FX Commentary – US Dollar Weaker Post FOMC

Market Talk

  • The dollar nursed losses on Thursday after the U.S. Federal Reserve kept rates unchanged but expressed a willingness to stick with its ultra-loose monetary measures to support the economy and dampened expectations for a quick economic recovery from the coronavirus pandemic.
  • The greenback was also weighed down as signs the pandemic is receding in other countries that reduced safe-haven demand and were positive trial results of an experimental COVID-19 treatment. Oil prices are pushing higher and more countries are looking to reopen, adding to the positive tone.
  • Gold fell for a fourth-straight session on Wednesday as markets from Wall Street to oil rose on optimism for U.S. recovery from the Covid-19 pandemic after relatively successful clinical trials for a drug by Gilead manufactured to treat those infected by the virus.
  • U.S. quarterly GDP on Wednesday showed U.S. gross domestic product fell in the first quarter at the sharpest pace since the Great Recession. Economists say the second quarter could be even worse.
  • The euro held steady before a ECB monetary meeting later on Thursday at 7.45pm local time where policymakers are likely to expand debt purchases to include junk bonds and take other steps to ease conditions in credit markets.

Chart Focus USD/JPY
Key Points

  1. Sell USD/JPY recommendation
  2. Sell USD/JPY at 106.75.Stop at 107.20 and profit target at 105.65
  3. US central bank rate cut to almost zero and its use of ultra-loose monetary policy is likely to weigh on the US dollar
  4. Price is capped by 2 strong resistance points and momentum indicators are bearish and weak.

Fundamental Comments

  1. US central bank’s usage of ultra-loose monetary measures to support the economy is likely to weigh on the US dollar.
  2. US dollar has lost its big interest rate differential after Fed brought interest rate to almost zero.

Technical Comments

  1. Price is capped by a previous support turned resistance and also a 20EMA point.
  2. MACD is bearish with both its lines below the zero line.

Key Levels

Support 106.15105.80105.50
Resistance 106.60106.90107.35

Technical Overview

AUD/USD – Price has been rising for the past 6 days but there are signs of a possible short term correction showing up. Stochastic and MACD are both showing divergence. A possible Evening Star could be forming on the hourly chart. If the candlestick reversal pattern is confirmed, price could be heading lower to 0.6450. Watch the closing at 3pm for confirmation and direction.

Support 0.65300.64800.6440
Resistance 0.65700.66200.6650

EUR/USD – Price reached a high of 1.08849 overnight, missing our profit target at 1.0885. We would recommend bringing stop higher to 1.0835 and profit target higher to 1.0895. MACD is still bullish but is losing momentum as price moves higher. Stochastic is still rising and in the middle of the range. There could be potential for price to move higher before ECB meeting later tonight.

Support 1.08401.07901.0755
Resistance 1.09001.09351.0960

GBP/USD – Price broke above 1.2515 on Tuesday but failed to move higher and ended below 1.2400. There was no follow through as well and price is back within the past 2 days’ peak and though. MACD is still bullish but is losing momentum. Stochastic is near to the overbought zone. Resistance lies at 1.2485 and if price cannot move above this point, it is likely to move down to 1.2400 again.

Support 1.24451.23851.2355
Resistance 1.24851.25251.2575

XAU/USD – Price has moved above its recent resistance at $1712.50 and if price can stay above this resistance point, it could be heading higher to $1728.60 initially and later to $1735. Stochastic is rising and its gradient is steep, which is a hint of a strong momentum. MACD fast line has moved above the zero line but its slow line is still in the bearish zone. We think the strong momentum can move price higher. Below $1707 would void the strong upside momentum.

Support 1712.301690.701680.50
Resistance 1724.401735.651747.10

USD/SGD – Our sell order was not filled yesterday as price keeps declining throughout the day. Price is now near our target at 1.4095 and if price were to fall below 1.4090, it could be moving lower to Fibonacci 50% correction point at 1.4040 or Fibonacci 62% at 1.3900. MACD is bearish and Stochastic is moving lower. Momentum indicators are hinting declines could be limited to 1.4040.

Support 1.40851.40401.4000
Resistance 1.41451.41851.4220

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