Market Talk
- The U.S. dollar found its footing on Thursday as better-than-expected services and private labour data eased recession fears at a time when many are fretting about the impact of the coronavirus spread in the U.S.
- US ISM Non-manufacturing PMI data for February showed an uptick to 57.3, beating expectations of 54.9. This represents the highest reading for the service sector index since February 2019. ADP private labour market generated a better-than-expected 183,000 jobs in February adding to the US dollar strength.
- The Canadian dollar was weaker against the dollar, after Bank of Canada slashed rates by 50 basis points, its biggest interest rate cut in more than 10 years, to cushion the impact from the spread of the coronavirus on the domestic economy.
- The British pound rose amid reports that UK-EU trade talks were off to a good start and incoming Bank of England governor said he would wait for more clarity about the virus before moving interest rates, rather than rushing to an emergency cut.
- The rally in gold paused on Wednesday after jumping as much as 3% on Tuesday after an emergency rate cut by the Federal Reserve and worry that U.S. cases from the coronavirus had crossed the triple-digit mark drove demand for the safe haven.
Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at 1629.85. Stop at 1619.80 and target at 1670.00
3. Lower interest rate and coronavirus spread will keep demand high for safe haven Gold
4. Price coming into a strong support zone with both momentum indicators showing bullish trend and further price upsides.
Fundamental Comments
1. Lower US interest rate and Treasury yields is good for Gold
2. Coronavirus uncertainty will keep demand high for safe haven Gold
Technical Comments
1. Price correction to a strong support zone and 20EMA is an opportunity to accumulate Gold
2. MACD is bullish and turning up. Stochastic is in the overbought extreme but looks strong, hinting of a strong trend condition.
Key Levels
| Support | 1633.70 | 1624.60 | 1611.00 |
| Resistance | 1642.75 | 1652.35 | 1665.80 |
Technical Overview
USD/JPY – Price recovered to 107.70 overnight, which was lower than our expectation of a minimum of 108.10. This could be a sign of a weak recovery and we see price going lower again to 106.70 in the next few days. MACD is still bearish and could be turning lower bringing price lower with it. Stochastic has moved out of the oversold zone but looks weak.
| Support | 107.25 | 106.85 | 106.50 |
| Resistance | 107.75 | 108.05 | 108.50 |
EUR/USD – Price made a high at 1.1211 with divergence from both MACD and Stochastic. Price has declined to a low of 1.1095 and we think price could be close to a correction low and a rebound is due soon. If price is support above 1.1100, we see another test to the high of 1.1211 again. Below 1.1070 would call for a deeper correction to 1.0995.
| Support | 1.1095 | 1.1055 | 1.1005 |
| Resistance | 1.1145 | 1.1280 | 1.1215 |
GBP/USD – Price moved above the resistance at 1.2840 and we are now expecting price to proceed higher to 1.2980. Stochastic is into the overbought extreme at the moment. MACD is bullish and moving higher. 20EMA has turned up and moving higher. These are signs supporting further price upsides. Below 1.2810 would negate our bullish view.
| Support | 1.2860 | 1.2825 | 1.2795 |
| Resistance | 1.2905 | 1.2945 | 1.2995 |
AUD/USD – Price is approaching Tuesday’s high of 0.6644 and we are expecting price to exceed this high. We expect price to move higher to 0.6670 to complete the rally off the 11-year low of 0.6433. MACD is still bullish and moving higher. Stochastic is moving into the overbought zone but still looks strong and likely to proceed higher.
| Support | 0.6610 | 0.6580 | 0.6540 |
| Resistance | 0.6645 | 0.6670 | 0.6710 |
USD/CHF – Our sell order was not filled as price only reached a high of 0.9595 overnight before declining lower to 0.9530. MACD is bearish with both its lines below the zero line. Stochastic is rising and could be unwinding the oversold condition. We remain bearish and looking for another test of the low at 0.9510 again within the next couple of days.
| Support | 0.9570 | 0.9545 | 0.9515 |
| Resistance | 0.9610 | 0.9650 | 0.9690 |
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