FX Commentary – IMF’s Warning Could Favour Safe Havens

Market Talk

  • The dollar nursed losses on Wednesday as investors cautiously returned to riskier currencies after U.S. President Donald Trump edged toward rolling back some restrictions put in place to contain the coronavirus pandemic and re-open the economies in a timely manner.
  • Another factor weighing on the dollar is the large amount of greenback liquidity provisions, credit backstops, and monetary easing the U.S. central bank has unleashed in the past month to contain the economic damage caused by the pandemic. The Fed’s latest efforts have added to current dollar weakness,
  • Risk sentiment returned to the market following better-than-expected economic data from China, which painted a less gloomy picture than feared following the coronavirus outbreak there.
  • The global economy is expected to shrink by 3.0% this year in a stunning coronavirus-driven collapse, marking the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said on Tuesday.
  • Gold prices fell on Wednesday as investors took a cautiously optimistic view of the coronavirus pandemic’s progress that the worst may be over as some countries plan to re-open their economies.

Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation
2. Sell AUD/USD at 0.6395. Stop at 0.6445 and target at 0.6270
3. A month long rally in AUD/USD and a big drop in consumer confidence are likely to weigh on the Aussie
4. An Ichimoku reversal together with momentum indicators declining from their peak could be a sign of a price high.

Fundamental Comments
1. Consumer sentiment suffered a big drop, highlighting the plight of the Australian economy going forward.
2. A month long rally from 0.5505 could be near to its exhaustion point.

Technical Comments
1. Price has reached the Fibonacci 127% projection target and has formed a small Ichimoku reversal pattern
2. MACD is turning down and Stochastic is also turning down from overbought zone on the 4-hourly chart

Key Levels

Support 0.63600.63200.6270
Resistance 0.64000.64400.6480

Technical Overview

USD/JPY – Price was capped at 109.20 which was also the Fibonacci 50% correction level of the previous decline from 111.70 to the recent low of 106.90. Price tested the low of 106.90 again and if we can break this low, price is likely to decline to Fibonacci 127% projection target at 105.60. Stochastic is in the oversold zone and MACD is improving. There is a possibility of a Double Bottom chart pattern forming. Wait for better direction.

Support 106.90106.40106.15
Resistance 107.25107.50107.80

EUR/USD – We had lowered our stop loss to 1.0970 yesterday and this was triggered overnight. Price reached a high of 1.0990 this morning but MACD is not strong and flat at the moment. Stochastic is near to the overbought zone. It is not clear if price can continue higher. The next resistance zone is at 1.1020-1.1040. However if price is capped below 1.10, we are likely to see a move to 1.0920.

Support 1.09501.09151.0880
Resistance 1.09901.10201.1050

GBP/USD – Price moved above our expectation of 1.2625 to a high of 1.2645 overnight. A Shooting Star candlestick price pattern was seen on the 4-hourly chart and could this be a sign that the rally from 1.2160 has come to an end? MACD is flat and Stochastic has reached the overbought zone. We favour the downside but would recommend waiting for reversal confirmation before jumping in.

Support 1.25951.25401.2490
Resistance 1.26451.27051.2725

XAU/USD – Price moved to new 8-year high overnight at $1749.10 and we are looking at $1769 as our target over the next few days. MACD is still bullish. Stochastic is in the overbought zone. Both momentum indicators are still bullish. 20EMA is rising and its gradient is steep, which is a hint of a strong bullish trend. We may see a price pullback to $1700 area but this could be a good location to accumulate for the longer term.

Support 1717.701708.601699.55
Resistance 1730.251747.101754.10

USD/SGD – Our order was filled yesterday when price reached a high of 1.4169. Price has declined lower to 1.4127 overnight but this morning we are back to 1.4145. We would recommend bring stop lower to 1.4175 while keeping profit target at 1.4090. It could take another 2-3 days before price reached our target. MACD is still bearish but Stochastic is turning up which is a hint of a price correction.

Support 1.41301.40901.4060
Resistance 1.41701.42201.4250

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