FX Commentary – Safe Haven Declined On Good US Job Data

Market Talk

  • A surprising improvement in U.S. labour market data bolstered expectations for an economic recovery, which reduced safe-haven demand for the US dollar and gold. The safe haven yen weakened to 109.85 yen against the US dollar, close to a two-month high for USD/JPY.
  • The jobless rate also fell to 13.3% last month from a post-World War Two high of 14.7% in April, offering hope that the world’s largest economy is starting to stabilize after the coronavirus pandemic triggered a wave of job cuts. Sentiment improved and risk appetite increased, causing gold prices to dip to a low of $1670.15
  • Data on Sunday showed exports from China, the world’s second-largest economy, fell less in May than expected, sending the Australian and New Zealand dollars to their highest since January 2020.
  • The Canadian dollar benefited from a strong Canadian jobs report as USD/CAD sank to a new low of 1.3390. An agreement to extend oil production curb by OPEC + Russia, helped to keep crude oil price near recent high and also help the Canadian dollar.
  • Euro rose to $1.1314 as the common currency continued to ride a wave of optimism after the ECB said last week it will increase bond purchases to help the bloc’s weakest economies. Sentiment will face a test later on Monday with the release of data forecast to show that German industrial output falling the most on record in April.

Chart Focus Gold
Key Points

  1. Sell Gold recommendation
  2. Sell Gold at $1700. Stop at $1713 and profit target at $1670
  3. A turnaround in US job data and a better than expected export data from China, both showed global economies are recovering from coronavirus pandemic, denting demand for safe haven gold
  4. A price and 20EMA resistance zone is capping price with MACD bearish and hinting of one more push lower.

Fundamental Comments

  1. A turnaround in US job data has bolstered expectation of an economic recovery, denting demand for safe haven gold
  2. Export data from China showed exports falling less in May, showing a recovery in the world second largest economy, reducing demand for safe haven gold

Technical Comments

  1. A price and 20EMA resistance zone around $1700 is likely to cap price advance
  2. MACD is bearish and despite the divergence warning, looks like it will test the low one more time

Key Levels

Support 1679.101670.101658.30
Resistance 1693.651701.501712.20

Technical Overview

USDCNH – Price moved to a high of 109.85 on Friday night but that high was accompanied by divergence warnings from both MACD and Stochastic. Both momentum indicators are hinting of a possible price high and a possible reversal in trend. We are bullish but remain cautious. We would prefer to wait for a correction to 108.60 over the next few days for a better and safer entry as we think there should be one more push higher in the next few days.

Support 109.35108.95108.60
Resistance 109.85110.20110.65

EUR/USD – Price made a new high at 1.1385 on Friday but has declined lower to 1.1280 this morning. Stochastic is moving lower but MACD is still bullish. We think this decline could be a corrective decline and another push higher above 1.1385 is likely. A good location to buy is at 1.1265 for the push to 1.1385. 20EMA is also providing support at 1.1265. Only a move below 1.1185 would negate our bullish view.

Support 1.12651.12201.1185
Resistance 1.12951.13351.1385

GBP/USD – Price continued its rally on Friday to a high of 1.2730. While price made the new high, both Stochastic and MACD are giving out divergence warnings. Price could be near to a temporary high and a bigger correction is likely. 20EMA is still strong and is supporting price at 1.2611. We are bullish but remain cautious. We would prefer a deeper dip to enter at 1.2610 as we think there may be another push higher.

Support 1.26751.26251.2580
Resistance 1.27051.27351.2795

EUR/AUD – Our sell call in this pair was not filled on Friday as price only made a high of 1.6280. Price has dipped lower to 1.6159 this morning but Stochastic is near to the oversold zone. While both MACD and 20EMA are still bearish, price is showing little downside traction below 1.6200. We are likely see a sideways consolidation for today. The upper boundary is at 1.6345 while support lies at 1.6095. Stand aside for today and wait for better trading idea from this pair.

Support 1.61751.61351.6095
Resistance 1.62251.62751.6320

USD/CNH – Price has declined below our price target of 7.0730. On Friday, price reached low of 7.0598. We think the down move may be over and a correction back to the Fibonacci 50% of this decline is possible. The Fibonacci 50% of the decline from 7.1961 to the low of 7.0598 lies at 7.1280. Stochastic is near to the oversold zone and MACD, while bearish, is also moving higher from its extreme point. 20EMA lies at 7.0970 and price needs to move above this point to confirm the low and reversal.

Support 7.06957.05957.0410
Resistance 7.08707.09707.1220

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