FX Commentary – Price Chart Is Showing Market Shock

Market Talk

  • The Japanese yen leapt 1.6% to a more than three-year high on Monday as the widening reach of the coronavirus sent investors scrambling for safety, while oil-exposed currencies plunged after Saudi Arabia slashed its selling price.
  • Oil prices collapsed, dropping by more than 20% after Saudi Arabia, the world’s top exporter, vowed to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia.
  • A senior Japanese finance ministry official on Monday warned against investors pushing up the yen rapidly, saying that authorities would watch market moves as spread of the epidemic prompted heavy selling of riskier assets by investors and a scramble into safe haven yen.
  • The gain in non-farm payroll was the largest since May 2018. Not only did the number jobs increase by a very healthy 273K, the prior month’s revised up +85K.  Wages remain steady but moving higher. The unemployment rate dipped down as well. However, the strong NFP report was largely ignored by the market.
  • The dollar dived against the Euro as trade in U.S. Treasury futures pointed to 10-year yields crumbling below 0.5%, effectively removing one of the dollar’s greatest attractions and implying more cuts by the Federal Reserve in the near term, weighing on the US dollar.

Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation
2. Sell USD/CHF at 0.9290. Stop at 0.9335 and target at 0.9170
3. Expectation of further rate cut by the Fed and spread of coronavirus are both in favour of the Swiss
4. Strong price resistance and bearish MACD are both hinting of further price decline.

Fundamental Comments
1. Expectation of further interest rate cut by the Fed is weighing on the US dollar
2. Safe haven Swiss is demand due to rapid spread of the coronavirus which is causing economic damage to the global economy

Technical Comments
1. Price is coming into resistance zone with both price resistance and 20EMA providing the cap
2. MACD is bearish and is showing no sign of a possible price reversal

Key Levels

Support 0.92050.91650.9100
Resistance 0.92550.93000.9360

Technical Overview

USD/JPY – Price reached a low of 105.02 on Friday but this morning gapped lower to 101.47. Condition is oversold but the trend is strong and MACD did not show a divergence. Resistance lies at 103.50 and this could cap price for another test of the low again at 101.47 in the next few days. Above 105.40 or closing of Monday’s gap would negate our bearish view.

Support 102.50102.00101.45
Resistance 103.05103.70104.25

EUR/USD – On Friday, price broke above Thursday’s Hanging Man’s high and moved to a high of 1.1491. MACD is strong and bullish. MACD is also rising. Stochastic is into the overbought extreme and has a bearish crossover and is declining. Support is at 1.1330 to 1.1305, which could be a good area to accumulate for another test of the high at 1.1491.

Support 1.13751.13251.1285
Resistance 1.14251.14901.1515

GBP/USD – Price created a Shooting Star on the 4-hourly chart this morning and unless the high of this morning at 1.3123 is taken out again, we are expecting a corrective price decline to 1.2950. MACD is bullish and strong. Stochastic is in the overbought extreme at the moment and had a bearish crossover and is likely to move lower. 20EMA is rising and its gradient is steep, hinting of a strong trend.

Support 1.30401.29851.2925
Resistance 1.30701.31251.3170

XAU/USD – Price made a high of 1702.70 this morning but has declined down to 1656.65 this afternoon. 20EMA has turned down and is pointing lower. Stochastic has a bearish crossover and is moving lower as well. MACD is about to turn bearish. Price may have reached a high and a correction could be unfolding.

Support 1662.101652.301641.70
Resistance 1676.151689.251702.70

USD/CNH – Our sell order was not filled on Friday as price only reached a high of 6.9625. Price has declined to our profit target but this morning we saw a jump in price higher to 6.9460. The price low was in the form a strong Hammer pattern. We think the low is in place and price is likely to move higher to first 6.9500 initially and later to 6.9580. Both MACD and Stochastic support this view with a divergence warning.

Support 6.93806.92606.9120
Resistance 6.94806.95806.9720

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