FX Commentary – Strong US Data Kept US Dollar Strong

Market Talk

  • The dollar climbed on Wednesday as firmer services and private labor market data suggested the underlying U.S. economy remained on solid footing and raised investors’ hopes that the economy will remain resilient despite the threat to global growth from a coronavirus-led slowdown in China.
  • ADP National Employment Report showed private payrolls jumped by 291,000 jobs in January, the most since May 2015, while another report showed U.S. services sector activity picked up last month, suggesting the economy could continue to grow moderately this year even as consumer spending slows.
  • Brexit concerns remerged following reports that the EU, as part of upcoming trade talks, could strip concessions it granted to U.K. investment firms; a potential move that would hurt Britain’s economically important financial sector.
  • The Singapore dollar licked its wounds after posting its steepest drop in two years on Wednesday when the central bank said the currency has room to weaken as the virus weighs on the economy.
  • Risk appetite continues to grow after China announced a cut in tariffs on some imported goods from the United States and both Chinese and British scientist made significant breakout in drugs to fight the coronavirus.

Chart Focus Gold
Key Points
1. Sell Gold recommendation
2. Sell Gold at 1562.70. Stop at 1567.10 and target at 1547.70
3. An increase in risk appetite and good US data are both weighing on Gold
4. Price is capped by price resistance with both momentum indicators hinting of more price declines

Fundamental Comments
1. An increase in risk appetite is not good for Gold
2. Good US data is giving US dollar strength

Technical Comments
1. Strong price resistance and 20EMA is capping the rally for Gold
2. MACD is bearish and Stochastic is weak

Key Levels

Support 1554.901547.501535.70
Resistance 1563.401572.101580.10

Technical Overview

USD/JPY – Price continues to move higher, reaching a high of 109.97 this morning. MACD is starting to warn with divergence of price high. Stochastic is into the oversold extreme and could be turning down. These are signs of a possible top before a price correction. If price break support at 109.70, it could mean the uptrend and rally is over.

Support 109.70109.30108.90
Resistance 110.15110.60111.05

EUR/USD – Our position was stopped out last night at 1.1020. We lost 30 pips on this trade. Price has come back to the previous low of 1.0990. If this support cannot hold, price is likely to decline to 1.0880. Stochastic is into the oversold extreme and Stochastic is hinting of limited downside. However MACD is bearish. Watch the support at 1.0990.

Support 1.09901.09651.0935
Resistance 1.10251.10501.1080

GBP/USD – Our view remains the same as yesterday. We see price going below 1.2940 within the next 48 hours. Price was capped yesterday at 1.3063 and has currently decline to 1.2980. A break of 1.2970 would open up the way to a test of 1.2938. MACD is bearish and Stochastic is weak. Both momentum indicators are hinting of more price declines.

Support 1.29751.29451.2905
Resistance 1.30051.30451.3080

NZD/USD – Our buy call was filled this morning. Keep stop at 0.6440 and target at 0.6540. MACD remains bearish at the moment and could be turning lower. Stochastic moved above oversold extreme but is looking weak as well. Our view could be wrong.

Support 0.64450.64050.6380
Resistance 0.64750.65000.6540

EUR/JPY – Price reached our profit target last night and we are out with a 55 pips profit. There is a good chance price might re-visit the high of 121.14 again as Stochastic is still bullish and rising. MACD is still bullish and rising. However the upside could be limited. Support is currently at 120.60 and a break of 120.30 would confirm the rally is over.

Support 120.50120.30120.00
Resistance 120.95121.15121.30

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