FX Commentary – Flight To Safety Send US Dollar Higher

Market Talk

  • A flight to safety bid pushed the dollar higher against its peers on Thursday after dire retail and factory data showed the severity of the collapse in U.S. economic activity caused by the coronavirus pandemic.
  • IMF’s warning that global economy is expected to shrink by 3.0% this year in a stunning coronavirus-driven collapse drove the U.S. dollar higher in European trade on Wednesday but poor US data send the US dollar declining in the night before recovering.
  • U.S. Retail Sales crashed in March as state-wide lockdowns across the country in response to the Covid-19 epidemic. Official data released showed sales fell 8.7% from February, nearly three times as much as the sharpest monthly drop during the financial crisis in 2008. U.S  industrial production fell at its sharpest rate since 1946 with a drop of 5.4% and manufacturing output fell by 6.3%, while the New York Empire State Manufacturing index fell to its lowest-ever level at -78.2.
  • Gold traded like a risk asset again on Wednesday, falling alongside oil and equities while other haven assets rallied against a backdrop of dismal economic data.
  • USD/CNH climbed to 7.0579 after China’s central bank stepped up policy support for its embattled economy, cutting the one-year medium-term lending facility rate to financial institutions to 2.95%. That’s a record low and down 20 basis points from 3.15% previously

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at 1708. Stop at 1698 and target at 1747
3. Poor US data overnight and low interest rate is both favourable for Gold
4. A strong support zone couple with bullish MACD is a sign of further price up move

Fundamental Comments
1. Poor US data overnight is likely to weigh on the US dollar and in favour of Gold
2. Uncertainty in current market situation and low interest rate are both favourable for Gold

Technical Comments
1. Strong support zone provided by 20EMA and an uptrending trend line
2. MACD is bullish and the fast line could be turning around near the zero line

Key Levels

Support 1708.001699.551686.90
Resistance 1717.701730.251747.10

Technical Overview

USD/JPY – A Double Bottom chart pattern on the 4-hourly chart has sent price higher to 108.07. However the bearish trend is not over as yet. Until price can move above 109.20, we are still in a bearish trend for this pair. Stochastic is rising but MACD is still bearish. 50EMA is now capping price at 108.05 and there is a strong price resistance at 108.20. We would prefer to sell rally to 108.50 for a decline to 106.90 again.

Support 107.65107.25106.90
Resistance 108.05108.55109.05

EUR/USD – Price broke below a Rising Wedge chart pattern and declined to a low of 1.0855 overnight. A recovery from this overnight low was capped at 1.0940. As long as price is capped at 1.0940, we see price testing the low of 1.0855 again and going lower to 1.0765 over the next few days. MACD is now bearish but Stochastic is hinting of a price pullback toward the 20EMA at 1.0920.

Support 1.08801.08501.0810
Resistance 1.09151.09501.0990

GBP/USD – Price declined to a low of 1.2435 overnight and managed to recover to a high of 1.2574. We think price is likely to stay within these two pivot points. MACD is bullish and Stochastic is about to have a bullish crossover near the oversold zone. Momentum indicators are both hinting of a price rally today. We would recommend watching the 2 pivot points for breakout trade

Support 1.24601.24051.2365
Resistance 1.25251.25701.2610

AUD/USD – Our sell order was not filled yesterday as price only reached a high of 0.6370. Price reached a low of 0.6263 overnight. This low is also sitting on the 50EMA line. However, we do not think price will stay supported at this level. We see price going lower with MACD declining. Stochastic is near to the oversold zone but is still declining. We keep to our bearish view. We see price going to 0.6220.

Support 0.62600.62150.6165
Resistance 0.62900.63400.6390

USD/SGD – Yesterday, we had brought stop loss lower to 1.4175. This was triggered and we are out with a loss of 10 pips. The sharp rally brought price to 1.4280. Stochastic is near to the overbought extreme but MACD is still bullish and rising. We think the rally can continue higher to 1.4400. However a move below 1.4170 would negate our bullish view for the next few days.

Support 1.42551.42101.4175
Resistance 1.43051.43501.4410

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