FX Commentary – Euro Zone Economy Sent EUR/USD To 4-Month Low

Market Talk

  • Euro slumped to 4-month low as data on Monday showed Euro zone Sentix Investor Confidence missed estimates at a time when traders are concerned that Germany, Europe’s biggest economy could have contracted in the fourth quarter.
  • Some analysts are warning the coronavirus poses a bigger risk to the economy of Germany, the EU’s growth engine, than that of the U.S also undermine the single currency.  The EURUSD has now fallen for 6 consecutive days taking the currency to a low of 1.0907.
  • The pound climbed against the dollar on Monday, but some experts warned further gains will likely be kept in check by ongoing UK-EU trade tensions and steady U.S. interest rates. UK’s GDP data is scheduled at 5.30pm later today.
  • On Tuesday night at 11pm, Federal Reserve Chairman Jerome Powell starts a 2-day testimony to Congress and is likely to deliver a positive assessment of the U.S. economy in his semiannual testimony which together with recent strong US economic data could keep the US dollar strong against its peers.
  • Gold hit a one-week high ahead of testimony from Federal Reserve Chairman Jerome Powell but safe haven JPY and CHF, both continue to weaken against the US dollar despite the death toll of coronavirus surpassing the 1,000 mark.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation
2. Sell EUR/AUD at 1.6265. Stop at 1.6295 and profit target at 1.6180
3. Euro zone confidence index missing estimate and worries that Euro zone biggest economy may suffered a bigger impact from coronavirus is weighing on the single currency.
4. Price recovery halting at Fibonacci 62% correction point with both momentum indicators pointing to further price declines are signs of a bearish trend.

Fundamental Comments
1. Euro zone Sentix Investor Confidence missed estimate showing the Euro zone economy is still weak which is likely to weigh on the single currency
2. Worries that the coronavirus could hit Germany’s economy harder than the US economy is also weighing of the single currency.

Technical Comments
1. Price recovery was halted at the Fibonacci 62% correction point, hinting of further price decline ahead.
2. Stochastic is moving lower and MACD has turned bearish, both are hints of further price declines

Key Levels

Support 1.62201.61801.6135
Resistance 1.62651.63101.6370

Technical Overview

USD/JPY – Price had declined to a low of 109.50 two days ago and yesterday price managed to hold above this support. Today, we think the rally should start and bring price higher to 110.30. MACD is turning up and is still bullish. Stochastic has a bullish crossover and is moving up as well. Only a price move below 109.50 would negate our bullish view.

Support 109.70109.50109.20
Resistance 110.00110.30110.60

EUR/USD – Price did not go above 1.0960 yesterday and fell to a 4-month low of 1.0907. MACD’s bearish trend is still strong and despite Stochastic being in the oversold extreme, we think price could fall further lower to 1.0870. This could be the last decline before a correction set in as price has been declining for the past 6 days.

Support 1.08951.08701.0845
Resistance 1.09301.09651.0990

GBP/USD – Price reached a low of 1.2870 overnight but the bearish trend may not have found a bottom as yet. Price resistance at 1.2960 could cap any rally and provoke another decline to 1.2810. While Stochastic is rising from the oversold extreme, MACD is still bearish. However MACD has a divergence warning of a low.

Support 1.28701.28451.2810
Resistance 1.29201.29601.2990

XAU/USD – We view price as consolidating within the range of 1593 to 1547. Yesterday, price moved to a high of 1578 and with Stochastic moving down from the overbought extreme and MACD having a bearish crossover, we think price is likely to move lower to 1561 today. Overall we view price as moving within the bigger range as determined by the Stochastic reading.

Support 1562.251554.901547.50
Resistance 1571.501582.751593.05

USD/CAD – Our sell call yesterday was wrong and we got stop out with a loss of 35 pips. Price reached a high of 1.3328 but our view remains unchanged. We think the upside is limited and price is likely to decline to 1.3200. Stochastic is near to the overbought extreme and looks weak. MACD is showing divergence warnings. Both confirms our limited upside view.

Support 1.32851.32601.3230
Resistance 1.33101.33301.3350

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