FX Commentary – Strong US Data Boosted The Greenback

Market Talk

  • The dollar rose on Thursday helped by the conclusion of a U.S.-China trade deal and multiple upbeat U.S. economic data that signaled a healthy U.S. economy and lifted the US dollar against most currencies except the NZ dollar.
  • U.S. retail sales increased for a third straight month in December and the number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week, indicating the labour market remains strong.
  • Another data showed a gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest in eight months, leading the Federal Reserve Bank of Philadelphia to call the factory outlook the brightest in more than 18 months.
  • The Swiss franc was modestly weaker against the greenback, after reaching a 16-month high earlier on Thursday. It reached 0.961 overnight, its strongest level since Sept. 2018. Gold and safe haven Yen was little changed.
  • China’s Q4 GDP data came in at 6% as expected while 2019 GDP number was 6.1%, slightly below expectation of 6.2%. Industrial Production for Dec and Retail Sales were also better than expectation. Data show China economy is not going into a drastic slowdown, helping the Yuan higher to 6.8715.

Chart Focus USD/CHF
Key Points
1. Trading Buy on USD/CHF
2. Buy USD/CHF at 0.9630. Stop at 0.9595 and target at 0.9695
3. Upbeat US economic data and interest rate differential are both boosting the US dollar
4. A Hammer candlestick price pattern with MACD hinting of a possible low is a hint of more price upsides.

Fundamental Comments
1. Upbeat US economic data is giving the US dollar a boost
2. Interest rate differential is in the US dollar favour

Technical Comments
1. A Hammer candlestick price pattern is hinting of a bottom in place
2. MACD has a bullish divergence warning, hinting of a possible bottom reversal

Key Levels

Support 0.96300.96100.9570
Resistance 0.96600.97000.9735

Technical Overview

USD/JPY – Price rose higher above the previous high of 110.20 but unfortunately our buy order was not filled. Price only reached a low of 109.90, missing our buy order at 109.85. MACD is still bullish and hinting of another rally. However, Stochastic is still moving lower. 20EMA is similar to MACD and is bullish and rising.

Support 110.10109.70109.40
Resistance 110.45110.75111.05

EUR/USD – Price reached a high of 1.1071 overnight and that price candlestick was in the form of a Shooting Star. This is a hint of a possible price high. However, MACD is still bullish and moving higher which is a hint of further price upside but Stochastic is moving lower. There could be a possible bearish Flag pattern in the process of forming as well. Watch out for the confirmation of the Flag pattern.

Support 1.11101.10801.1040
Resistance 1.11451.11801.1205

GBP/USD – Price is testing the 1.3080 resistance and the next direction could be dependent on this breakout. MACD is still bullish and Stochastic is in the overbought extreme, this could be a hint of limited topside. Above 1.3080, price could push for 1.3140. Below 1.3080, price could fall back to 1.2960.

Support 1.30351.30001.2965
Resistance 1.30801.31251.3170

XAU/USD – Price was capped by 1558 overnight as per our expectation but the decline to 1547 failed to provide any follow through. Price managed to bounce higher this morning to 1556.80 but MACD has remained bearish while Stochastic is near to the overbought extreme. For today, we would recommend watching 1546 and 1558 again

Support 1545.101535.501525.40
Resistance 1558.001569.701573.25

EUR/JPY – Price reached a high of 122.85 and has pulled back to our entry level. Our view remains unchanged. We would suggest bringing stop higher to 122.40 while keeping profit target at 123.10. MACD is still bullish at the moment. Stochastic could be rising again which should be good for the upside.

Support 122.45122.10121.75
Resistance 122.75123.15123.40

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