FX Commentary – Risk For A Hard Brexit Has Increased.

Market Talk

  • The euro held onto gains against the dollar on Thursday after an overnight Bloomberg’s report that ECB officials are growing more confident in the bloc’s economic outlook sent it higher. Investors are waiting for an ECB meeting to gauge policymakers’ views on how the euro’s rise to a two-year high this month affects the outlook for inflation and economic growth
  • U.K. has caused disruption in the Brexit process with a possible attempt to rewrite the terms of the country’s exit deal in what appears to be a contravention of international law that increased the possibility of a no-deal Brexit in four months’ time.
  • The Aussie nudged slightly lower to 0.7275 as investors nervously monitor an outbreak of coronavirus infections in the state of Victoria. The NZ dollar inched up to 0.6682 against the US dollar.
  • A rebound in crude oil price helped to clawed back some of its previous losses, leading to a stronger Canadian dollar against the US dollar. A recovery in the US equity market also helps to improve risk sentiment and less demand for the safe haven US dollar.
  • Gold was steady on Thursday morning in Asia after a rapid rise overnight. A fall in the US dollar had set the stage for the initial rise. The continued rise in COVID-19 cases globally and a delay in vaccine development drove investors into the yellow metal.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at $1942.20. Stop at $1935.70 and target at $1961.80
3. Geopolitical and coronavirus risks are both increasing demand for safe haven gold.
4. Price is on target to reach Fibonacci 168% projection point with bullish MACD and Stochastic in support.

Fundamental Comments
1. The continued rise in COVID-19 cases globally and a delay in vaccine development is aiding demand for safe haven gold.
2. Geopolitical risk as an increase in tensions between US-China, Australia-China and UK-EU is increasing demand for the yellow metal.

Technical Comments
1. Price has broken above an important resistance point, which is pointing to a rally to the Fibonacci 161.8% projection point.
2. Both MACD and Stochastic are rising and hinting of further price upsides ahead.

Key Levels

Support 1939.501937.501919.45
Resistance 1950.501963.801979.65

Technical Overview

USD/JPY – Our view since last Friday was for this pair to move higher to 106.90. However, while price has not moved below 105.70, we had warning that our bullish view could be wrong. MACD has turned bearish while 20EMA is declining. However, price has managed to stay above 105.70 and we have seen a movement to 106.30 this morning. Trend may be sideways for now. Watch 105.70 and 106.50 for clues.

Support 106.05105.70105.45
Resistance 106.50106.95107.25

AUD/USD – Price may have reached a bottom at 0.7190. There were divergence warnings from both MACD and Stochastic about a possible price low. Price has since climbed up to 0.7280 and near to the Fibonacci 50% of the decline from 0.7413 to 0.7190. MACD and Stochastic are both still rising and we may see a test of 0.7320. 20EMA is also turning bullish.

Support 0.72600.72300.7190
Resistance 0.72900.73250.7365

GBP/USD – From a high of 1.3481 on 1 Sep 2020, price reached a low of 1.2881 last night. However, this may not be the end of the down move. Price is likely to be capped by the support turned resistance point at 1.3055 as well as the 20EMA at 1.3060. We are likely to see another decline below 1.2881 to 1.2775. MACD is bearish but Stochastic is turning up from the oversold extreme.

Support 1.29951.29401.2880
Resistance 1.30501.31051.3160

EUR/USD – Our buy order was filled yesterday at 1.1760 when price dropped to a low of 1.1752. Our view remains unchanged but would recommend bringing stop higher to 1.1750 while keeping profit target at 1.1850 ahead of ECB meeting later today. Stochastic and MACD are both rising which bode well for our bullish view. 20EMA has also turned bullish and is starting to rise.

Support 1.17951.17501.1720
Resistance 1.18351.18651.1895

USD/CAD – From the price low of 1.3040, we saw a 3-wave ABC Fibonacci price pattern which brought price to 1.3258 yesterday morning. Since this high, we have seen a price correction back to 1.3140. If price can stay above 1.3115, we think there is a chance of another test of the recent high of 1.3258. MACD is still bullish but Stochastic is still declining after reaching the overbought zone

Support 1.31151.30801.3035
Resistance 1.31501.31901.3225

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