FX Commentary – Market Is Waiting For Trump’s Package

Market Talk

  • The dollar recovered on Tuesday after slumping to its lowest in 18 months against a basket of currencies, after Trump said he plans to unveil “very substantial relief”, including payroll-tax cuts, amid the spreading coronavirus.
  • Money markets show the Fed, which already stunned investors with a surprise 50 basis point rate cut last week, is likely to ease policy further in the future. Market is expecting Fed to cut rate by 50 basis points at its March 17-18 meeting and again in its April meeting by another 25 basis points.
  • The Japanese yen tumbled against the U.S. dollar following comments by Japan Finance Minister saying he will respond appropriately depending on market conditions. The Yen had reached a 3-year high against the US dollar on Monday at 101.47
  • Data today showed China’s producer prices fell 0.4% from a year earlier, compared with the expectations of a 0.3% drop. Due to improving situation from coronavirus, China’s Yuan was at its strongest at 6.9100 since 20 Jan 2020.
  • The pound rose to one-month highs against the dollar amid expectations the Federal Reserve will slash rates to 2015 lows, while growing optimism that new fiscal stimulus to boost economic growth measures will be included in the upcoming UK budget, also underpinned sterling.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at 1647.20. Stop at 1636.30 and target at 1685.00
3. Gold is likely to benefit from worries over a US rate cut and spread of coronavirus in the USA
4. Price is in a correction phase and MACD is still bullish. We may see another attempt to test the resistance at 1685.

Fundamental Comments
1. Worries of US rate cut is likely to weigh on the US dollar
2. Spread of coronavirus in the U.S. is also likely to weigh on the US dollar

Technical Comments
1. Price is in a correction and is coming back to support zone which could provoke a rally to test resistance point
2. MACD is still bullish and we may see another test to the high again.

Key Levels

Support 1651.201641.751633.55
Resistance 1662.501676.151689.25

Technical Overview

USD/JPY – Price has moved higher from the low at 101.47 and is moving into the gap resistance zone. Above 105.25 would mean a closing of Monday’s gap which negates our bearish view. Above the gap, price is likely to test the high of 106.80. MACD remains bearish although Stochastic is rising. We remain bearish and do not think price can move above the gap.

Support 104.20103.70103.05
Resistance 104.90105.40105.80

EUR/USD – From the high of 1.1491, price has dropped down to 1.1331 this morning. This is just above a gap support. If price can stay above this support, we are likely to see a test of the high at 1.1491 again in the next few days. MACD is strong and bullish at the moment, with both its lines high above the zero line. However Stochastic is declining after a bearish divergence warning. We remain bullish.

Support 1.13251.12851.1245
Resistance 1.13851.14251.1470

GBP/USD – Price reached a high of almost 1.32 overnight but has declined to 1.3064 this morning, which is also the 20EMA support. MACD is bullish and strong but Stochastic is declining from the overbought extreme. We remain bullish as long as price stays above 1.2930. We see price holding at current support level and a test of 1.32 again over the next few days.

Support 1.30201.29851.2925
Resistance 1.30601.31001.3140

AUD/USD – After recovering from the low, price has reached a high of 0.6684. However MACD is showing divergence with price and warning that this high could be a high point and a decline is likely. Stochastic is also turning down after reaching the overbought extreme. 20EMA is also turning down. We think price is likely to test the low at 0.6450 again in the next couple of days.

Support 0.65300.64850.6430
Resistance 0.65850.65900.6620

USD/CHF – Our sell order was filled yesterday and price reached a low of 0.9200 overnight but Trump’s comment of economic help sent price higher to 0.9373 this morning. Our stop was triggered and we are out with a 45 pips loss. If resistance at 0.9390 cannot be taken out, price may test the low at 0.9200 again over the next few days

Support 0.93200.92800.9255
Resistance 0.93700.94150.9460

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