FX Commentary – Market Risk Appetite Increased

Market Talk

  • The dollar fell on Friday as news reports on signs of success in a COVID-19 treatment drug trial as well as US President Trump’s plans to re-open the U.S. economy drove fresh optimism and increase risk appetite.
  • Medical news website STAT, citing a recorded discussion between doctors involved in a clinical trial, said most of 125 patients given Gilead’s remdesivir drug at a hospital in Chicago had recovered and been discharged.  Gilead said anecdotal reports do not provide the data needed to determine the safety or efficacy of remdesivir as a treatment for COVID-19 and that it expects more data will be available at the end of the month.
  • U.S. President Donald Trump on Thursday announced guidelines for a return to work in the world’s biggest economy – a gradual, three-stage process dependent on robust virus testing and subject to state governors’ discretion.
  • China’s economy shrank 6.8% in the first quarter, the first reversal since at least 1992, as the coronavirus outbreak paralyzed production and spending. However, the decline was largely in line with expectations for a 6.5% contraction, and investors were encouraged by a less-than-expected 1.1% drop in industrial output.
  • Gold prices in Asia were down on Friday as global stocks rose on the back of U.S. President Donald Trump’s plans to reopen the world’s biggest economy after a month-long lockdown to prevent the spread of COVID-19 and a return of risk appetite.

Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation
2. Sell AUD/USD at 0.6375. Stop at 0.6445 and target at 0.6220.
3. A big drop in consumer confidence and a month long rally are both weighing on the Aussie dollar.
4. Price is capped by a strong resistance point and MACD is hinting of further price decline.

Fundamental Comments
1. Aussie consumer sentiment suffered a big drop this week, highlighting the plight of the Australian economy.
2. A month long rally from 0.5505 to 0.6445 may have come to its exhaustion point and a reversal is due.

Technical Comments
1. Price is capped by the Fibonacci 62% correction point as well as a support turned resistance point.
2. MACD is bearish and could be turning down again, hinting of more price declines.

Key Levels

Support 0.63400.63150.6280
Resistance 0.63850.64150.6445

Technical Overview

USD/JPY – Price was capped by 108.05 again for a second day. MACD is flat and neutral and Stochastic is close to the overbought zone. 50EMA is also near to this point and providing another layer of price resistance. If price is unable to move above this resistance, we see price going lower to 107.20 or 106.90 again. Above resistance at 108.05, price can go up to 108.60

Support 107.55107.25106.90
Resistance 107.90108.35108.60

EUR/USD – Price broke below a Rising Wedge chart pattern and declined to a low of 1.0855 yesterday A recovery from that low was capped at 1.0940 and last night we seen a movement to 1.0816. Stochastic is into the oversold zone but MACD is bearish and still moving lower. We are expecting price to decline back to the base of the Rising Wedge chart pattern at 1.0767. A move above 1.0920 will negate our bearish view

Support 1.08451.08101.0770
Resistance 1.08801.09151.0945

GBP/USD – A Shooting Star candlestick price pattern on the 4-hourly chart is hinting of a price decline ahead. MACD is bearish and trending lower but Stochastic is close to the oversold zone. We think that if price is unable to move above 1.2525, we are likely to see another decline to 1.2405. If price moves above 1.2525, we are likely to see the rally continues to 1.2650.

Support 1.24601.24051.2365
Resistance 1.25251.25701.2610

XAU/USD – Our buy order was stopped out this morning when price decline to a low of 1697.50. Price managed to stay above the support at 1699 but is currently below the uptrend line. Stochastic is still moving lower, hinting that price could go lower. MACD is neutral at the moment. Price can go in either direction and we would recommend a wait and see approach for today. Watch support at 1699.

Support 1697.401686.901672.50
Resistance 1708.701717.701730.25

USD/SGD – Price managed to stay above 1.4200 and our bullish view is intact but we have toned down our price target to 1.4310. MACD is still bullish and the fast line could be turning up again. Stochastic has dropped below the overbought extreme is close to the overbought zone. If price can stay above 1.4200, we see a test of 1.4310 over the next couple of days. Below 1.4170 will abort our bullish view.

Support 1.42101.41751.4135
Resistance 1.42551.43101.4350

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