Market Talk
- The yen traded near an eight-month low versus the dollar on Tuesday, while the euro held steady as investors awaited meetings of European Central Bank on Thursday amid a slightly improving backdrop for global growth.
- IMF shaved its outlook for world growth this year to 3.3%, down from 3.6%. IMF did offer a brighter view on China and lifted the outlook for China’s economic growth to 6%, as it said that a U.S.-China trade deal could see activity bottom out.
- The euro was locked in a narrow range before a European Central Bank (ECB) meeting on Thursday where it is expected to launch a comprehensive review of central bank strategy, including the ECB’s inflation target which was not achieved in 2019.
- Sterling dipped sharply against all of its main trading peers on Monday, as traders reacted to weekend Brexit comments from U.K. Finance Minister Sajid Javid, who warned U.K. businesses that the government would remain committed to as hard a Brexit as possible and that it would not seek regulatory alignment with Brussels.
- Australian dollar was little changed at $0.6876 before labour market data on Thursday that could help determine whether the Reserve Bank of Australia lowers interest rates at a meeting on Feb. 4.
Chart Focus AUD/JPY
Key Points
1. Trading Sell on AUD/JPY
2. Sell AUD/JPY at 75.60. Stop at 75.95 and target at 75.00
3. Expectation of a RBA rate cut and spread of coronavirus in China are both weighing on the Aussie dollar
4. Break of a Double Top pattern’s neckline and MACD bearish divergence both add weight to a possible price decline
Fundamental Comments
1. Expectation of a RBA rate cut is weighing on the Aussie dollar
2. Spread of coronavirus in China is also weighing on the Aussie dollar
Technical Comments
1. Break of Double Top chart pattern’s neckline is a hint of more price declines
2. MACD bearish divergence warning adds weight to a price decline
Key Levels
| Support | 75.30 | 75.00 | 74.70 |
| Resistance | 75.60 | 75.95 | 76.30 |
Technical Overview
USD/JPY –Price may have formed a Double Top chart pattern with high on 14 Jan and 17 Jan marking the tops. There was also a bearish divergence warning from MACD reinforcing this Double Top view. A move below 109.70 would confirm the top in place and a reversal lower to 108.95. Above 110.30 would extend the price rally to 110.65.
| Support | 109.70 | 109.40 | 108.95 |
| Resistance | 110.05 | 110.30 | 110.65 |
EUR/USD – Our trading sell call was not filled yesterday as price failed to move higher than 1.1102. MACD is warning with a bullish divergence and this is a hint that the decline from 1.1172 could be coming to an end soon. Stochastic is in the oversold extreme. We see a short term low at 1.1075 and with a Evening Doji Star candlestick pattern, we are looking for a price recovery to 1.1120.
| Support | 1.1075 | 1.1040 | 1.1005 |
| Resistance | 1.1100 | 1.1145 | 1.1180 |
GBP/USD – Price declined to a low of 1.2961. As price managed to hold above this important base, there is a chance of a correction to 1.3040 to 1.3060 but we think price is more likely to try 1.2905 in the next couple of days than moving above 1.3060. MACD is neutral but Stochastic is already in the overbought extreme
| Support | 1.2990 | 1.2960 | 1.2905 |
| Resistance | 1.3020 | 1.3070 | 1.3115 |
XAU/USD – Our view remains the same as yesterday. We are expecting price to move higher to 1580-1582 which is also the 62% Fibonacci correction point of the decline from 1611 to the low of 1526. If price fails to move above 1582, we see a bigger decline to 1510. Above 1582 would likely lead to another test of 1611.
| Support | 1558.00 | 1545.10 | 1535.50 |
| Resistance | 1569.70 | 1580.65 | 1593.95 |
USD/CNH – Price made a low at 6.8452 yesterday and this low was accompanied by bullish divergence warnings from both MACD and Stochastic. Price broke above the support turned resistance point at 6.8745 and this had led to a rally to 6.90. We are expecting a pullback towards 6.8830. This could be a good level to accumulate for another rally to 6.9225.
| Support | 6.8880 | 6.8780 | 6.8740 |
| Resistance | 6.9000 | 6.9050 | 6.9100 |
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