FX Commentary – US Softer On Upbeat Mood

Market Talk

  • The U.S. dollar was broadly softer on Tuesday morning against most of its peers, continuing its soft stance from Monday as the broader upbeat mood encouraged investors to move into other currencies.
  • The Australian and NZ dollar tested six-week highs on Tuesday, as signs of progress in re-opening economies helped the risk-sensitive currency recoup most of the panic selling seen in March, and as the greenback nursed overnight losses.
  • Two days before the Fed unveils its rate decision and Chairman Powell delivers his press conference, ING warned that the dollar could extend losses on reduced safe-haven demand should the central bank maintained its stance to do whatever it takes to cushion the economic fallout from the Covid-19 pandemic and as more and more countries announce a gradual lifting of their Covid-19 restrictions.
  • Helping the positive tone was the addition of more stimuli from the Bank of Japan earlier Monday, which opened up the possibility of unlimited Japanese government bond buying, while raising its ceilings on corporate bonds and commercial paper to 20 trillion yen following its monetary policy meeting yesterday.
  • The USDCAD remains rooted near 1-week lows at 1.41 and in the process ignored the 20% tumble in crude oil price overnight. The pair is eyeing last week’s low at 1.3999 that is a support target that may prove difficult to get below on the first look given the continued decline in oil price.

Chart Focus USD/CAD
Key Points

  1. Buy USD/CAD recommendation
  2. Buy USD/CAD at 1.4035. Stop at 1.3985 and profit target at 1.4145
  3. An easing of lockdown restrictions in the USA and a decline in crude oil price are both weighing on the Canadian dollar
  4. Price managed to stay above a support level and with a candlestick reversal pattern and bullish momentum are hints of a possible price low

Fundamental Comments

  1. An easing of lockdown restrictions in the USA is good for the US economy and for the US dollar.
  2. A decline in crude oil price is likely to weigh on the Canadian dollar.

Technical Comments

  1. Price has managed to stay above the Fibonacci 62% correction point on 2 occasions and a Morning Star candlestick pattern is hinting of a price reversal.
  2. Both MACD and Stochastic are turning up from their low points.

Key Levels

Support 1.40151.39851.3930
Resistance 1.40651.40951.4150

Technical Overview

USD/JPY – Price broke the range last night but only moved down to 106.99 and price has moved back into the range again. Resistance is currently at 107.45 and if price does not moved above this resistance, there is still a chance of moving lower to 106.90 again. A move above 107.35 is likely to see another test of 107.90 and back into the range trading mode again.

Support 106.90106.55106.15
Resistance 107.35107.65107.90

EUR/USD – Our order was filled and price reached a low of 1.0816. MACD has turned bearish now although Stochastic is near to the oversold zone. We think price may go lower again without moving above 1.09. We would recommend moving stop higher to 1.0805 while keeping profit target at 1.0900. A move below 1.0790 is likely to send price back to test the previous low at 1.0726 again.

Support 1.07901.07551.0725
Resistance 1.08351.08651.0900

GBP/USD – The rally off last week’s low at 1.2246 reached a high of 2453 overnight, which is also the Fibonacci 50% correction point of the decline from 1.2647 to 1.2246. Price will need to move above this resistance to be bullish. Support is where the 20EMA and 50EMA converge at 1.2390. MACD is still bullish but Stochastic is near t the overbought zone and there is a bearish crossover.

Support 1.23901.23551.2310
Resistance 1.24551.24951.2525

XAU/USD – Price has dropped below $1700 and below the 20EMA as well as the 50EMA. We are now likely to see a bigger and deeper correction down to $1663 over the next few days. The first support lies at $1675 and if this support breaks, we are likely to see $1663. MACD is still bullish but is trending lower. Stochastic is also moving lower and moving into the oversold zone but looks weak.

Support 1791.101680.501662.65
Resistance 1704.401717.701728.35

USD/SGD – Price tested the 1.4180 support yesterday and declined to a low of 1.4172. Price managed to recover higher to 1.4220 this morning. If price can move above 1.4220, we are likely to see a test to the previous high at 1.4325. However if price falls below 1.4170, we are likely to decline to 1.4095. Stochastic is near to the oversold zone but MACD is still bearish at the moment. We would prefer to watch and follow the breakout.

Support 1.41701.41351.4095
Resistance 1.42201.42501.4280

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