Market Talk
- The dollar continued its march higher on Thursday helped by strong US economic data. The Philadelphia Fed said its manufacturing index rose to a reading of 36.12, a three-year high. The U.S. Department of Labour reported that US jobless claims rose by 4,000 to a seasonally adjusted 210,000, in line with economists’ forecasts.
- The yen’s status as a safe haven is coming under pressure as unease grows about the rising number of coronavirus cases in Japan, against the backdrop of a stuttering domestic economy. Factory activity in Japan suffered its steepest contraction in seven years this month, data showed on Friday morning.
- The Aussie continues to be pressured, reaching an 11-year low after a mixed labour market report earlier this morning. AUD/USD declined to a low of 0.6605 this morning, dragging the kiwi lower with it. China’s Yuan is sitting near a two-and-a-half month low of 7.0547 per dollar touched in offshore trade overnight.
- The pound hovered near 3-month lows against the dollar, shrugging off better-than-expected U.K. retail sales data amid falling hopes the U.K. is set to unveil a big increase in fiscal spending next month.
- Gold after hitting seven-year highs on Thursday continues its rally, extending the rally to eight days to reach a high of 1623.66 as fears of a global contagion emerged from the virus pandemic in China. A switch from yen to Gold as safe haven is helping Gold.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation
2. Buy USD/CNH at 7.0340. Stop at 7.0280 and target at 7.0550
3. Upbeat U.S. economic data and impact from coronavirus are likely to weigh on the Yuan
4. Price uptrend is strong and MACD is bullish and a pullback to the 20EMA could offer a buying opportunity to get into the bullish trend
Fundamental Comments
1. Upbeat U.S. economic data is keep the US dollar strong
2. Coronavirus is affecting the Chinese economy and weighing on the Yuan
Technical Comments
1. Price uptrend is intact and a pullback to the 20EMA could offer a buying opportunity to get into the bullish trend.
2. MACD is bullish and strong, which is a hint of a strong trend.
Key Levels
| Support | 7.0340 | 7.0290 | 7.0230 |
| Resistance | 7.0480 | 7.0550 | 7.0645 |
Technical Overview
USD/JPY – A 2-day rally has brought price up to 112.20 but we are seeing divergence warnings from both MACD and Stochastic. Stochastic is also turning down from the overbought zone after a bearish crossover. MACD, while bullish has a bearish divergence warning and both its lines are moving lower. We think the upside is limited and a break of the 20EMA line support at 111.85 is likely to trigger the correction lower to 111.15.
| Support | 111.95 | 111.65 | 111.35 |
| Resistance | 112.20 | 112.45 | 112.70 |
EUR/USD – Price made another marginal low at 1.0767 overnight but a recovery was capped at 1.0820. MACD has been giving bullish divergence warnings in the past few days while price moved lower but the strong bearish trend remains intact. Stochastic has moved above the oversold zone but remains weak. We remain bearish but see a correction higher to 1.0805 before the downtrend resumes again.
| Support | 1.0765 | 1.0730 | 1.0695 |
| Resistance | 1.0795 | 1.0820 | 1.0860 |
GBP/USD -Price continues its decline after breaking the 1.2905 low 2 days ago. Price broke the recent low at 1.2870 last night and made a new low at 1.2848. 20EMA is declining and its gradient is steep. This is a hint of a strong trend but we are seeing potential bullish divergence from MACD. Stochastic is in the oversold zone and is moving higher. We think the bearish trend’s downside could be limited and find support at 1.2805 for the last day of the week.
| Support | 1.2905 | 1.2870 | 1.2835 |
| Resistance | 1.2940 | 1.2975 | 1.3005 |
XAU/USD – Price broke above a previous high of 1610.99 2 days ago but there was no follow through. However, after consolidating for a day, we saw a strong breakout last night and price reached a high of 1623.66. Stochastic is in the overbought zone but MACD is still bullish. But MACD could be forming a bearish divergence. We see limited upside for today and this rally. Our target is pegged at 1625-1627.
| Support | 1611.00 | 1600.00 | 1593.40 |
| Resistance | 1625.70 | 1635.50 | 1640.55 |
USD/CAD – Our buy call was filled 2 days ago. Price reached a high of 1.3268 last night. We would recommend bringing stop higher to cost at 1.3230 while keeping profit target at 1.3295. Stochastic is moving up from the oversold extreme MACD is bullish. Both Stochastic and MACD have given bullish divergence warnings of a possible high in the making. We may need to get out by the end of Friday’s trading.
| Support | 1.3230 | 1.3200 | 1.3165 |
| Resistance | 1.3270 | 1.3305 | 1.3330 |
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