FX Commentary – Market Is Awaiting Big Announcements Today

Market Talk

  • The dollar nursed losses against most currencies on Wednesday amid some speculation the U.S. Federal Reserve could take steps to curb a recent rise in bond yields at its policy meeting tonight and on hopes for economic recovery.
  • The main focus is a Fed policy meeting later on Wednesday. While no major changes are expected, recent rises in yields have pushed up the dollar due to increasing signs the U.S. economy is stabilizing and investors are watching if the Fed will adopt yield curve control to guide 10-year Treasury yields lower.
  • The Australian and New Zealand dollars pulled back slightly against the greenback but sentiment remained positive as economic activity resumes in both countries following the lifting of coronavirus restrictions. The Antipodean currencies have been on a stellar run against the greenback due to hopes for economic recovery, prompting some investors to book profits.
  • Concerns about progress in trade talks between Britain and the European Union continue to hamper both the euro and the pound. The EU’s chief Brexit negotiator, Michel Barnier, is scheduled to speak later on Wednesday, which may yield details that will help determine whether market sentiment will improve.
  • A flight to safety and a loss of risk appetite moved gold to $1,720 on Tuesday and cautious investors are awaiting clarity on the state of the economy and further stimulus from the U.S. Federal Reserve’s policy meeting later tonight.

Chart Focus AUD/USD
Key Points

  1. Sell AUD/USD recommendation
  2. Sell AUD/USD at 0.6990. Stop at 0.7045 and target at 0.6860
  3. A rise in US bond yield and profit taking in Aussie after a stellar run-up are weighing on the Aussie dollar
  4. Price is capped by Fibonacci 50% correction point and MACD is hinting of more price downside, both are hinting of a price correction lower.

Fundamental Comments

  1. Aussie dollar stellar run against the greenback is prompting some investors to book profits.
  2. A recent rise in US bond yields is increasing demand for the US dollar

Technical Comments

  1. A price pullback is halted by the Fibonacci 50% correction point, hinting of more price downside ahead.
  2. MACD is declining and hinting of more price downside ahead

Key Levels

Support 0.69400.69300.6895
Resistance 0.69900.70150.7040

Technical Overview

USD/JPY – Price continued its decline to a low of 107.52 this morning. The next two supports are at 107.35 and 107.07 and we think price could be halted at either one of these two supports. MACD and Stochastic are both turning around and hinting of a temporary low. Stochastic is also deep into the oversold extreme. We see a possible corrective rally higher to 108.25 if one of these supports managed to halt the decline.

Support 107.40107.05106.70
Resistance 107.70108.10108.45

EUR/USD – Price dipped lower than our expectation of 1.1265. Price went to a low of 1.1240 before bouncing back to 1.1363. We are expecting this rally to continue and test the previous high at 1.1383. A break above will target 1.1425. MACD is still bullish and 20EMA is pointing up and its gradient is steep, hinting of a strong bullish trend. Stochastic is rising and has not yet reached the overbought zone.

Support 1.13151.12751.1225
Resistance 1.13601.13851.1425

GBP/USD – Yesterday, a correction saw price declined to a low of 1.2616 and from there, a rally took price higher to 1.2745 this morning. The rally looks like it will continue higher to 1.2835 as long as it can stay above 1.2640. MACD is bullish and is still rising. Stochastic has reached the overbought extreme but is not turning down as yet while 20EMA is hinting of a strong bullish trend.

Support 1.27051.26651.2615
Resistance 1.27601.27951.2835

XAU/USD – A loss of risk appetite moved gold to $1,720 last night and price has been hanging around this region. A break of $1722, which is the previous high, could lead to a new high for Gold. The breakout, using the Ichimoku V shaped price projection, has a target of $1774. Stochastic is near to the overbought extreme but MACD is still bullish. 20EMA is also rising. We remain cautious and wait for the breakout confirmation

Support 1711.101701.501689.95
Resistance 1721.401731.701744.40

EUR/AUD – Price reached a high at 1.6346 overnight but our buy call was not filled as price did not dip to our buy level. MACD is still bullish but Stochastic is near to the overbought zone. Price is also capped by a previous high resistance as well as a 55EMA resistance point. If price is unable to move above 1.6365, there is still a chance we may test the low of 1.6060 again. We remain neutral and wait for better trading idea.

Support 1.62201.61751.6130
Resistance 1.62701.63301.6385

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