FX Commentary – US Softer On Economies Re-opening

Market Talk

  • The dollar was on the back foot on Wednesday for the second day as rising stocks reflected improving risk appetite, and economic optimism after several countries and U.S. states laid out plans to reopen businesses that were shut to stem the spread of the novel coronavirus.
  • Gold prices fell on Tuesday as risk assets extended their recovery amid hopes that the lifting of lockdown restrictions in the U.S. and Europe will allow a sharp rebound in advanced economies later in the year.
  • The risk-sensitive Australia dollar rose to $0.6517 to track toward a sixth straight session of gains, and the currency’s best month in four years. The New Zealand dollar rose to $0.6093 on the back of strong trade data in March 2020, its highest in a week but gains were capped by caution as markets look to the U.S. Federal Reserve for guidance.
  • EUR/USD slumped to 1.0816 after hitting a high of 1.0889 earlier in the day on US dollar weakness after Fitch cut Italy’s credit rating to BBB-, which is just one notch above “junk” status.
  • Investors will be watching to see if the U.S. central bank gives any clues on its future policy path after it responded to the economic devastation of the COVID-19 pandemic by slashing rates, buying bonds and backstopping credit markets

Chart Focus USD/SGD
Key Points

  1. Sell USD/SGD recommendation
  2. Sell USD/SGD at 1.4170. Stop at 1.4205 and target at 1.4100
  3. As economies of several countries and several US states reopen, investors are withdrawing from safe haven US dollar
  4. Price has broken below an important support and momentum indicators are bearish are hints of more price declines.

Fundamental Comments

  1. An increase in risk appetite as economic optimism increased after several countries and U.S. states laid out plans to reopen businesses
  2. Re-opening of economies have led to less demand for safe haven US$

Technical Comments

  1. Price has broken below an important support and trend line at 1.4180, opening up the way for a decline to 1.4095
  2. MACD is bearish and moving lower, while Stochastic is weak in the oversold extreme

Key Levels

Support 1.41451.41251.4095
Resistance 1.41851.42201.4250

Technical Overview

USD/JPY – Price broke below the range yesterday and moved to a low of 106.44 this morning. Tokyo is closed for a holiday today but we are expecting price to move lower to 106.10 initially and later 105.50 in the next one to two days. MACD is still bearish and Stochastic is weak in the oversold zone. 20EMA is moving lower and its gradient steep, which is a hint of a strong bearish trend.

Support 106.15105.80105.50
Resistance 106.60106.90107.35

EUR/USD – Price moved to a low of 1.0809 before climbing higher to 1.0889. Our position is intact. We could recommend bringing stop higher to 1.0815 and lowering profit target to 1.0885. MACD is bullish but is losing momentum. Stochastic is still moving lower despite price going higher overnight. 20EMA is flat at the moment, indicating a possible range movement ahead for today.

Support 1.08351.07901.0755
Resistance 1.08651.09001.0935

GBP/USD – Sterling moved higher yesterday but was capped by the resistance at 1.2525 and declined back to 1.2400. Price has moved higher this morning and is trying to re-test the high of 1.2525 again. Failure to penetrate this resistance is likely to see a price drop to 1.2400 again. Above 1.2525 would call for a test of 1.2646. MACD is still bullish but Stochastic is declining at the moment.

Support 1.24551.23951.2355
Resistance 1.24951.25251.2575

XAU/USD – Price declined yesterday to a low of $1690.75 and bounced back higher to $1713. Price is currently close to this resistance and will need to move above this resistance for the bullish stance to prevail. Above $1713, price is likely to test $1736 again. However a drop below $1690 would mean the correction is not over and a re-test of $1663.

Support 1690.701680.501662.65
Resistance 1713.201721.701725.65

USD/CAD – Our buy call yesterday was wrong and we got stop out for a loss of 50 pips. Price is testing the overnight low again this morning at 1.3935. We are expecting price to test the previous low at 1.3855 again within the next few days. MACD is bearish and heading lower. Stochastic is weak and flat and near to the oversold extreme. 20EMA is also pointing lower.

Support 1.39201.38801.3850
Resistance 1.39701.40051.4065

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