- The dollar gave up a little ground to riskier currencies on Thursday, while safe haven maintain their gains after the United States and China ended some uncertainties for the world economy by signing a partial trade agreement.
- U.S. President Donald Trump signed a partial trade deal with China on Wednesday that takes steps to root out several practices by Beijing that have irked the White House. Those include intellectual property theft and forced technology transfers from U.S. firms in exchange for Chinese market access.
- Beijing and Washington touted the Phase 1 deal as a step forward while investors hoped the Sino-U.S. trade deal could herald warmer relations between the world’s two biggest economies and help to revive global growth.
- UK CPI fell to a three-year low of 1.3% in December under the weight of electoral and Brexit-related uncertainty strengthening the case for a Bank of England’s rate cut as the pace of inflation slipped to a three-year low.
- Softer Eurozone industrial production data did little to ease worries about stuttering growth in the Eurozone economic bloc. Germany also recorded its slowest growth in six years in 2019, as GDP growth slowed to only 0.6% from 1.5% in 2018 according to a preliminary estimate from the country’s statistics office.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation
2. Buy USD/JPY at 109.85. Stop at 109.55 and target at 110.70
3. Interest rate differential and Sino-U.S. trade deal are both likely to weigh on the safe haven Yen
4. Price is supported at 20EMA and a support area with both momentum indicators hinting of further price advancement
Fundamental Comments
1. Sino-U.S. trade deal has ended uncertainties for world economy which is likely to weigh on the safe haven Yen
2. Interest rate differential is in the US dollar favour
Technical Comments
1. Price is supported by the 20EMA as well a previous resistance high turned into support
2. MACD is bullish and Stochastic is turning up from oversold extreme are both hinting of further price advancement
Key Levels
| Support | 109.70 | 109.40 | 108.95 |
| Resistance | 110.10 | 110.45 | 110.75 |
Technical Overview
EUR/USD – Price reached a high of 1.1161 overnight but Stochastic has shown no sign of turning down as yet. In fact Stochastic looks like it will continue to move higher. MACD has turned bullish and could be rising. 20EMA is bullish and rising. We think price may continue to rise higher to 1.1180. Stay aside and wait for confirmation for downtrend reversal before getting into a short position.
| Support | 1.1145 | 1.1110 | 1.1080 |
| Resistance | 1.1180 | 1.1205 | 1.1245 |
EUR/AUD – We had recommended buying at 1.6120 but price did not reach our buying objective. During the day, price reached a high of 1.6197 but fell this morning to a low of 1.6123. The rally we were looking for yesterday may have ended. We will not look to buy at 1.6120 for today. MACD could turn bearish and the trend may change. Wait for better direction.
| Support | 1.6115 | 1.6080 | 1.6035 |
| Resistance | 1.6160 | 1.6210 | 1.6250 |
GBP/USD – Price reached a high of 1.3057 this morning but the rally may not be over as yet. Our view remains the same as yesterday. We think the rally would be capped at 1.3080 and we are looking for another decline to 1.2960. MACD is still bearish and Stochastic is approaching the overbought extreme. Above 1.3080 would negate our bearish view.
| Support | 1.3035 | 1.3000 | 1.2965 |
| Resistance | 1.3080 | 1.3125 | 1.3170 |
XAU/USD – Price reached a high of 1558 overnight and again this morning. We think this could be the high and price could be turning lower to 1546 as per our view yesterday. Stochastic is turning down from overbought extreme. MACD is bullish but is weak. 20EMA has turned down and this could be a hint of a reversal. Above 1558 will negate our bearish view.
| Support | 1545.10 | 1535.50 | 1525.40 |
| Resistance | 1558.00 | 1569.70 | 1573.25 |
EUR/JPY – Price moved to a low of 122.19 overnight but gains have been capped at 122.71. We suggest moving stop to 122.20 and lower profit objective to 123.10. While MACD is still bullish and rising, Stochastic is declining from the overbought zone. Price and 20EMA has been flat over the past 2 days and we fear it may continue to move in a sideways manner.
| Support | 122.45 | 122.10 | 121.75 |
| Resistance | 122.75 | 123.15 | 123.40 |
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