FX Commentary – US Dollar Hold Steady Near A 3-Year High

Market Talk

  • The dollar eased on Tuesday but remained near a three-year high against a basket of currencies as investors sought the world’s main funding and settlement currency ahead of a sharp anticipated fall in cash flow.
  • Market reaction was mixed when the U.S. Federal Reserve’s announced unlimited quantitative easing and programs to support credit markets on Monday in a drastic bid to backstop an economy reeling from emergency restrictions on commerce.
  • Gold prices in Asia rose Tuesday morning above the $1,500 mark to $1584 as the U.S. Federal Reserve announced an extraordinary array of programs, its third emergency move this month in further steps to combat the COVID-19 pandemic.
  • Wall Street’s slide deepened on Monday as the rapidly spreading coronavirus forced more U.S. states into lock down while Washington’s fiscal stimulus package remained stalled in the Senate.
  • The British pound stood at $1.1548 in early trade though it remained near its 35-year low of $1.1413 set last week. The euro ticked up to $1.0752 after touching a near three-year low of $1.0636 in the previous session. Strength in both pair could be temporary.

Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.0780. Stop at 1.0830 and target at 1.0670
3. Risk sentiment from the spread of coronavirus, worries global economy and funding are likely to aid the US dollar
4. Price has failed to surpass a strong resistance and with momentum indicators turning bearish, price could be due for a decline.

Fundamental Comments
1. Spread of coronavirus is likely to aid safe haven US dollar
2. Risk sentiment is likely to drive demand for US dollar

Technical Comments
1. Price has failed to surpass a strong resistance on four attempts over two weeks.
2. Momentum indicators are starting to turn bearish, hinting of a price decline.

Key Levels

Support 1.07501.07051.0635
Resistance 1.08301.08951.0950

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, which could be a hint of a possible price high. Price has also formed a Triple Top chart pattern and has declined close to the lower trend line of the 2 weeks trend channel. A break of the channel would turn the trend bearish for 107.50.

Support 109.75109.25108.60
Resistance 110.30110.70111.50

USD/SGD – From 1.3753, over a 2 weeks period, price has reached a high of 1.4644. There is a Shooting Star Candlestick price pattern on the 4-hourly chart and we could see a correction of this rally in the days ahead. MACD has a divergence warning and Stochastic is starting to turn lower. We see price going lower to Fibonacci 38% correction point of the rally at 1.4305 in the next few days.

Support 1.45101.44551.4415
Resistance 1.45651.45901.4645

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 after price had stayed within the range in the previous day.  Going forward we see price moving within this range 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 1.15901.15501.1475
Resistance 1.16551.17151.1760

XAU/USD – Price had a strong rally overnight after Fed QE announcement. The rally to $1584 looks in need to a consolidation. Stochastic is starting to turn down from overbought extreme and MACD is also turning down. We see a corrective decline to $1545 before the rally can resume again.

Support 1552.951543.851527.50
Resistance 1562.401584.101596.80

AUD/JPY – Our sell call was doing well until Fed announced its QE programs. We were stopped out for a loss of 50 pips. Price reached a high of 65.63 this morning. This looks like a temporary top and there is a possibility of a pullback to 64.40. Stochastic is turning down from overbought extreme and MACD has a bearish crossover in the bullish zone.

Support 64.7564.3063.85
Resistance 65.3065.6566.00

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