FX Commentary – EUR/USD & GBP/USD At A Crossroad

Market Talk

– The dollar rose to a three-week high against a basket of currencies on Thursday, helped by continued tightness in U.S. money markets, while heightened political tensions and a gloomy economic outlook weighed on the euro and sterling.

– The US dollar drew support from mounting political tensions as an effort by Democrats to impeach President Donald Trump as well as risk aversion driven by trade war fears. A resilient U.S. economy and increasingly less-dovish-than-expected language from U.S. Federal Reserve board members were supporting the greenback.

– The euro slipped to a fresh two-year low below 1.0904, its weakest since May 2017, pressured by an increasingly bleak euro zone economic outlook for the euro zone. A strong greenback also adds to the gloom for the single currency.

– Sterling fell to a 2-week low as investors waited for the British parliament’s next step to break the Brexit impasse and as opposition leaders gathered to discuss tactics while EU’s negotiators wait for Britain to provide “legal and operational” proposals for to reach an agreement on exiting the bloc.

– Optimism over U.S.-China trade relations lingered on Thursday after China’s top diplomat said that China was willing to buy more U.S. products. Wang Yi said trade talks would yield results if both sides “take more enthusiastic measures” to show goodwill and reduce “pessimistic language” in their trade dispute.

Chart Focus USD/SGD
Key Points
1. Buy USD/SGD recommendation
2. Buy USD/SGD at 1.3790. Stop at 1.3745 and target at 1.3850
3. US political tension, a resilient US economy and a tumble in Singapore Factory Output are all weighing on the SGD
4. A strong support at a previous high turned support and 20EMA coupled with a bullish MACD is hinting of further price upside

Fundamental Comments
1. US political tension, resilient US economy is keeping the US dollar strong
2. Singapore Factory Output tumbled by 8% which is reigniting fears of a technical recession

Technical Comments
1. A previous high turned support and 20EMA are both providing a support
2. MACD is bullish and hinting of further price upside

Key Levels

Support 1.37901.37451.3710
Resistance 1.38251.38501.3895

Technical Overview

USD/JPY – Price managed to stay above 107.40 and we think there is a possibility of another price push to 108.45 in the next couple of days. MACD is still bullish and could be moving higher. However, Stochastic is into overbought zone. A move below 107.40 would target 106.75.

Support 107.55107.30106.95
Resistance 107.95108.15108.45

EUR/USD – Price reached a low of 1.0904 last night and this could be a temporary low. Stochastic is into oversold extreme but MACD is still bearish at the moment. 20EMA is also bearish and its gradient is steep, which is a hint of a strong bearish trend. For today, we think there would be a correction back to test the 20EMA resistance at 1.0960 before another decline.

Support 1.09051.08801.0840
Resistance 1.09601.09901.1025

GBP/USD – Our sell order yesterday was not triggered as price reached only a high of 1.2381. Price declined to a low of 1.2301 overnight and both MACD and Stochastic have given divergence warnings. There is likely to be a price pullback towards the 20EMA around 1.2370. Another decline is possible after this price pullback. Watch out for the development.

Support 1.23051.22701.2230
Resistance 1.23651.24151.2460

XAU/USD – Price declined to 1500.30 again for a second time last night but the decline may not be completed as yet. MACD is still bearish and Stochastic is into oversold extreme but 20EMA is still hinting of a bearish trend. If price stays below 1512.30, we think price is likely to test the low of 1480 again. Above 1513 would negate our bearish view

Support 1500.201493.851482.50
Resistance 1515.301527.601535.60

EUR/GBP – Price may have reached a temporary low at 0.8785. Stochastic and MACD have both shown bullish divergence hinting of a potential low. MACD has turned bullish now and 20EMA has also turned bullish. Price has also crossed above the 20EMA. Price is likely to target the Fibonacci 127% projection target at 0.8890

Support 0.88550.88300.8800
Resistance 0.88850.89050.8935

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FX Trading Idea – EUR/GBP

Price broke above the sideways trading channel and could be heading higher to 0.8920.

MACD has been showing bullish divergence twice before today’s breakout. MACD has been warning of potential low for some time now. Stochastic has also had a bullish divergence warning. 20EMA is turning up now and all these are supporting a price push towards Fibonacci 161.8% or 200%.

Buy 0.8860 for a price rally to 0.8920 with a stop below 0.8830.

FX Commentary – Fallout From Yuan’s Decline

Market Talk

– China allowed its onshore Yuan to weaken past the key 7-per-dollar level on Monday for the first time in 11 years. China had previously intervened heavily to keep it below 7 but there were no central bank intervention to cap the USD/CNY movement yesterday. The offshore Yuan fell to an all-time low of 7.1185 and continued its decline to 7.1265 this morning.

– This move shows Beijing is prepared to use its currency as a tool to respond to Trump’s decision to impose 10% tariffs on $300 billion of Chinese imports from 1st Sept 2019, marking a sharp escalation in the bruising trade war between the world’s two largest economies. Chinese buyers of US’s soya bean halted orders, reportedly on trade concern. China’s retaliation could mean there will be no trade deal at the end of the road.

– U.S. Treasury Secretary Steven Mnuchin said in a statement on Monday, the US government had determined that China is manipulating its currency and that Washington would engage with the IMF to eliminate unfair competition from Beijing. Trump tweeted that “This is a major violation which will greatly weaken China over time”

– RBA kept rate unchanged at 1.0% after its Monetary Meeting today, dampening market hopes of another rate cut. However, this action managed to lift AUD/USD off its low.

– Tomorrow morning, RBNZ will be holding its Monetary Policy meeting with rate announcement scheduled at 10am. Press conference will be at 11am.

Chart Focus EUR/JPY

Key Points

1. Sell EUR/JPY recommendation

2. Sell EUR/JPY at 119.50. Stop at 120.05 and target at 117.70

3. Trade tariffs war and Chinese Yuan’s decline are likely to keep safe haven JPY strong

4. Price is capped by Fibonacci 62% correction point and a bearish MACD is hinting of further price decline.

Fundamental Comment

1. Trade tariffs war between the US and China is likely to keep safe haven JPY strong

2. Chinese Yuan currency decline is likely to lead to worries that a trade deal will not be concluded between the 2 largest economies

Technical Comments

1. Price is capped by the Fibonacci 62% correction point of the decline from 121.73 to the low at 117.69

2. MACD is rising but is still bearish

Key Levels

Support 119.10118.50118.05
Resistance 119.50119.95120.50

Technical Overview

USD/JPY – After reaching a low of 105.50 this morning, price has recovered higher to 107.08. Stochastic is moving higher from oversold extreme but it still looks weak. MACD is recovering but is still bearish. If price is unable to move above 107.86, we think price is likely to test 105.70 again in the next few days.

Support 106.30105.95105.50
Resistance 106.70 107.10 107.55

EUR/USD – We had a sell call on this pair yesterday, but we got it wrong. We were stopped out with a 30 pips loss. Price has reached a high close to 1.1250 and Stochastic is deep into overbought extreme but MACD is still bullish. We are expecting a price pullback to 1.1170-1.1150. We will watch the reaction at this support to gauge the next directional move.

Support 1.11801.11501.1115
Resistance 1.12251.12501.1285

GBP/USD – After reaching a low on Friday at 1.2069, price has been consolidating around 1.22 to 1.2069. Stochastic may have reached its peak and could be about to turn lower. MACD is rising but is neutral at the moment. 20EMA is flat and not indicative at the moment. Wait for better trading idea

Support 1.2135 1.2100 1.2070
Resistance 1.2185 1.2210 1.2250

XAU/USD – Price rallied overnight to reach a high of 1474.80. Stochastic is turning down from overbought extreme and MACD has a crossover and is heading lower. We are expecting a price correction down to 1447 before the uptrend resumes again. A move below 1428 could signal a prolong correction

Support 1456.50 1446.45 1431.25
Resistance 1464.651475.10 1487.95

EUR/GBP – This morning price reached a high of 0.9249, filling our profit order at 0.9230. We are out with a 95 pips profit. Price may have exhausted its move and we are likely to see a price decline lower to 0.9100. MACD and Stochastic have both given bearish divergence warnings of a potential price high.

Support 0.9185 0.9150 0.9115
Resistance 0.9225 0.92500.9300

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FX Commentary – Fallout From Tariffs War

Market Talk

Fallout from the U.S.-China trade dispute saw investors seek cover in perceived safe-haven JPY, CHF and gold. The Japanese currency rose to a seven-month peak, while Gold breached a 6-year high achieved on 19th of July, reaching a high of 1456 this morning.

China on Friday vowed to fight back against U.S. President Trump’s decision to slap 10% tariffs on the remaining $300 billion in Chinese imports.  Any retaliation is likely to worsen trade relationship between the 2 largest economies in the world, sending the offshore China’s Yuan to a historic low at beyond 7.0 this morning and Aussie near to its 2019’s low.

Tension in the Middle East is likely to weigh on sentiment with Iran’s seizure of a foreign tanker on Sunday and its Foreign Minister Javad Zarif announcing that Tehran would make a third move to roll back commitments to the 2015 nuclear deal signed under the Obama administration.

On Friday, the closely-watched U.S. NFP data showed nonfarm payrolls increased by 164,000 jobs in July, fewer than the prior month, and wages increased modestly, increasing  expectations that the Fed might deliver another interest rate cut in September after it delivered its first rate reduction in more than a decade at the end of July.

China’s Caixin Services Purchasing Manager’s Index (PMI) for July 2019 came in at 51.6 against June’s reading of 52.0. July’s reading was at a 5-month low, heightening the slowdown in China’s economy as a result of the ongoing trade tariffs dispute between the U.S.  Tonight, U.S. Non-manufacturing PMI is scheduled at 10pm.

Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation

2. Sell EUR/USD at 1.1145. Stop at 1.1175 and target at 1.1075

3. Interest rate differential and GDP growth rate are both in the US$ favour

4. Price is at a resistance zone with momentum indicators hinting of a bearish trend

Fundamental Comment

1. Interest rate differential is in US$ favour

2. GDP growth rate is in US favour

Technical Comments

1. A strong resistance zone at 1.1145 to 1.1160 is likely to provide a strong barrier

2. MACD is bearish and Stochastic is near to overbought extreme.

Key Levels

Support 1.11051.10751.1040
Resistance 1.11401.11651.1195

Technical Overview

USD/JPY – Trend is still bearish for this pair, with trade tariffs dispute, tension in the Middle East keeping safe haven JPY strong. Price has reached the Fibonacci 161.8% of the rally from 107.25 to 109.31 but a break of this support could lead to a decline to 105.10. MACD is bearish and Stochastic is oversold but there are no indications of a reversal by both indicators

Support 105.75 105.35105.10
Resistance 106.15 106.80 106.95

AUD/USD – Price reached a low of 0.6746 this morning on the back of a weaker China Caixin PMI data. Stochastic is starting to show divergence with price and MACD’s bearish momentum is weaker. Price could be near to a bottom. A move above 0.6815 could confirm the bottom and a possible price rally to 0.6900.

Support 0.67600.67450.6705
Resistance 0.6785 0.6815 0.6865

GBP/USD – Price recovered this morning to a high of 1.2190 but has not been able to sustain the rally. Price has declined to 1.2120. MACD is still bearish at the moment and could be about to turn lower again while Stochastic has lost its upward momentum. 20EMA is still hinting of another decline. A break of 1.2068 could bring price to the important support at 1.1985.

Support 1.2100 1.2070 1.2030
Resistance 1.2130 1.2175 1.2205

XAU/USD – Price broke above a previous high at 1452.80, reaching a high of 1459.07 this morning. MACD is still bullish and rising and Stochastic is still rising and has not yet make a bearish turn. There is a possibility of price exceeding 1460. The 20EMA is bullish and its gradient steep, hinting of a strong trend.

Support 1452.70 1442.70 1430.60
Resistance 1462.451478.10 1487.95

EUR/GBP – Our trade recommendation was filled on Friday as price went to a low of 0.9089. Luckily it did not hit our stop at 0.9085. Price is back up to 0.9166 and our view remains unchanged. Bring stop higher to 0.9115 and keep target unchanged at 0.9230. MACD is still bullish and rising while Stochastic has not yet turned down from overbought extreme. 20EMA is bullish and moving higher.

Support 0.9150 0.9120 0.9085
Resistance 0.9190 0.92050.9230

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FX Commentary – Tariffs War Is Back

Market Talk

Trump, in a series of tweets, said the U.S. would impose an additional 10% tariff on US$300 billion of Chinese imports to the U.S.  The levy will take effect on Sept 1 and could go up to 25%, saying China had failed to buy large quantities of U.S. agricultural products as promised in previous talks.

– Trump’s comments came after a U.S. delegation met with Chinese trade officials earlier this week in the first in-person trade talks between China and the U.S. since both countries reached a truce. An escalation in trade friction between the world’s two-largest economies threatens to derail global economic growth.

– Gold’s price spiked as investors looked for safety after CBOE’s Volatility Index (VIX), considered the best fear gauge in the market, surged 8.7% higher at 17.57. The Japanese yen hit a more-than-one month high against the dollar and multi-year peaks against Aussie and NZ$ currencies on Friday

– Aussie dollar was the weakest currency on Friday; weigh down by trade friction between the U.S. and China. Aussie is usually a proxy for the Chinese currency, which is restricted and not freely traded.

– U.S Non-Farm Payroll data is scheduled for release tonight at 8.30pm.

Chart Focus EUR/GBP

Key Points

1. Buy EUR/GBP recommendation

2. Buy EUR/GBP at 0.9135. Stop at 0.9085 and target at 0.9230

3. Worries over a no-deal Brexit and a cut in interest rate by BoE are likely to weigh on the Sterling

4. Price has rebounded from 20EMA support with both momentum indicators bullish.

Fundamental Comment

1. Worries over a no-deal Brexit is likely to weigh on Sterling

2. Worries over a BoE rate cut in the event of a no-deal Brexit is likely to weigh on Sterling

Technical Comments

1. Price has rebounded from support around the 20EMA

2. Both MACD and Stochastic are moving higher, hinting of a possible price rally.

Key Levels

Support 0.91250.90850.9050
Resistance 0.91600.9190 0.9230

Technical Overview

USD/JPY – Our buy recommendation was stopped out on news of new trade tariffs on Chinese imports. We lost 55 pips as a result. Price is now near to an important support point at 106.77. MACD has turned bearish and Stochastic is still moving lower with no signs of a reversal as yet. Stay bearish on this pair if 106.77 support point fails to hold.

Support 106.75 106.30106.00
Resistance 107.20 107.60 108.10

EUR/USD – Price is currently capped by the 20EMA around 1.1095. If price is unable to move above this 20EMA resistance, it is likely to test the low at 1.1020 again. MACD is hinting of another price decline; MACD is bearish and both lines are below the zero lines. Only a price move above 1.1165 would negate this bearish view

Support 1.1060 1.1025 1.1000
Resistance 1.1095 1.1125 1.1165

GBP/USD – There are divergence warnings from MACD and Stochastic but price continues to move lower. This is a sign of a strong bearish trend. 20EMA is pointing lower and its gradient is steep, which is a hint of a strong bearish trend. Unless price can move above 1.2250, the risk is to the downside.

Support 1.2070 1.2030 1.1985
Resistance 1.2140 1.2170 1.2250

XAU/USD – Price had a strong rally overnight to 1446.20 but on the 4-hourly chart, there is a bearish Engulfing candlestick pattern. This is a warning of a possible price decline. Price could correct back to 1423 where there is a 20EMA support. MACD is bullish while Stochastic is rising.

Support 1432.25 1424.95 1414.50
Resistance 1445.801452.80 1460.10

USD/CAD – Price was supported by the 20EMA overnight at 1.3185 and has continued to move higher to 1.3225. MACD is bullish and both lines are above zero at the moment. Stochastic is into overbought extreme but is still strong at the moment. We think price is likely to head towards 1.3290

Support 1.3205 1.3180 1.3150
Resistance 1.3245 1.3275 1.3320

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