FX Commentary – Strong Jobs Data Dented Safe Havens

Market Talk

  • The dollar was hemmed into a narrow range on Friday supported by safe-haven flows as rising Covid-19 infections across the U.S. Sunbelt suggested that new economic lockdowns might be in order, stunting the nascent recovery seen over the past two months discouraging investors from taking on excessive risk.
  • U.S. economy added 4.8 million jobs in June according to the Labour Department, 1.8 million more than analysts expected, setting a second consecutive record. Massive rehiring also sent the unemployment rate down to 11.1%. The labour market has still recovered only a fraction of the 22 million jobs lost in the March-April plunge.
  • The dollar has fallen 5% since hitting a three-year high in March as investors’ sentiment on risk improved amid a rally in global equity markets following a slump earlier this year caused by measures to curb the outbreaks of the coronavirus pandemic. Improving global economic data has also helped to dent the safe haven appeal of the US dollar.
  • The Yuan was caught in a range as data on China’s services sector showed an expansion of business activity but investors avoided taking big positions due to worries about diplomatic friction between Washington and Beijing over civil liberties in Hong Kong.
  • Gold finished up on Thursday despite a surge in risk appetite earlier in the day on Wall Street, sparked by the U.S. Labour Department’s nonfarm payrolls report showing the economy added 4.8 million jobs in June versus a forecast growth of 3 million jobs but an increase in coronavirus cases in the U.S. lifted price off the low.

Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation
2. Buy GBP/USD at 1.2440. Stop at 1.2395 and target at 1.2560
3. Good global economic data and Haldane’s comment of a strong UK economic rebound has boosted Sterling and dented safe haven US dollar
4. Strong supports and bullish MACD are both likely to keep the uptrend in GBP intact and moves it higher.

Fundamental Comments
1. Good global economic data has increased investors’ risk appetite and dented safe haven US dollar demand
2. BOE’s chief economist Haldane comment of a stronger than expected economic rebound in UK has boosted the British pound

Technical Comments
1. Two strong supports provided by 20EMA and Fibonacci 50% correction are likely to keep the uptrend intact
2. MACD is bullish and the fast line could be turning up, hinting of possible price upsides in the near term

Key Levels

Support 1.24401.24001.2355
Resistance 1.24901.25451.2590

Technical Overview
NZD/USDSince hitting a low of 0.6385 on Tuesday, price has been on an uptrend and has rallied to a high of 0.6535 last night. The corrective decline after reaching the high has been shallow and MACD is still bullish and rising. We think price can continue higher to 0.6580. 20EMA is still strong and bullish but Stochastic has reached the overbought zone.

Support 0.64950.64400.6385
Resistance 0.65350.65850.6625

EUR/USD – Price went up to a high of 1.1302 overnight but has declined back to 1.1230 again. Price could be forming a bearish Flag chart pattern at the moment. A move below 1.1220 would confirm this chart pattern and called for a price movement to 1.1167. MACD could be about to turn bearish and 20EMA has also turned bearish. Stochastic has a bearish crossover and is moving lower.

Support 1.12201.11901.1165
Resistance 1.12501.12901.1325

USD/JPY – Our order was filled when price dropped to a low of 107.32. Price had rallied to a high of 107.72 but is now sitting on the 20EMA at 107.55. Our view remains unchanged but would recommend bringing stop higher to 107.25 while keeping target at 108.70. MACD is still bullish but Stochastic is looking weak and unable to move off the oversold zone.

Support 107.30106.801.06.45
Resistance 107.65108.15108.50

XAU/USD – Price saw a sharp dip to $1757.40 following NFP announcement but the strong rally back to $1779.30 showed strong underlying support for Gold. But our view of an impending correction of gold remains unchanged. MACD is still bullish and Stochastic is rising but we view this as a corrective rally. Price will need to move above $1790 or we are likely to see $1747 again in the next few days.

Support 1771.901757.401747.35
Resistance 1779.751788.951800.00

USD/CAD – After reaching a high of 1.3714 last Friday, price has been declining and we saw a low of 1.3545 on Wednesday. The rally yesterday was capped by the Fibonacci 50% correction point at 1.3623 and we think a decline to 1.3525 was seen this morning. We think the price decline can continue lower to 1.3545. MACD is bearish but Stochastic is into the oversold extreme.

Support 1.35451.34851.3440
Resistance 1.35901.36251.3655

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.