FX Commentary – US Dollar Handed Back Gains On Trade War Fears

Market Talk

  • The US dollar handed back gains on Tuesday to commodity currencies as oil price bounced back but hung on against the Yuan as traders weighed optimism about a coronavirus recovery in China against fears about rising Sino-U.S. tensions.
  • The Australian and NZ dollars inched ahead, after recouping Monday’s falls but public holidays in Japan and China lightened trade and caution on the global growth outlook and looming Australian and New Zealand central bank meetings capped further moves.
  • Data on Monday showed new orders for U.S.-made goods suffered a record decline in March and could sink further as disruptions from the coronavirus fracture supply chains and depress exports.
  • Oil prices climbed on Tuesday, adding to gains in the previous session, on expectations that fuel demand will begin to pick up as some U.S. states and nations in Europe and Asia start to ease coronavirus lockdown restrictions.
  • The Reserve Bank of Australia (RBA) announced an unchanged interest rate at 0.25% and continues to paint a rather bleak picture of the economy but have scaled back on QE a little.

Chart Focus AUD/JPY
Key Points

  1. Sell AUD/JPY recommendation
  2. Sell AUD/JPY at 68.80. Stop at 69.30 and target at 68.05
  3. Worries over rising Sino-U.S. tensions and bleak Aussie economy are both likely to weigh on the Aussie dollar
  4. Price is capped by both the 20EMA and 50EMA and MACD is still bearish.

Fundamental Comments

  1. Worries over rising Sino-U.S. tensions are likely to weigh on the Aussie dollar
  2. RBA’s comments of a bleak economy ahead for Australia are likely to weigh on the Aussie.

Technical Comments

  1. Price is capped by both the 20EMA and 50EMA resistance point.
  2. MACD is bearish and the slow line is still far away from the zero line.

Key Levels

Support 68.4567.9567.25
Resistance 68.8569.2569.70

Technical Overview

USD/JPY – On Friday, price stayed within the range of Thursday. Today, we have a Japanese holiday and we are expecting price to stay in a tight range again. Thursday’s range of 107.49 and 106.38 are the points to watch out for and this morning price reached a low of 106.50. Stochastic and MACD are both turning up and we may see a test of 50EMA resistance point at 106.75 today.

Support 106.50106.10105.60
Resistance 106.80107.10107.50

EUR/USD – Price reached a high of 1.0948 overnight, missing our sell order at 1.0950. Price reached a low of 1.0895 near the end of New York session but MACD is still bearish. However, Stochastic is rising. If price is supported by 20EMA at 1.0885, it may be able to test the high of 1.0950 again within the next 2 days. However a move below 1.0850 would call for a test of 1.0730.

Support 1.08951.08551.0815
Resistance 1.09251.09551.0990

GBP/USD – Price declined to a low of 1.2405 overnight but a recovery was capped this morning by the 50EMA at 1.2467. MACD is still bearish but Stochastic is already into the oversold extreme. If price is capped by the 50EMA, we may still see a test of 1.2405 again but a move above 1.2495 will likely mean a test of the previous high at 1.2647.

Support 1.24001.23601.2315
Resistance 1.24651.24951.2555

XAU/USD – Yesterday price reached a high of $1712.95 but declined to a low of $1696.55 this morning. We see this as a consolidation. While Stochastic is rising from the oversold zone, MACD is still bearish at the moment. As price had moved above $1709 yesterday, we think $1668 is the low and if price can stay above this morning low, we see a test of $1712.95 and a move to $1738 in the next few days.

Support 1695.101683.551668.80
Resistance 1712.951721.401738.55

USD/CAD – Price reached a high of 1.4150 overnight and declined to the 20EMA support point at 1.4040. We think this decline is a corrective consolidation and a good opportunity to buy. If price can stay above the 20EMA, we see another test of 1.4150 again within a couple of days. MACD is still bullish but Stochastic is still correcting and heading lower at the moment. Below 1.3985 would negate our bullish view.

Support 1.40301.39851.3940
Resistance 1.40601.41101.4150

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