FX Commentary – US Dollar Strong At 2-Month High

Market Talk

  • The Australian dollar and the Yuan were under pressure on Thursday as investors tried to shield themselves from assets that could be hit by China’s virus epidemic. The Aussie was back near 3-1/2 months lows while the Yuan was close to a 1-month low
  • The dollar held near a two-month high against a basket of major currencies as the dollar’s strong showing this week was helped by the relatively positive performance of the U.S. economy that has underlined its safe-haven credentials.
  • The Federal Reserve kept interest rates steady on Wednesday at the FOMC meeting and signaled it will remain on hold. The central bank also cited the Wuhan virus as a source of uncertainty for the economic outlook. Chairman Jerome Powell’s comments about a low inflation outlook added to U.S. government bonds’ appeal.
  • Sterling traded unchanged at $1.3016 ahead of the Bank of England’s policy decision later in the day. The European Parliament gave final approval to Britain’s divorce from the European Union on Wednesday, paving the way for the country to quit the bloc on Friday after nearly half a century.
  • Gold and bonds were in demand on Thursday as worries about the spread of a new virus from China sent investors heading for safety. Bond was also helped by Powell’s remark of low inflation which helps to protect bond value.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at 1569.85. Stop at 1562.85 and target at 1592.70
3. Coronavirus and economic shut down in China are likely to lead to a higher demand for Gold
4. Price support and rising Stochastic are likely to propel price higher.

Fundamental Comments
1. Coronavirus is likely to keep investors’ demand for Gold
2. Economic shut down in China is likely to lead to a slowdown in Chinese economy

Technical Comments
1. Price’s support at previous resistance turned support and base of trend channel is likely to hold and propel price higher
2. MACD is still bullish and Stochastic is rising from oversold extreme

Key Levels

Support 1572.601562.901550.90
Resistance 1581.901592.501611.00

Technical Overview

USD/JPY – Price resistance lies at 109.30 and if price is unable to move above this point, we see price going lower to test the base first at 108.70 and later at 107.60. Stochastic is moving lower and MACD is still bearish. Both momentum indicators are hinting of a bearish trend. Only a move above 109.30 would negate our bearish view.

Support 108.80108.45108.05
Resistance 109.30109.65110.00

EUR/USD – Price was supported at 1.0990 but there is an inability to rally past the 20EMA at the moment. If price is unable to move past the 20EMA, there is a high chance price is likely to test the support at 1.0990 and also a chance that we will see 1.0950. Stochastic is moving higher but MACD is still bearish. Only a move above 1.1040 would negate our bearish view.

Support 1.09851.09551.0925
Resistance 1.10201.10501.1080

GBP/USD – Price is still caught within the board range of 1.3155 to the base at 1.2960. Currently 20EMA is acting as an immediate resistance at 1.3040 and if this resistance holds, we are likely to see a test of the support at 1.2960 again as MACD is still bearish. Stochastic is correcting higher at the moment. .

Support 1.29901.29551.2905
Resistance 1.30301.30701.3105

AUD/USD – Price is currently testing its 3.5-month’s low of 0.6735. Both Stochastic and MACD are warning of a possible price low but the trend is bearish and strong. 20EMA gradient is also steep, which is a hint of a strong bearish trend. If price is unable to hold above 0.6735, it could be moving down to test the base at 0.6700.

Support 0.67350.67000.6670
Resistance 0.67650.68050.6830

USD/CNH – Price is trying to break above its previous high of 6.9900. If price is able to move above this resistance, we see price going higher to 7.0130. If price is unable to move above, 6.9900, price is likely to decline back to 9.9500. Stochastic is moving higher but MACD is warning of a potential bearish divergence. We think the upside could be limited to 7.00.

Support 6.98200.97506.9665
Resistance 6.98956.99857.0090

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