FX Commentary – EUR/USD Is At A 33-Month Critical Low Point

Market Talk

  • The euro hit a 33-month low of $1.0826 on Friday, as concerns mounted about weakening economic growth in Europe at a time financial markets and policy makers fret about a new threat to the global economy from a fast spreading coronavirus in China.
  • Europe’s biggest economy posted zero growth from the previous quarter while separate data showed euro zone gross domestic product grew 0.1% quarter-on-quarter in the fourth quarter, in line with forecasts but the weakest since 2014.
  • U.S. core retail sales data was flat last month, lagging expectations of 0.3% growth while its rise in December was revised down to 0.2% from a previously reported 0.5%. Industrial production also shrank more than expected by 0.3%.
  • Moody lowered GDP forecasts for China to 5.2% in 2020 and global economies to 2.4% as coronavirus dents optimism just as global economy showed signs of stabilization of global growth this year resulting from truce in US-China trade war.
  • Japan’s economy was also under increasing strain, with GDP figures released on Monday coming in far below economist’ forecasts.  The world’s third-largest economy shrank 1.6% in the three months to December, the largest drop in six years, hit by a sales tax hike.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation
2. Buy NZD/USD at 0.6420. Stop at 0.6395 and target at 0.6510
3. Disappointing US data and Beijing’s effort to boost the economy through tax and fee cut could boosted the NZ dollar
4. Price has been supported at the Fibonacci 62% correction point with momentum indicators turning up and hinting of price upside is signs of a possible bullish trend.

Fundamental Comments
1. Disappointing US data on Friday is likely to weigh on the US dollar.
2. Beijing’s effort to roll out targeted and phrased tax and fee cut to boost the economy could boost the NZ dollar.

Technical Comments
1. Price has been supported at the Fibonacci 62% correction point.
2. Stochastic and MACD are both bottoming out and could be turning up hinting of price upsides ahead.

Key Levels

Support 0.64100.63950.6370
Resistance 0.64450.64800.6515

Technical Overview

USD/JPY – Price has been in a range from 109.65 to a high of 110.10 for the past week. MACD is flat and around the zero line and is not giving much hint. Stochastic is above the oversold extreme but is weak. We think price is likely to range again for this week until we have a break of either 109.65 or 110.10. Watch these 2 levels for clues.

Support 109.60109.20108.90
Resistance 109.90110.15110.30

EUR/USD – Price has reached a low of 1.0826 on Friday which was close to our target at 1.0810. We believe price is close to a bottom after a 10-day decline and Stochastic is starting to warn of divergence. MACD is still bearish but is rising and there was a bullish crossover as well. We are looking at 1.0890 if 1.0810 halts the decline.

Support 1.08101.07901.0765
Resistance 1.08451.08701.0905

GBP/USD – Price was capped at 1.3070 resistance point and will need to move above this resistance to be bullish. However both momentum indicators, Stochastic and MACD are not hinting of strong price uptrend at the moment. Support is now at 1.3000 and a break below 1.2985 would negate our bullish view for 1.3155.

Support 1.30101.29801.2940
Resistance 1.30451.30701.3105

XAU/USD – Our view remains unchanged from last week. We view price as consolidating within the range of 1593 to 1547. Price moved to a high of 1584.85 on Friday, above our expectation of 1582. We think the upside could be limited to 1588. Stochastic is in the overbought extreme. MACD is bullish but may its strength is not strong. We continue to see consolidation range trading for Gold.

Support 1576.901567.501554.90
Resistance 1584.851593.051611.00

USD/CAD – Our order was not filled on Friday as price only reached a high of 1.3259. Price has continued to decline and is now at the support level of 1.3229. A break of this support is likely to send price lower to 1.3180. MACD is bearish and is starting to turn lower, supporting this bearish view. Stochastic is weak and is also turning lower.

Support 1.32151.31801.3145
Resistance 1.32501.32701.3305

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