FX Commentary – Gold Higher On Grim Powell Speech.

Market Talk

  • The dollar held its gains on Thursday morning after U.S. Federal Reserve chair Jerome Powell dismissed negative rate and warned of an “extended period” of weak economic growth, while vowing to use the U.S. central bank’s power as needed and calling for additional fiscal spending to stem the fallout from the pandemic.
  • Gold was up on Thursday morning in Asia, rising close to $1720 with investors turning to the yellow metal after a grim speech by U.S. Federal Reserve chair Jerome Powell which sent equity lower and safe havens higher.
  • The Australian dollar fell after data showed the country shed jobs in April at the fastest pace on record, suggesting more monetary and fiscal easing may be needed to support the economy. The jobless rate rose to a five-year high.
  • The United States and other countries are easing restrictions to allow factories and shops to open again for business, but there are significant risks of a second wave of infections and a full-fledged economic recovery is likely to remain distant until a vaccine for the coronavirus is available.
  • Many investors await China’s release on Friday of data on industrial production, retail sales and investment to measure how quickly the world’s second-largest economy is recovering from its first contraction in decades in the first quarter.

Chart Focus AUD/USD
Key Points

  1. Sell AUD/USD recommendation
  2. Sell AUD/USD at 0.6465. Stop at 0.6505 and target at 0.6375
  3. Poor Aussie employment data and fear of a second wave of coronavirus inflection are weighing on the Aussie dollar
  4. A continuation of a price decline with bearish momentum is likely to bring price lower.

Fundamental Comments

  1. Poor Aussie employment data today is likely to weigh on the Aussie dollar
  2. Worries over a second wave of COVID-19 inflections as economies re-open are driving flows into safe havens

Technical Comments

  1. Price is declining after a failure test at 0.6576 and 2 moving averages are providing resistance at 0.6465.
  2. Momentum indicators are bearish and turning down, hinting of more price declines.

Key Levels

Support 0.64150.63700.6335
Resistance 0.64650.65100.6560

Technical Overview

USD/JPY – Our order was filled at 107.05 but the situation does not look good after Powell’s speech seems to move flow into safe haven. Price is currently close to our stop at 106.70. We will leave the stop at that level. MACD could be turning bearish but Stochastic is near to oversold extreme. Price could go either way for now. Wait for better trading clues from this pair.

Support 106.65106.20105.95
Resistance 107.00107.40107.75

EUR/USD – For a second consecutive day, price traded higher but closed near to the low of the day. MACD is now bearish but Stochastic is into the oversold extreme. 20EMA is also bearish but its gradient is not steep. However, we think the corrective rally could be over for now and a decline to test the low could be on the card. Breaking the 8-week uptrend line at 1.0780 would confirm the start of a downtrend

Support 1.07951.07651.0725
Resistance 1.08351.08801.0925

GBP/USD – Last night, the pullback was stronger than we had expected, rising to a high of 1.2338. Price declined from this high and price is now below 1.2200. We see the decline continuing lower to 1.2150. Stochastic is already deep in oversold zone. MACD is still bearish but the bearish momentum is not as strong currently. The downside could be limited to 1.2150 for now.

Support 1..21651.21301.2085
Resistance 1.22101.22501.2290

XAU/USD – Price broke above $1710 overnight and rose to $1720. In a bigger picture, on the daily chart, we are still consolidating with a triangle pattern. Price needs to move above $1728 to break out of the triangle pattern to advance higher to $1746, the previous 8-year high. Stochastic is near to the overbought zone and MACD’s momentum is not that strong. We think price is likely to consolidate again today.

Support 1710.851701.151691.15
Resistance 1722.501731.051738.55

NZD/USD – After a Hammer candlestick price pattern at the low yesterday, we were calling for a corrective rally to 0.6060 but price only managed to move up to 0.6054 and has since declined below 0.6000. This second decline below 0.60 could be the end of the decline as MACD is starting to warn with bullish divergence. Stochastic is also rising after price hit a low of 0.5967. We prefer to trade on the long side for today.

Support 0.59650.59250.5890
Resistance 0.60050.60550.6095

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