FX Commentary – US Dollar Strengthened On Funding And Coronavirus Worries.

Market Talk

  • The dollar rose against major currencies on Monday as fresh declines in global stocks and worries about tightening liquidity amid the worsening coronavirus crisis accelerated the flight to cash.
  • Major central banks have ramped up efforts to ease a global dollar funding crunch and to mitigate the damage to the global economy caused by Covid-19, but worries about the spread of the virus is likely to support the dollar in the mist of this crisis.
  • The euro rose from 1.0800 to 1.0980 against its peers on Thursday after the ECB announced a 750 billion euro asset-purchase program to offset the impact the coronavirus outbreak is having on the global economy and financial markets. However, it ended the week close to 1.0700.
  • The U.S. currency approached an 11-year peak against the New Zealand dollar as the country prepared to enter lock down for the next 48 hours to contain the virus. The greenback also rose toward a 17-year high against the Australian dollar.
  • Uncertainty about U.S. government stimulus added to the tense mood in Asia. Partisan battles in the U.S. Senate stopped a $1 trillion-plus coronavirus response bill from advancing on Sunday with another voting scheduled later today.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 63.80. Stop at 64.30 and target at 62.90
3. Spread of coronavirus and its impact on the global economy are likely to weigh on the Aussie and move capital into safe haven Yen.
4. Strong price and 20EMA resistance coupled with bearish MACD are likely a hint of further price declines.

Fundamental Comments
1. Spread of coronavirus and its impact on the global economy is weighing on the Aussie dollar
2. Worries over the coronavirus is likely to move capital into safe haven Japanese Yen

Technical Comments
1. Strong resistance provided by the 20EMA as well as a series of price resistance are likely to cap price rally.
2. MACD is bearish and could be about to have a bearish crossover.

Key Levels

Support 63.3062.7562.20
Resistance 63.8564.3064.75

Technical Overview

USD/JPY – Price has moved higher over the past 2 weeks from a low of 101.17 to last Friday’s high at 111.49. There is a divergence warning from MACD and Stochastic is moving higher, which could be a hint of a possible price high. However the 2-week trend is still strong. If price can stay above 109.25, there is a chance of another test to the high. Below 109.25, price could move to 107.50.

Support 109.75109.25108.60
Resistance 110.30110.70111.50

EUR/USD – Price reached a low of 1.0635 last Friday and we have a price recovery this morning to 1.0760. The price rally may be capped at 1.0800, where the 20EMA lies as well as a previous price support turned into a resistance. MACD is still bearish but Stochastic is deep in the oversold extreme. However the trend and 20EMA is bearish and strong at the moment.

Support 1.07101.06551.0630
Resistance 1.07951.08401.0895

GBP/USD – Last Friday’s range formed an Outside Range Day price pattern with Thursday’s range and we are expecting price to stay within Friday’s range for today and going forward as well until price can moved out of Friday’s range. The upper boundary is at 1.1930 while the lower boundary is at 1.1332. Stochastic is rising but MACD is near to the zero line and is neutral.

Support 1.16501.15851.1530
Resistance 1.17101.17601.1810

XAU/USD -Price’s range has decreased over the past 3 days and this could be a sign of price consolidation. MACD is slightly bearish on the 4-hourly chart and Stochastic is still rising but could have a bearish crossover soon. Price is also currently moving around the 20EMA. We still favour a test of the low of 1450 or lower before a resumption of the uptrend.

Support 1483.601470.401456.60
Resistance 1497.251507.701519.10

USD/CNH – Price reached a high of 7.1650 on Thursday, which was a high for year 2020. The trend is bullish and we are expecting price to test 7.1650 again and later to reach 7.20 in the next few months. For the short term, support is at 7.1045 and from this point; there is a possibility of a rally to test 7.1650. MACD is still bullish and Stochastic is still strong.

Support 7.12057.10457.0905
Resistance 7.14257.15307.1650

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