FX Commentary – Gold Is Up On Increasing Coronavirus Cases

Market Talk

  • The dollar weakened on Monday as better-than-expected U.S. services data strengthened investors’ expectations for a speedier economic recovery but a steady rise of new coronavirus infections in the United States has encouraged some investors to seek renewed demand for safe-haven assets. 
  • The Institute for Supply Management’s Non-manufacturing purchasing managers’ index (PMI) jumped to 57.1 in June from 45.4 in May. Despite a higher-than-expected figure exceeding analyst forecasts as well as indicating the U.S. services sector is back to growth, some investors remain cautious about the global economic recovery with the ever-increasing coronavirus cases and no cure.
  • The Yuan on Monday recorded its best day against the dollar since December as investors lapped up risky assets on growing expectations of a strong revival in Chin’s economic rebound and as glimmers of good news in U.S. data drove down demand for the safe-haven dollar
  • The Euro rose to a 2-week high against the US dollar as Germany, the economic powerhouse of the EU, reported that factory orders rebounded 10.4% in May, as the country reopened from lockdown. The British pound was flat at $1.2494 as traders continue to fret over the outcome of EU and UK trade post-Brexit trade talks.

– Gold was up in Asia on Tuesday morning, with investors turning to the safe-haven asset as the number of coronavirus cases globally continuing to show no signs of abating, although robust equities and positive economic data limits the yellow metal advance.

Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation
2. Buy USD/CNH at 7.0105. Stop at 6.9945 and target at 7.0400
3. An increasing number of coronavirus cases and a correction are likely to limit the strength of the Chinese Yuan
4. A three-candlestick reversal coupled with rising Stochastic is a hinting of a price rally ahead.

Fundamental Comments
1. An increasing number of coronavirus cases is limiting the rise of the Chinese Yuan.
2. A seven day decline is in need of a price correction

Technical Comments
1. A three-candlestick reversal is hinting of a price correction
2. Stochastic is rising from the oversold extreme, hinting of a price correction ahead.

Key Levels

Support 7.01006.99506.9750
Resistance 7.02607.04107.0560

Technical Overview
USD/JPY – Our stop order was filled at 107.25 when price dropped to a low of 107.24 last night. We had raised stop higher the day before and we took a 15 pips loss. If the overnight low holds, price may be able to move higher to 107.75 initially and later to 108.15. MACD is still bearish but is starting to turn higher. Stochastic has also turned up near the oversold zone.

Support 107.30106.80106.45
Resistance 107.75108.15108.50

EUR/USD – Price has been trading in a range of 1.1167 to 1.1302 for the past 7 trading days. Price is currently close to the range’s high of 1.1350. A break of 1.1350 could lead to a rally to 1.1400. However, inability to break this resistance is likely to send price back to the low of the range at 1.1167. MACD is bullish and rising. Stochastic has a bearish crossover and is turning down.

Support 1.12701.12201.1165
Resistance 1.13151.13501.1390

GBP/USD – Our order from Friday was filled at 1.2440 when price dropped to a low of 1.2436 on Friday. Price has moved higher to 1.2500 yesterday’s morning and our view remains unchanged. We would recommend bringing stop higher to cost at 1.2440 and profit target remaining unchanged at 1.2560. MACD is getting weaker and Stochastic is also getting weaker.

Support 1.24801.24401.2400
Resistance 1.25301.25901.2640

XAU/USD – Price broke above Thursday’s high of $1779.30 and moved to a high of $1786.95. Price is currently sitting on the 20EMA support at $1782.20. We see price moving higher $1791 if supported at this level. If price is unable to hold above the 20EMA, it is likely to decline to $1777.90. MACD is still bullish but Stochastic is turning down from the overbought zone.

Support 1777.901769.801757.40
Resistance 1786.951800.001824.10

USD/CAD – Price is currently moving above a range high as well as the 20EMA resistance point of 1.3560. As long as price stays above this point, it is likely to move higher to 1.3615. A decline below 1.3515 is likely to send price down to 1.3480. MACD is bearish at the moment but is rising and is now close to the zero line. Stochastic is rising from the oversold zone.

Support 1.35451.35151.3480
Resistance 1.35901.36251.3660

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