FX Commentary – Gold Should Test 8-Year High at $1748

Market Talk

  • On Friday morning, the U.S. dollar gives up some of its gains from Thursday amid concerns that U.S.-China relations will be strained further by the pandemic. Increasingly bitter exchanges between both sides have questioned the future of a partial trade deal they signed in January.
  • Investors are keeping an eye on simmering U.S.-China tensions, with U.S. President Trump saying in an interview overnight that he did not want to speak with Chinese counterpart Xi Jinping and suggesting that he could cut ties with the second largest economy.
  • The British pound remained under pressure after touching a five-week low of $1.2161 overnight after the British government reiterated its refusal to extend the Brexit transition deadline beyond December.
  • An already-dismal near-term U.S. economic outlook has darkened further in the latest Reuters poll of economists, with a forecast for a 35% annualized second-quarter contraction. While a recovery is still forecast for the second half, the economy won’t come close to regaining the ground it lost this year.
  • China presented a mixed picture of its recovery from the COVID-19 virus as it said that industrial production in April increased 3.9% year-on-year, higher than the 1.5% predicted by analyst. But it also said that retail sales in the same month slid 7.5% year-on-year, against analyst forecasts of a 7% drop.

Chart Focus AUD/JPY
Key Points

  1. Sell AUD/JPY recommendation
  2. Sell AUD/JPY at 69.30. Stop at 69.65 and target at 68.60
  3. Concern over U.S.-China relation and poor Australian job data are both likely to weigh on the Aussie dollar
  4. Price, capped by the Fibonacci 62% correction point and bearish MACD are both hinting of further price declines.

Fundamental Comments

  1. Concerns over U.S.-China relations is likely to drive flow into safe haven Yen
  2. Poor Aussie job data that showed the country shedding jobs in April at the fast pace on record is likely to weigh on the Aussie dollar

Technical Comments

  1. Price correction being halted at the Fibonacci 62% correction point is usually a sign of a reversal.
  2. MACD is still bearish and could be turning down which is a hint of further price declines

Key Levels

Support 69.1568.9068.55
Resistance 69.5569.8570.15

Technical Overview

USD/JPY – Our buy order from Wednesday is currently still alive. Our stop loss was not triggered as price only reached a low of 106.73 and price has currently moved higher to 107.43. We recommending keeping both stop and profit order unchanged at 106.70 and 107.75 respectively. Stochastic is rising and MACD is still bullish. We think price can continue higher.

Support 107.00106.65106.30
Resistance 107.40107.75108.05

EUR/USD – Our view remains the same as yesterday. We think the corrective rally could be over for now after price had reached 1.0895 and a decline to test the low of 1.0725 could be on the card. Breaking the 8-week uptrend line at 1.0780 would confirm the start of a downtrend. Stochastic is in the oversold zone but MACD is still bearish. If 50EMA at 1.0830 can cap price advance, we can see 1.0725 in the next few days.

Support 1.07951.07651.0725
Resistance 1.08251.08551.0895

GBP/USD – Price has reached a low of 1.2165 overnight but the trend is still bearish. Stochastic is in oversold zone but MACD is still bearish. 20EMA is pointing lower and its gradient is steep, which is a hint of a strong bearish trend. We think price can continue lower to 1.2115 within the next 48 hours. Price should be capped at 1.2250 for the bearish trend to prevail.

Support 1..21651.21301.2085
Resistance 1.22101.22501.2290

XAU/USD – Price has moved above $1728 and has reached a high of $1738. A break of the Triangle chart pattern on the daily chart is a sign of more price upsides. The first target would be the 8-year high at $1748. Stochastic is into the overbought extreme at the moment. However MACD is still bullish and moving higher. We think price should be able to test $1748 within the next 48 hours.

Support 1728.151718.901708.45
Resistance 1738.551747.151754.10

AUD/USD – Our sell order was filled this morning as price rose to a high of 0.6472. Our view remains the same as yesterday. Keep stop at 0.6505 and profit target at 0.6375. Stochastic is near to the overbought zone while MACD is still bearish at the moment. 20EMA is currently providing resistance at 0.6460 and as long as price stays below the 20EMA, it is likely to move lower again.

Support 0.64150.63700.6335
Resistance 0.64650.65100.6560

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