FX Commentary – Euro Declined On Court Decision

Market Talk

  • The yen scaled a three-year high against the euro and a seven-week peak on the dollar on Wednesday, after a court decision challenging German participation in Europe’s stimulus program and worries about a bumpy global recovery spooked investors.
  • The pandemic’s heavier toll on indebted Italy and Spain, compared with Germany, has revived tension between wealthy northern and poorer southern European member states – leaving politicians divided and the ECB to do the heavy lifting.
  • U.S. President Donald Trump has again pressed China about the origins of the outbreak that has killed more than a quarter of a million people since it started in the Chinese city of Wuhan late last year. Markets are awaiting a response from Beijing to his latest comments, which last week included a threat of fresh tariffs on Chinese goods.
  • Sterling was weighed down by Brexit-related uncertainty amid signs of little progress on U.K-European Union trade talks. Worries are mounting that Britain could leave the EU without a trade deal as the U.K. has insisted it would not seek to extend negotiations beyond the transition period, which ends on Dec. 31.
  • Aussie and NZ dollars dipped a tad and the safe-haven yen cracked through resistance against the dollar to hit a seven-week high of 106.20. Gold was little change from the previous day’s level.

Chart Focus USD/CAD
Key Points

  1. Buy USD/CAD recommendation
  2. Buy USD/CAD at 1.4010. Stop at 1.3980 and target at 1.4145
  3. Hostilities between U.S.-China and relative lower crude oil prices are likely to weigh on the Canadian dollar
  4. Price is supported by the Fibonacci 50% correction point and MACD is hinting of more price upsides.

Fundamental Comments

  1. Relative lower crude oil prices are likely to weigh on the Canadian dollar
  2. Hostilities between U.S. and China are likely to favour the US dollar

Technical Comments

  1. Price is support by the previous low as well as a Fibonacci 50% correction point
  2. MACD is still bullish, hinting that the current decline could be a correction.

Key Levels

Support 1.40051.39851.3940
Resistance 1.40451.40951.4120

Technical Overview

USD/JPY – This morning price broke below the range of Thursday to reach a low of 106.20. The marginal breakout of Thursday’s range is inconclusive at the moment. MACD is still bearish but Stochastic is into the oversold extreme. 20EMA is still moving lower. We prefer to see the decline continue lower towards 105.60. Price will need to be capped below 106.70 for the downtrend to prevail.

Support 106.20105.90105.60
Resistance 106.50106.80107.10

EUR/USD – Price broke below 1.0885 overnight and declined to current rate of 1.0820. Stochastic is moving lower but is closed to the oversold zone but MACD is still bearish. 20EMA is also bearish and trending lower. We are expecting the decline to continue lower to 1.0727 over the next few days. Only a move beyond 1.0890 would negate our bearish view.

Support 1.08151.07851.0755
Resistance 1.08551.08951.0925

GBP/USD – Price stayed within a 85 pips range yesterday. MACD is flat and neutral at the moment. MACD is also very close to the zero line. Stochastic is also flat but is near to the oversold zone. We are likely to be confined to 1.2400 to 1.2485 again for today. As both 20EMA and 50EMA are both still bearish, we prefer the breakout on the downside.

Support 1.24001.23601.2315
Resistance 1.24401.24951.2525

XAU/USD – Yesterday price stayed within Monday’s range of $1712.95 to $1696.55. MACD is flat and neutral at the moment. Both 20EMA and 50EMA are also flat at the moment and not indicating any trend. Stochastic is also flat and near to the overbought zone. We see another day of range trading. Follow in the direction of the Monday’s range breakout. We prefer the topside breakout.

Support 1695.101683.551668.80
Resistance 1712.951721.401738.55

AUD/JPY – Our sell order was filled last night when price reached a high of 68.97. Price declined to a low of 68.18 this morning but has recovered higher to 68.55 again. MACD is still bearish but Stochastic is still moving higher. Our view remains the same as yesterday. We recommend bringing stop down to cost at 68.80 while keeping profit target at 68.05.

Support 68.4567.9567.25
Resistance 68.8569.2569.70

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