FX Commentary – Gold Up On Increased Coronavirus Cases And Deaths

Market Talk

  • The U.S. dollar continued to rack up gains against its rivals on Wednesday as Federal Reserve Chairman Jerome Powell, in his second day of testimony to Congress continued to talk up the strength of the economy and suggested there was little reason for the Fed to cut rates as the economy remained in a good place.
  • Sterling managed to gain against the US dollar as expectations for the next U.K. budget due in March, to include a boost to fiscal spending, supporting UK’s economic growth and eased worries about tricky U.K.-EU negotiations slated for March.
  • USD/CAD slipped as the Canadian dollar firmed on a surge in oil prices as hopes Russia may support OPEC-led proposals to cut production further offset a larger-than-expected build in U.S. weekly crude inventories report on Wednesday night.
  • Safe haven Jap yen and Gold strengthened on Thursday after China’s Hubei province, the epicenter of a coronavirus outbreak, reported a sharp jump in the number of new cases in a jolt to markets and sparking a flight for safe-haven assets.
  • The dollar traded at $1.0872 per euro, close to its strongest level in more than two years due to growing optimism about the health of the U.S. economy and worries over Euro zone economy.

Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation
2. Buy USD/CNH at 6.9735. Stop at 6.9635 and profit target at 7.0080
3. Increasing death toll and hint of no US rate cut are both likely to weigh on the Chinese Yuan
4. Price finding support with MACD and Stochastic hinting of more price upsides is a bullish trend.

Fundamental Comments
1. Increasing number of coronaviurs death toll are likely to weigh on the Chinese Yuan
2. Hint of no rate cut by Powell is likely to keep US dollar strong

Technical Comments
1. Price has bounced from a strong support base and is likely to move higher
2. Both Stochastic and MACD are rising, hinting of more price upsides

Key Levels

Support 6.97756.96856.9570
Resistance 6.98956.99607.0080

Technical Overview

USD/JPY – Price reached a high of 110.12 and declined below 110.00. We think a top may have been made and price is likely to decline further to 109.50. A break of 109.50 is likely to see further decline to 108.90. Only a move above 110.15 will negate our bearish view. MACD has turned bearish and Stochastic is moving lower.

Support 109.70109.50109.20
Resistance 110.10110.30110.60

USD/CHF – Our sell call was filled yesterday when price reached a high of 0.9786. Price is back to our cost at 0.9770 but price is currently supported by the 20EMA. MACD is still bullish and is showing no signs of a turn around and hinting of further price rally. Keep stop at 0.9795 and profit target at 0.9725.

Support 0.97600.97200.9695
Resistance 0.97950.98250.9860

GBP/USD – Price reached a high of 1.2992 overnight which was higher than our expectation but still below our reversal point of 1.3000. While we remain bearish, our downside target is revised upward to 1.2870 instead of 1.2810. Stochastic is rising and near to the overbought extreme.  MACD is still bearish. A move above 1.3000 could negate our bearish view.

Support 1.29301.29051.2870
Resistance 1.29751.300513045

XAU/USD – We view price as consolidating within the range of 1593 to 1547. Yesterday, price moved to a low of 1561.40, just above our expectation and has moved up higher to 1574 this morning. Stochastic and MACD both had a bullish crossover and both indicators are moving up today. We see price moving to test the upper band of 1582 for today.

Support 1567.501554.901547.50
Resistance 1582.751593.051611.00

EUR/AUD – Our profit order was filled yesterday at 1.6180 and we are out with a 85 pips. . Price declined to a low of 1.6128 and this morning has moved up to 1.6210. Stochastic is still in oversold extreme while there could be a possible MACD divergence warning of a possible low in formation. We see price moving higher to 1.6275 in the next couple of days.

Support 1.61601.61301.6100
Resistance 1.62051.62601.6310

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