FX Commentary – US Dollar Weaker Despite Rising Coronavirus Cases

Market Talk

  • The dollar give up some hard won gains from last week on Monday morning, after touching a three-week high last week, despite investors facing the possibility of renewed lockdowns as COVID-19 cases spiked over the weekend across the globe. Worries about a second wave of coronavirus infections sent investors into safe havens.
  • The common currency edged past 1.12 on Monday late morning after dipping to a three-week low of $1.1168 in early trade – squeezed as European Union leaders remain divided on how to structure a planned COVID-19 recovery fund.
  • The pound held just above a three-week low at $1.2363, weighted down by Brexit worries with little progress in trade talks with European Union as well as worries that BOE quantitative easing program may be insufficient to support the British economy devastated by the coronavirus.
  • The risk-sensitive Australian dollar slipped against the U.S. dollar and yen in morning trade, before paring losses to inch higher to 0.6811. The New Zealand dollar was also a fraction stronger at S$0.6418, though both currencies have lost the momentum they had in early June against the US dollar.
  • Gold gained as a rise in coronavirus cases raised concerns of a second wave of the pandemic that could compel governments to implement new lockdowns requirement. Spot goldwas up $1758 and looks like to test a 7-year high at $1764.

Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation
2. Buy EUR/JPY at 119.45. Stop at 119.05 and target at 120.90
3. Euro dollar may have found a bottom while the JPY could be suppress by hopes of economic recovery
4. Price has bounced off Fibonacci support points with bullish momentum indicators hinting of further price rally.

Fundamental Comments
1. Euro dollar may have found a bottom as seen from the sharp and quick rally from this morning’s low
2. Hopes of an economic recovery with US pressing ahead with re-opening despite a high number of coronavirus cases

Technical Comments
1. Price has bounced off a Fibonacci 127% and 50% on two different projection, hinting of a possible reversal.
2. MACD and Stochastic are both rising from their extreme points.

Key Levels

Support 119.60119.30118.85
Resistance 119.95120.40120.90

Technical Overview

USD/JPY – Price has been trapped inside a tight range for the past 2 trading days. The range is from 106.66 to 107.12. MACD is bearish but flat at the moment. MACD is also warning with a divergence. Stochastic is rising from the oversold zone but we think the range is likely to continue for today. Watch the range for clue to the next direction

Support 106.65106.25105.95
Resistance 107.10107.60107.95

EUR/USD – Price saw a test to 1.1255 but fell later into the day to a low of 1.1167 on Friday. This morning the decline continued to a low of 1.1167 again but has managed to bounce higher above 1.1200. We think price may have reached a low and we could see a corrective rally higher to 1.1250 again as Stochastic and MACD are both rising.

Support 1.11851.11401.1100
Resistance 1.12201.12651.1295

GBP/USD – Our sell order was not filled on Friday as price only reached a high of 1.2459. This morning price fell to a low of 1.2335 but has managed to bounce higher to 1.2400. Stochastic is still in the oversold extreme. MACD is still bearish but we have seen a bullish crossover which could hint of more price correction towards 1.2425. Price would need to surpass this level to end the bearish trend.

Support 1.23651.23351.2290
Resistance 1.24051.24551.2495

XAU/USD – Price broke above the upper range boundary at $1744 on Friday and has continued to a high of $1758 this morning. We are expecting price to move higher to test the 7-year high at $1764 over the next couple of days. Stochastic is still rising and MACD is bullish and rising as well, supporting the bullish view.

Support 1744.601733.951722.10
Resistance 1758.151764.601771.70

USD/CNH – For the past 5 trading days, since the beginning of last Monday, price has been caught in a range from 7.0600 to 7.0975. MACD is flat around the zero line at the moment and Stochastic is likely to rise after a bullish crossover. 20EMA and 55EMA are both flat at the moment as price consolidates within the range. Watch the range boundaries for clues to the next trend direction

Support 7.05957.04507.0255
Resistance 7.07857.09757.1085

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