Market Talk
- The dollar was on the defensive against most currencies on Friday after concerns about the U.S. economy, combined with an excess supply of dollars already in circulation due to the Fed’s massive quantitative easing, are likely to weigh on the greenback in coming weeks
- The pound continued its rally on Friday, shrugging off concerns that the U.K and EU are unlikely to find a breakthrough on the latest round of post-Brexit talks and after a dip in Treasury yields dampened the appeal of holding the greenback.
- A larger-than-expected rise in weekly U.S. jobless claims came just one day after Fed officials warned that a recovery in hiring is starting to slow, raising doubts about how quickly the world’s largest economy will bounce back from the coronavirus.
- The Euro stood at $1.1866 on Friday in Asia following a 0.2% decline in the previous session. Traders in the euro are looking ahead to the release later on Friday of manufacturing data for the euro zone and for Europe’s largest economy, Germany.
- Gold price was up on Friday morning trading, recovering from Thursday 3% decline, after a surprising uptick in the number of U.S jobless claims above one million, saw investors turn to the safe-haven yellow metal.
Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 76.10. Stop at 76.40 and profit target at 75.35
3. US-China tensions and a slowing US economy which is likely to affect global trades are both likely to weigh on the Aussie dollar
4. Price capped by the Fibonacci 62% correction point with bearish MACD is a hint of more price declines to follow.
Fundamental Comments
1. Increase in U.S.-China tensions after the U.S. suspended its extradition treaty and reciprocal tax treatment on shipping with Hong Kong is likely to weigh on the Aussie.
2. Fed warning of a slowing US economy is likely to weigh on global economy and increase risk sentiment and weigh on the Aussie dollar
Technical Comments
1. Price rally was capped by the Fibonacci 62% correction point of the decline from 76.65 to 75.60, which is a hint of more price declines to follow
2. MACD is bearish with both its lines below the zero line, hinting of more price declines to follow
Key Levels
| Support | 75.95 | 75.60 | 75.25 |
| Resistance | 76.25 | 76.65 | 76.90 |
Technical Overview
USD/JPY – The high of 106.21 turned out to be the peak of a corrective rally and price has declined to 105.55 currently at the point of writing. We think price is likely to decline further to 105.10 which is similar to our view from yesterday. MACD is bearish. Stochastic had a bearish crossover and is declining. 20EMA is also bearish and declining. A move above 106.21 would negate our bearish view.
| Support | 105.35 | 105.05 | 104.70 |
| Resistance | 105.80 | 106.20 | 106.65 |
EUR/USD – As long as price stays below 1.1915, the short term trend is likely to be bearish and a fall to 1.1790 is likely. MACD has a bearish crossover near to the zero line and is declining. However, Stochastic is rising after a bullish crossover. 20EMA is flat. Indicators are inconclusive at the moment and there is an important Euro data later today. We prefer to stay aside for the today.
| Support | 1.1840 | 1.1790 | 1.1750 |
| Resistance | 1.1880 | 1.1915 | 1.1965 |
GBP/USD – Sterling has recovered from a low of 1.3064 overnight to 1.3254 today. However, price momentum looks weak at the moment. MACD is starting to show a divergence. However, Stochastic is still rising after a bullish crossover. Price will need to move above Wednesday’s high of 1.3267 to be bullish. If price is unable to break this resistance, we are likely to see a move to 1.3185 or lower.
| Support | 1.3225 | 1.3185 | 1.3140 |
| Resistance | 1.3265 | 1.3300 | 1.3340 |
XAU/USD – Price, after reaching a low of $1924 on Thursday, price has been in a flat and sideways consolidation. The consolidation range is from $1924 to $1955. MACD is flat at the moment and neutral. Stochastic is near to the overbought zone. 20EMA is flat. We think price is likely to stay within the consolidation range for today. Watch the breakout of this range for clue to the next directional move.
| Support | 1940.20 | 1924.55 | 1916.70 |
| Resistance | 1955.20 | 1966.05 | 1983.90 |
USD/CNH – Our buy recommendation was stopped out overnight when price declined to a low of 6.8930. MACD is bearish but is starting to warn with divergence. Stochastic is still declining; hinting price may not have reached a bottom at 6.8930 as yet. 20EMA is also bearish and pointing lower. We think the decline is likely to continue but the downside could be limited to 6.8600.
| Support | 6.8930 | 6.8645 | 6.8450 |
| Resistance | 6.9060 | 6.9295 | 6.9450 |
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