Market Talk
- Growing concerns over an outbreak of a mysterious pneumonia-like virus in China, which had killed 9 and infected hundreds more, has impacted currency markets and pushed the Chinese yuan lower.
- The Japanese yen, often seen as a safe-haven in times of uncertainty, strengthened sharply against the dollar to levels below 109.70 to trade at 109.65. The Chinese yuan declined to 6.92 against the US dollar. With the spread of coronavirus, both currency pair trend are expected to continue.
- Housing data rose 3.6% to a 5.54 million annual rate, strengthening expectations that the U.S. economy will remain on solid footing. It was the strongest pace of growth since February 2018. Market is now expecting the Fed to be on hold for the rest of 2020 after a series of strong economic data in the past 2 weeks.
- Bank of Canada kept its benchmark rate on hold, but left the door open to a future rate cut, saying that it will monitor data to gauge whether the recent slowdown in domestic growth has accelerated. BOC dovish view coupled with a decline in crude oil price send USD/CAD to 1.3160.
- Australian dollar, which has shed more than a cent this year as the domestic economy stalls, jumped 0.5% to $0.6877 after jobs data showed an unexpected drop in unemployment to 5.1%. Employment also surprised with a 28.9k jump against an expectation of only 12.2k
Chart Focus AUD/USD
Key Points
1. Trading buy AUD/USD
2. Buy AUD/USD at 0.6850. Stop at 0.6815 and target at 0.6915
3. Strong Australian data showed a strong Australian economy and reduces hope of a RBA cut which are both favourable to the Aussie dollar.
4. A Double Bottom chart pattern with MACD bullish divergence is a strong hint of a possible price bottom
Fundamental Comments
1. Strong Aussie data is a sign that the Australian economy is doing well
2. Strong data reduces the chance of RBA cutting rate in its next meeting in early February 2020.
Technical Comments
1. Price has made a Double Bottom chart pattern which is a hint of a bottom
2. MACD is showing bullish divergence which is a hint of a possible price bottom
Key Levels
| Support | 0.6840 | 0.6825 | 0.6795 |
| Resistance | 0.6875 | 0.6920 | 0.6950 |
Technical Overview
USD/JPY – Price broke below 109.70 this morning and we think the decline can continue to 108.95 over the next couple of days. MACD has turned bearish with both its lines now below the zero line. MACD is still trending lower. 20EMA has also turned bearish and its gradient is steep, hinting of a strong bearish trend. Above 110.30 would negate our bearish view.
| Support | 109.40 | 108.95 | 108.65 |
| Resistance | 109.70 | 110.10 | 110.30 |
EUR/USD -Price tested the previous low of 1.1075 but did not make much headway, dropping to a low of 1.1067 before bouncing higher to 1.1100. MACD is flat and neutral at the moment while Stochastic is still moving lower from the oversold zone. Avoid this pair until after ECB announcement.
| Support | 1.1070 | 1.1040 | 1.1005 |
| Resistance | 1.1100 | 1.1140 | 1.1175 |
GBP/USD – Price moved higher than we anticipated. Price moved above 1.3120 to a high of 1.3151. MACD is still bullish at the moment and Stochastic has yet to turn down from overbought extreme. There is a possibility of price continuation to 1.3200. A move below 1.3020 would negate our bullish view
| Support | 1.3100 | 1.3070 | 1.3020 |
| Resistance | 1.3150 | 1.3210 | 1.3255 |
XAU/USD – Price is still consolidating and we think the consolidation is likely to continue for today. The bigger range is from 1569 down to 1535. MACD is still above the zero line and bullish but MACD is flat and not hinting much. Stochastic is in the middle of its range. Both momentum indicators are hinting of a sideways consolidation.
| Support | 1549.20 | 1535.80 | 1525.20 |
| Resistance | 1563.35 | 1573.30 | 1585.25 |
USD/CHF – Our sell call was stopped out when price spiked higher to 0.9728. Our view remains the same as yesterday. Price could have made a top and could be moving lower to 0.9620. MACD is still bullish but Stochastic has turned down from near the overbought zone and is moving lower.
| Support | 0.9665 | 0.9630 | 0.9610 |
| Resistance | 0.9700 | 0.9735 | 0.9760 |
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