managed to stay above 109.70. As such, we our view remained unchanged but we remain wary of a change in direction. Stochastic and MACD both have a divergence warning. If price drops below 109.70, the downtrend could be in force for 108.95.

Support 109.70109.40108.95
Resistance 110.10110.45110.75

EUR/USD – Price did not made another move higher but instead stayed in a range of 1.1100 to 1.1145. Our view remains unchanged. We still think price is likely to move higher to 1.1165 to complete the rally. Momentum indicators are not clear at the moment. MACD is bullish but Stochastic is near to the overbought zone. Stay aside for the moment.

Support 1.11101.10801.1065
Resistance 1.11451.11801.1205

GBP/USD – Price has turned higher and is heading towards 1.3080. If price moved above this high price can continue higher 1.3120 but if price is unable to move above 1.3080, price is likely to retreat back to 1.2960. MACD is still bearish but Stochastic is rising and has room for price to progress higher

Support 1.30001.29651.2905
Resistance 1.30351.30801.3125

XAU/USD – Price recovered from 1535 and reached a high of 1554 this morning but this could be a turning point. MACD is showing signs of turning bearish and Stochastic has reached the overbought extreme. There is a high chance of a price decline back to 1546 if price is unable to move above 1.554

Support 1545.101535.501525.40
Resistance 1554.951563.001569.70

EUR/JPY – Yesterday, our buy order was filled at 122.50 when price declined on news of no tariffs rollback on signing of a Sino-U.S. trade deal. We would suggest keeping the position with stop at 122.10 and profit target at 123.90 unchanged. MACD is still bullish but Stochastic is starting to decline from overbought extreme.

Support 122.10121.75121.45
Resistance 122.50122.85123.15

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