- The dollar held overnight gains on Wednesday against most major currencies as risk appetite returned amid a rally on Wall Street after the Federal Reserve and the Trump administration rolled out new stimulus measures to combat the Covid-19 outbreak. A deepening fear around the coronavirus has fuelled a scramble for the greenback resulting in its rise across the board.
- Data on Tuesday showed that U.S. retail sales unexpectedly fell in February, with households cutting back on purchases of a range of products, and the coronavirus outbreak is expected to depress sales in the months ahead.
- Gold traded to $1466 before posting a turnaround to reached $1553 on talk of massive US stimulus spending. USD/CAD gained 200 pips to 1.4211 and a high of 1.4277 after crude oil turned in another 6% rout.
- The pound moved off fresh lows at 1.2003 against the greenback after the UK unveiled further stimulus measures to support businesses affected by the virus. Sterling is dangerously close to a series of Brexit lows down to 1.1943 in 2016.
- The Australian dollar has made its first trip under 60 cents since 2003 while the kiwi was at $0.5955. The Australian dollar has lost nearly 15% against the greenback this year.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation
2. Buy AUD/USD at 0.6000. Stop at 0.5955 and target at 0.6115
3. Interest rate differential and an easing in offshore dollar demand are both likely to aid the Aussie dollar
4. Price has moved above an Inside Day price pattern and both momentum indicators are hinting of more price upsides.
Fundamental Comments
1. Offshore dollar funding demand is easing and this could weigh on the US dollar but aid the Aussie
2. Interest rate differential is in the Aussie dollar favour
Technical Comments
1. Price has moved above its recent low at 0.5958 and above an Inside Day price pattern
2. MACD and Stochastic are both moving higher, which could be a hint of more price upsides.
Key Levels
| Support | 0.6000 | 0.5980 | 0.5955 |
| Resistance | 0.6040 | 0.6080 | 0.6120 |
Technical Overview
USD/JPY – Our view remains the same as yesterday. Price has moved higher than our expectation to 107.85 and we are now expecting to see a price decline to 105.30 or 105.60. MACD has started to turn down and Stochastic is moving near to the overbought zone. Both indicators are hinting of a limited upside. A move above 108.55 would negate our bearish view.
| Support | 106.80 | 106.30 | 105.85 |
| Resistance | 107.40 | 107.85 | 108.05 |
EUR/USD – Price reached a low of 1.0952 overnight and the recovery has failed to penetrate above 1.1050. If price cannot move above this resistance point, price is likely to decline back to 1.0950. MACD is still bearish at the moment. Stochastic is near to the overbought zone. The upside could be limited and a decline likely. Above 1.1050, price is likely to test 1.1115 handle.
| Support | 1.1005 | 1.0980 | 1.0950 |
| Resistance | 1.1050 | 1.1090 | 1.1120 |
GBP/USD – Price has been capped by the Hourly 20EMA resistance point at 1.2115 for the past 6 hours. MACD is bearish but is showing potential divergence. Stochastic is still in the oversold extreme and looks weak. If price is unable to move above 1.2120, we are likely to see another test to the 1.2003 low again. Above 1.2120 would likely see a test to 1.2230 resistance point.
| Support | 1.2075 | 1.2040 | 1.2000 |
| Resistance | 1.2125 | 1.2170 | 1.2235 |
XAU/USD – Price may have made an $87 rally off the $1466 low but the rally was capped by a price resistance high point which has already resulted in price declining to $1508. We think price is likely to continue its decline to $1492. Price needs to stay above this point to remain bullish. Below this point, we are likely to see a test back to $1466 again
| Support | 1504.20 | 1492.50 | 1481.75 |
| Resistance | 1518.90 | 1527.50 | 1537.85 |
AUD/JPY – Our sell call was not filled yesterday but price had moved beyond our targeted area and there was a price recovery higher this morning. Resistance is currently located at 64.70 and this level will need to break if price is to move higher. If not, we are likely to see another test of the 63.92 overnight low. MACD is still bearish and Stochastic is in the middle of its range.
| Support | 64.30 | 63.90 | 63.45 |
| Resistance | 64.80 | 65.20 | 65.80 |
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