FX Commentary – US Dollar Re-gained Lost Ground

Market Talk

  • The dollar found a footing on Wednesday morning as investors returned to safe-havens after the state of New York reported its biggest increase in coronavirus deaths overnight.
  • The dollar had lost ground on Tuesday as riskier currencies rebounded with risk sentiment boosted by further evidence that the virus has peaked in some countries in Europe, while the U.S. has also seen scattered evidence of improvement.
  • The premium for Comex gold over spot gold widened to almost $50 an ounce, amid further reports of trouble in sourcing enough physical gold to cover all the claims of U.S.-registered ETFs. The latest surge came on the back of reports on Monday that the U.S. is preparing a fourth economic support package that could be worth around $1.4 trillion.
  • Sterling also rallied, even as traders awaited news on the condition of British Prime Minister Boris Johnson, who is fighting worsening coronavirus symptoms in intensive care.
  • The U.S. Federal Reserve releases minutes from its emergency meeting last month, which may include more commentary on the depth of the economic contraction that looms as a result of the coronavirus impact.

Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation
2. Buy USD/JPY at 108.70. Stop at 108.40 and target at 109.60
3. Risk appetite is improving and moving capital away from the safe haven yen
4. Price is finding support at the EMA support points and MACD is hinting of further price advance.

Fundamental Comments
1. Risk appetite is increasing as coronavirus improved in the U.S. and across the globe weighing on the safe haven yen
2. Interest rate differential is in the US dollar’s favour

Technical Comments
1. Price is finding support at the 20EMA and 55EMA support points
2. MACD is bullish and could be turning up again, hinting of further price rally

Key Levels

Support 108.80108.50108.15
Resistance 109.00109.35109.65

Technical Overview

AUD/USD – Price has been in a range of 0.5962 to 0.6220 since 31 March. Price is likely to stay within this range as it consolidates after the recent rally from 0.5503. Immediate support lies at 0.6115. MACD is still bullish but Stochastic is turning down from the overbought zone. If price stays below 0.6220, we may see a test of support at 0.6080.

Support 0.61100.60600.6005
Resistance 0.61500.61950.6225

EUR/USD – Price found support at 1.0765, forming a Double Bottom chart pattern. A breakout of this chart pattern has seen price moved higher to 1.0925. A pullback this morning to 1.0857 could be a correction. If this is a correction, we think price will move higher to 1.0965. MACD could be turning bullish but Stochastic could see a bearish crossover. Momentum indicators are inconclusive at the moment

Support 1.08251.07901.0765
Resistance 1.08651.08901.0925

GBP/USD – Price has been in a range of 1.2155 to 1.2185 since the 27 Mar 2020. MACD is flat and neutral at the moment while Stochastic could be having a bearish crossover and turning down.  We may see a test of the lower range boundary at 1.2220 if price were to move below 1.2300.

Support 1.22751.22251.2160
Resistance 1.23151.23451.2385

XAU/USD – Price has come back to the previous high turn support point at $1642.50.MACD is still bullish and if price can stay at the support point, we may see another rally to test the high of $1673 again. A drop below $1642 is likely to drive price lower to $1616.

Support 1641.001631.451622.25
Resistance 1650.601663.801672.45

USD/SGD – Price has decline back to the previous low and support point at 1.4205. If price can hold above this support, we see price moving higher to 1.4410 again in the next few days. Stochastic is turning up from oversold extreme. MACD is rising but is currently bearish. A fall below 1.4200 is likely to bring price lower to 1.4030.

Support 1.42651.42151.4165
Resistance 1.42951.43451.4375

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