FX Commentary – US Dollar Remains Strong Despite An Increase in Risk Appetite

Market Talk

  • The dollar pushed ahead against the currencies of oil producers on Thursday as a rebound in crude prices from an unprecedented collapse only partially calmed markets unnerved by the massive coronavirus-led drop in global demand.
  • Canadian dollar recovered, helped by rising oil prices, which closed up as much as 20%. However support for USD/CAD at t 1.4120, coupled with a gloomy outlook and a growing glut for crude oil made the recovery seem tenuous and unsustainable.
  • The pound erased the bulk of its gains against the dollar on Wednesday as timid inflation data, coronavirus pandemic, post-Brexit trade talks and worries being cast adrift from its biggest trade partner are expected to inflict huge damage to the U.K. economy weighed on sentiment.
  • Gold continued its rally above the $1,700 berth after U.S. lawmakers approved a new $500 billion coronavirus stimulus package. A rally in the US equity market and a recovery in crude oil price
  • In the past 4 weeks, 22 million has claims jobless benefits in the U.S. Tonight, another 4.3 million are forecasted to claim jobless benefits. Analysts said that investor sentiment is still supportive of the dollar as the COVID-19 pandemic’s negative economic impact will encourage investors to hold their fund in dollars, considered a safe haven.

Chart Focus Gold
Key Points

  1. Buy Gold recommendation
  2. Buy Gold at $1705.00 Stop at $1698.00 and target at $1733.00
  3. Amount of money spent by the U.S. government to support the economy and the negative economic impact of COVID-19 are both likely to support Gold
  4. Price has likely ended a correction process and MACD is hinting of higher price.

Fundamental Comments

  1. Worries over the pandemic’s negative economic impact is likely to send investors fleeing into safe haven Gold
  2. A 4th coronavirus stimulus package by the US government meant total package of US$3 trillion and this is likely to weigh on the US dollar

Technical Comments

  1. Price has likely finished a correction process and could be heading higher to test the previous high.
  2. MACD is bullish and moving higher is a sign of further price upsides

Key Levels

Support 1704.401691.101675.65
Resistance 1719.801733.501746.90

Technical Overview

USD/JPY – Price has been in a range of 107.20 to 107.90 for the past 3 days. Yesterday, price tried to move above the range high but only managed to stay above 107.90 for a brief moment. We are expecting another day of range. MACD is flat and neutral and Stochastic is also flat at the moment. 20EMA on the 4-hourly chart is also flat and neutral. Stay aside and wait for better trading direction.

Support 107.55107.25106.90
Resistance 107.90108.35108.60

EUR/USD – Price was caught in a range of 1.0810 to 1.0890 for 3 days but yesterday’s break of the lower boundary only brought price lower to 1.0802. We have seen a recovery back into the range. MACD remains bearish and Stochastic is still moving lower. We think price should be capped at 1.0845 and make another attempt to push lower to 1.0770. Above 1.0900 would negate our bearish view.

Support 1.08001.07701.0740
Resistance 1.08451.08801.0915

GBP/USD – From a low of 1.2225, there was a price rally to a high of 1.2385 overnight. This morning price is pushing higher and we might see another test of 1.2385 again today. A break of this likely is likely to send price higher to 1.2445 while a failure to penetrate above is likely to see a decline back to 1.2245. Stochastic is moving higher and MACD is bullish and moving higher as well. We see a test to 1.2445.

Support 1.23351.22951.2245
Resistance 1.23851.24451.2485

USD/CAD – From a low of 1.3855, we saw a rally to 1.4180, followed by a decline to 1.3985. This was followed by another rally to 1.4264. We think the 3-waves correction is completed and price is likely to decline back to 1.4010. MACD, after a divergence warning is moving lower but still bullish. Stochastic is moving lower at the moment. Only a move above 1.4265 would negate our bearish view.

Support 1.41151.40651.4015
Resistance 1.41601.41951.4230

USD/CNH – Our buy order was not filled yesterday as price only reached a low of 7.0908 on the bid price but not on the offer price. Stochastic is still moving lower and MACD has turned flat and neutral. Price may dip further today but we will not taking part today as the direction is not unclear, especially if price dipped below the previous resistance turned support at 7.0920.

Support 7.09107.08407.0740
Resistance 7.10907.12007.1330

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