FX Commentary – Market Moves Towards Safe Havens

Market Talk

  • The dollargained due to safety buying as fears grew over a rapid rise in coronavirus infections in some U.S. states cast doubt over the reopening of the economy, and as trade tensions worsened between the United States and the European Union, keeping the allure of its safe-haven value.
  • Supporting the greenback was the broader rise in corporate demand typically seen towards the end of the month. That helped the dollar stay firm despite the stubbornly upbeat risk appetite seen in global equity markets, which comes even as new coronavirus infections surge.
  • Initial claims for state unemployment benefits stood at a seasonally adjusted 1.48 million for the week ended June 20, down 60,000 from a week earlier but still double their peak during the 2007-2009 Great Recession.  Data showed weak demand is forcing U.S. employers to lay off workers even as businesses have reopened.
  • The Australian dollar was stuck in a triangle pattern with boundaries at $0.68 and 0.70 range in the past couple of weeks. The euro eased to $1.1221 losing steam after hitting a one-week peak of $1.1348 on Tuesday.
  • Spot gold edged higher, as a surge in coronavirus cases and mounting economic tolls kept investors on edge, though the metal stepped back from last session’s more than seven and a half year high.

Chart Focus USD/CNH

Key Points
1. Buy USD/CNH recommendation
2. Buy USD/CNH at 7.0745. Stop at 7.0635 and target at 7.1150
3. Month-end dollar demand and growing number of coronavirus cases is driving safe haven US dollar higher.
4. Strong support with bullish MACD is a sign of further price upsides ahead.

Fundamental Comments
1. A growing number of coronavirus cases is driving investors into safe haven US dollar
2. Month end corporate buying of US dollar is driving the US dollar higher

Technical Comments
1. Double support provided by 20EMA and support is likely to prevent price from falling lower.
2. MACD is bullish and is rising.

Key Levels

Support 7.07457.06157.0450
Resistance 7.08907.10307.1160

Technical Overview
USD/JPY – Price reached a high of 107.45 overnight but price has started to decline lower towards the 20EMA at 107.00. Price will need to stay above this level to be bullish and continue higher to 107.62. A decline below 107.00 could see a move to 106.45.  MACD is still bullish and rising but Stochastic is declining from the overbought zone.

Support 107.00106.65106.35
Resistance 107.60108.00108.25

EUR/USD – Price has continued its decline after hitting a high of 1.1348 on Tuesday. The decline reached a low of 1.1190 last night but the decline may not be over as yet. There could be one more decline to 1.1167. MACD is bearish at the moment but Stochastic has reached the oversold. Visibility is poor at the moment and we would prefer to wait for better trading idea

Support 1.11901.11651.1115
Resistance 1.12301.12701.1320

GBP/USD – Price reversed from 1.2542 and has been declining to a low of 1.2388 overnight. We are expecting the decline to continue lower to 1.2330 over the next couple of day. MACD is now bearish and could be moving lower. Stochastic is in the oversold extreme. However 20EMA is still bearish and pointing lower.

Support 1.23851.23301.2280
Resistance 1.24301.24801.2510

XAU/USD – Price has been hovering around the 20EMA for the past 24 hourly. MACD is still bullish at the moment but there was an earlier bearish divergence warning.  If price can hold above the 20EMA, we think price can move higher to $1779 again. However a move below $1749 would call for a need correction to $1732.

Support 1749.201739.401727.10
Resistance 1765.901779.101787.35

USD/CAD – Price reached a low of 1.3608 yesterday, in a tight rangy market. We are expecting price to be in a tight range for today as MACD is flat around the zero line. Stochastic has reached the overbought zone and is flat just above the overbought extreme as well. 20EMA support lies at 1.3600 and a break will be bearish for this pair.

Support 1.36301.35851.3540
Resistance 1.36701.37101.3740

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