FX Commentary – US Dollar Weakened On Fed’s Possible Move

Market Talk

  • The dollar regained lost ground on Tuesday as surging commodity currencies paused for breath and a rising yen pointed to investor trepidation over the Fed’s next move, as investors weigh the possibility of stepped-up bond buying – or even simply a very dovish outlook – from the Fed.
  • The NZ dollar hit a four-and-a-half month high of $0.6576 against the US dollar after, an ANZ survey of traffic movement – seen as a forward indicator of economic growth – saw a sharp rebound in heavy vehicle traffic last month. The Aussie dollar briefly touched a 10-month top of $0.7040 against the US dollar.
  • The British pound made a three-month high of $1.2755, but further gains for the pound may be hard to come by, after the fourth round of EU-UK future relationship negotiations concluded Friday with no major breakthroughs. The UK government has until the end of June to reach a trade agreement with the EU.
  • The Canadian dollar on Monday hit 1.3371, its lowest since Mar. 4, despite a fall in crude oil prices amid data showing Canadian housing starts bounced back last month, but analysts warn of easing risk sentiment in the near term that will keep a lid on further downside.
  • Gold made a surprising return to the key $1,700 level on Tuesday morning as the safe-haven crowd bet that the Federal Reserve, which meets this week, will uphold stimulus support for a U.S. economy still recovering from the coronavirus pandemic.

Chart Focus EUR/AUD
Key Points

  1. Buy EUR/AUD recommendation
  2. Buy EUR/AUD at 1.6135 Stop at 1.6060 and target at 1.6300
  3. ECB’s bold moves to simulate the Eurozone economy are likely to aid the Euro against the exhausted Aussie dollar
  4. A possible Double Bottom bounce with Stochastic hinting of further price upsides are signs of more price advances.

Fundamental Comments

  1. ECB’s bold measures are likely to stoked optimism of a quick recovery in the Eurozone
  2. Aussie looks exhausted after 7 days of consecutive gains from 0.6630 to 0.7040

Technical Comments

  1. Price failed to test the previous low and has rebounded strongly hinting of a possible reversal.
  2. Stochastic is rising from the oversold zone and has bullish crossover, hinting of further price advances.

Key Levels

Support 1.61301.60651.6025
Resistance 1.61951.62601.6305

Technical Overview

USD/JPY – The decline had moved lower than our expectation of 108.60. It may no longer be the correction but a possible bearish move instead as price has dropped below the Fibonacci 62% of the rally move. MACD has turned bearish and Stochastic is still declining. MACD also has a divergence warning when price made the high at 109.85. 20EMA has also turned bearish.

Support 107.90107.50107.05
Resistance 108.25108.65109.10

EUR/USD – Our view is the same as yesterday. We think this decline could be a corrective decline and another push higher above 1.1385 is likely. 20EMA has been supporting price around 1.1275, which is slightly higher than our expectation of 1.1265 from yesterday. MACD is bullish and is turning around, which is a hint of price advancement.

Support 1.12751.12201.1185
Resistance 1.13201.13601.1410

GBP/USD – Price continued its rally into Tuesday morning to a high of 1.2755. While price made the new high, MACD was giving out a bearish divergence warning. Stochastic is also in the overbought zone. 20EMA is currently bullish and pointing up. Its slope is also steep. We think price could be near to a temporary high and a bigger correction is likely, which could see price declining back to 1.2620.

Support 1.26701.26251.2580
Resistance 1.27201.27551.2800

XAU/USD – Yesterday we had a sell recommendation on Gold at $1700. This morning as price reached a high of $1704.60, our sell order got filled. Our view remains unchanged. Keep stop at $1713 and profit order at $1670. MACD is still bearish and Stochastic could be about to see a bearish crossover. 20EMA is still bearish. We see this as a final push lower before the bigger correction set in.

Support 1689.851679.101670.10
Resistance 1701.501712.201721.40

NZD/USD – Price rose to a high of 0.6580, which is a four-and-a-half month high but this high was accompanied by a divergence warning from the MACD indicator. This is a warning of a possible price high and a reversal to come. Stochastic is also in the overbought zone and has a bearish crossover. If price were to fall below the 20EMA at 0.6490, it would be the first confirmation of a high in place and a correction to follow.

Support 0.64900.64400.6395
Resistance 0.65450.65850.6625

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