FX Commentary – EURO Is Waiting For ECB’s Decision

Market Talk

  • The dollar advanced against commodity currencies Aussie and NZ dollar but nursed losses on the safe-haven Yen and Swiss amid a slew of dire headlines on the coronavirus outlook including WHO labeling the coronavirus outbreak as a pandemic.
  • The euro held its nerve on Thursday, as markets wait to see how aggressively the European Central Bank will move to combat the coronavirus’ economic shock in its monetary policy meeting today, following emergency rate cuts in the U.S. and Britain.
  • Trump’s package was not enough for investors who were looking for a more robust fiscal response to curb potentially slower economic growth and possible economic slowdown from the coronavirus pandemic.
  • The Bank of England cut its key rate by 50 basis points to 0.25% in an emergency rate cuts, aiming to support an economy that is set to be hurt by fallout of the spreading coronavirus. Sterling rose to $1.2946 from $1.2937 immediately before the announcement but ended the day at 1.2802.
  • The longest-ever bull market for U.S. stocks ended overnight with the Dow Jones index sliding into bear market territory. This is likely to increase demand for safe havens as investors seek refuge for their capital.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 67.40. Stop at 67.75 and target at 66.30
3. Spread of coronavirus is likely to benefit safe haven Yen and weigh down Aussie dollar.
4. Price and 20EMA resistance zone with bearish MACD are likely to send price lower.

Fundamental Comments
1. Spread of coronavirus has led to an increase demand for safe haven Yen
2. Commodity currency Aussie is likely to be weighed down by economic slowdown

Technical Comments
1. Price resistance and 20EMA resistance are both likely to cap price rally.
2. MACD is bearish and is likely to turn down.

Key Levels

Support 66.5566.1065.50
Resistance 67.0567.5067.95

Technical Overview

USD/JPY – Price managed to close the gap at 105.25 on Monday to reach a high of 105.90. However, price was unable to sustain above 105.25 and has declined to 103.08 last night. A rally from this low was capped by the 20EMA at 104.25. MACD is bearish and Stochastic is near to the oversold extreme but is weak. We see price going back to 103.08 again in the next couple of day.

Support 103.55103.05102.80
Resistance 104.05104.50104.95

EUR/USD – Our buy call was stopped out last night and we are out with a 45 pips loss. Price only reached a high of 1.1365 overnight and has declined to a low of 1.1250 this morning. Stochastic is into the oversold extreme. MACD is turning up and could turn bullish. We could be close to a temporary bottom and could see a price rally from here but let’s wait for reversal confirmation.

Support 1.12751.12451.1210
Resistance 1.13051.13451.1380

GBP/USD – Price declined to a low of 1.2802 overnight despite an emergency rate cut by the Bank of England. The rally off the low had stalled at 1.2850. MACD is bearish and Stochastic is weak. If price is capped below 1.2850, we see price going lower to 1.2765 in the next couple of days.

Support 1.27801.27451.2725
Resistance 1.28201.28551.2910

XAU/USD – Yesterday, we had raised the stop on our Gold position but this stop was triggered last night. We are out at cost without a loss. Price reached a high of 1671 overnight and has declined to 1630.60 this morning. We think price is likely to decline further to 1624.50. MACD is bearish and Stochastic is near to the oversold extreme.

Support 1624.501610.951599.55
Resistance 1639.451649.451658.55

USD/CAD – The rally since Friday is developing into a possible Rising Wedge chart pattern. MACD is showing possible bearish divergence as well. Stochastic is into the overbought extreme. We think the upside is limited and could be coming to an end. A price break of 1.3720 could bring price lower to 1.3560 again.

Support 1.37651.37301.3680
Resistance 1.37951.38201.3860

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