FX Commentary – Dollar Found Support On COVID-19 Dire News

Market Talk

  • The dollar found support on Monday after a rally in riskier currencies lost steam as investors braced for more dire news on the fallout from the coronavirus and governments across the globe moved only cautiously toward an economic re-start as caution took hold after two weeks of looking on the bright side.
  • Investors’ preference for the dollar as a safe harbour also pushed euro, pound and yen a little lower while risk-sensitive Australian and New Zealand dollars and the oil-sensitive Canadian dollar led losses with falls of around 0.3%.
  • Gold was down on Monday in Asia despite a souring of the increased risk sentiment from Friday’s slew of good news over the weekend. Gold had retreated on Friday as U.S. President Donald Trump announced guidelines to re-open his country’s economy and Gilead Sciences’ drug remdesivir success in treating COVID-19 patients.
  • China, which suffered its first quarterly growth contraction since quarterly records began, cuts its benchmark 1-year and 5-year lending rates on Monday to 3.85% and 4.65% respectively to give its economy a bit of a boost.
  • Market participants will be watching U.S. monthly employment figures at the end of the week and euro zone survey indicators. The week is also crucial to the COVID-19 recovery as governments around the world make tentative steps toward easing lockdowns.

Chart Focus USD/CAD
Key Points

  1. Buy USD/CAD recommendation
  2. Buy USD/CAD at 1.4030. Stop at 1.3980 and target at 1.4175
  3. Weak crude oil price and a move towards safe haven are both likely to weigh against the Canadian dollar
  4. Price ability to stay above Fibonacci 62% correction point and a bullish MACD are both pointing to a price rally ahead

Fundamental Comments

  1. Relative weak crude oil price as a result of lower global demand is likely to weigh on the Canadian dollar
  2. A move away from risker currencies is likely to favour the US dollar for its safe haven status

Technical Comments

  1. Price ability to stay above the Fibonacci 62% correction point is a hint of the end of a correction
  2. MACD is bullish and is turning up which is a hint of a possible price rally ahead.

Key Levels

Support 1.40501.40101.3980
Resistance 1.40901.41251.4180

Technical Overview

USD/JPY – Price moved in a 50 pips range on Friday, staying within Thursday’s range. MACD is flat and neutral at the moment. 20EMA is flat as well. Stochastic is moving higher again after a bullish crossover. Price is likely to range for today. On a longer term, price needs to move above 108.20 to kick start a move towards 109.20. Otherwise, we may see a test of 106.90 again.

Support 107.55107.25106.90
Resistance 107.90108.35108.60

EUR/USD – Price is capped by 20EMA at 1.0880 as well as a price resistance at 1.0895. Price will need to move above this resistance zone, in order to move higher. MACD is bearish and could be moving lower again but Stochastic is moving higher at the moment. We prefer to follow the MACD instead of the Stochastic indicator. We see price capped at 1.09 and a move lower to 1.0810 initially and later to 1.0770 over the next few days.

Support 1.08451.08101.0770
Resistance 1.08801.09151.0945

GBP/USD – Price has been moving in a range for the past 2 trading days. Price has been capped by resistance as well as 20EMA at 1.2480. MACD is moving lower and Stochastic is also moving lower. We see price moving lower today if price is capped below 1.2480. We see price going to test the base at 1.2405. A break will lead price lower to 1.2225.

Support 1.24401.24051.2355
Resistance 1.24801.25251.2570

XAU/USD – Price broke below 1700 on Friday and continued to a low of $1671.05. This could be a temporary low as Stochastic is turning up from oversold extreme. MACD is also turning. We could see a test of $1700 handle in the next couple of days. However if price stays below $1700, we are likely to see a move to 1646. We would recommend waiting on the side lines for a better indication.

Support 1671.051660.251647.25
Resistance 1685.051699.751709.85

AUD/USD – Our sell order was filled on Friday when price reached a high of 0.6377. However, price only reached a low of 0.6334 after hitting the high. MACD is still bearish but Stochastic has moved near to the oversold zone. 20EMA has also been moving in a sideways manner. Price could be moving in a sideways manner going forward. We would recommending bringing stop lower to 0.6380 and bring profit target higher to 0.6310.

Support 0.63400.63100.6280
Resistance 0.63850.64150.6445

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