FX Commentary – Risk Appetite Soured From North Korean News & Crude Oil Price Crash

Market Talk

  • Reports are circulating this morning that North Korean leader Kim Jong Un is dead. The US dollar and yen are both seeing inflows as news add to the risk-off mode started in late New York session following the collapse of crude oil price.
  • South Korean media Yonhap citing the South Korean government saidNorth Korean leader Kim Jong Un is not seriously ill and there was no unusual movement in North Korea. Reuter, citing a source at China’s Communist Party said North Korean leader is not seriously ill.
  • WTI May contract slumped to -$37.63 in the previous session ahead of the contract’s expiry on Tuesday, hitting investors with the reality of a supply glut. Futures traders got caught long and unable to take delivery with no storage facility to hold their goods, forcing them to sell at whatever price is available.
  • RBNZ governor Orr does not rule out negative rate for the NZ dollar. He also does not rule out direct monetization of government debt which sent the NZ dollar falling to 0.5978 from an overnight high of 0.6091.
  • The euro held steady as caution set in before data on Germany’s ZEW economic sentiment later on Tuesday which is likely to weigh down the Euro. Data is expected to show German investor sentiment remained weak in April because of the coronavirus pandemic.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 68.00. Stop at 68.60 and profit target at 67.00
3. A reduction in risk appetite and a likely low Aussie interest rate are both likely to weigh on the Aussie
4. A Double Top chart pattern and bearish momentum indicators’ reading are pointing to more price declines.

Fundamental Comments
1. Risk appetite has been lowered as a result of overnight crude price decline, Kim Jong Un’s news and coronavirus.
2. Lowe’s comment that current interest rate is likely to remain for a few years is weighing on the Aussie advantage over the Yen

Technical Comments
1. Breakdown from a Double Top chart pattern is hinting of more price declines
2. MACD is bearish and Stochastic is turning down. Both are hinting of further price declines.

Key Levels

Support 67.5566.9566.60
Resistance 68.0568.5568.90

Technical Overview

USD/JPY – Price moved in a 60 pips range yesterday, staying within Friday’s range. MACD is flat and slightly bearish at the moment. 20EMA is flat as well. Stochastic is moving lower again after a bullish crossover failed to move it much higher. Price is likely to range for today. On a longer term, price needs to move above 108.20 to kick start a move towards 109.20. Otherwise, we may see a test of 106.90 again.

Support 107.25106.90106.60
Resistance 107.55107.90108.35

EUR/USD – Price moved in a 55 pips range yesterday, staying within Friday’s range. MACD is bearish at the moment but is near to the zero line. Stochastic has a bullish crossover in the oversold zone but 20EMA is still pointing to a bearish trend. We remain bearish for today. We see price capped at 1.0860 and see a move to 1.0770 in the next few days. A move above 1.0925 will negate our bearish view.

Support 1.08251.07701.0745
Resistance 1.08601.08951.0925

GBP/USD – Our view remains the same as yesterday. We are looking at price being capped at 1.2480 and we are looking for a test of 1.2225 after price broke support at 1.2405. Stochastic is close to the oversold zone at the moment but MACD is still bearish. 20EMA is also bearish. However, momentum seems to have decreased. We may see price declined halted at 1.2360.

Support 1.23901.23601.2315
Resistance 1.24351.24801.2525

XAU/USD – Price managed to stay above $1671 and we saw a push higher to $1702. This may be the correction pullback we have been looking for. As long as price is capped at $1702 and 20EMA resistance at $1695, we are likely to see a move back to break the $1671 support. A move above $1702 will abort our bearish view and calls for a move to $1721. MACD is still bearish but Stochastic is turning higher from oversold extreme.

Support 1685.351671,051660.10
Resistance 1702.301717.701725.20

USD/CAD – Our buy order was not filled yesterday as price only reached a low of 1.4031. Overnight, with the drop in crude oil price weighing on the Canadian dollar, price reached a high of 1.4177, which was close to the previous high back on 16 April 2020. Stochastic is in the overbought zone but MACD is still bullish. Price will need to break above 1.4182 to maintain its bullish momentum.

Support 1.41451.40901.4050
Resistance 1.41801.42251.4250

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2 thoughts on “FX Commentary – Risk Appetite Soured From North Korean News & Crude Oil Price Crash

  • I thot on the 21/5 webinar, you presented Gold is forecasted to be a super performer in this Covid19? but the above assessment is bearish on Gold?

    • I am bullish on Gold. There is no change in your view on Gold. I see Gold going to $1900 before the next Chinese New Year. But that does not mean it will go up in a straight line. There will be up and there will be down. It happens that we had seen a new 8-year high on 14 April. The current downward movement is a correction in my opinion.

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