FX Commentary – US Dollar Strengthened On Rising Coronavirus Cases

Market Talk

  • The dollar held onto gains on Wednesday as a resurgence of the coronavirus in the United States and the return of lockdowns in some countries cast doubts over the economic recovery while oil prices eased on oversupply fears and this boosted safe-haven demand for the U.S. currency.
  • Optimism over economic recovery after recent good data were dented after Federal Reserve officials expressed concern that rising U.S. coronavirus cases could harm economic growth just as stimulus measures start to expire.
  • The yuan fell against the dollar, halting a two-day rally, after the Chinese central bank’s daily midpoint for the currency was set at a weaker than expected level. USD/CNH rallied back from an almost four-month low reached on Tuesday amid speculation the People’s Bank of China is trying to check the currency’s gains.
  • The pound marched higher against the dollar on Tuesday, after UK Prime Minister Boris Johnson reiterated his commitment to reaching an early trade deal with the EU but analysts warned that sterling’s strength will fade as time is running out for both sides to strike a deal.
  • Gold rose on Tuesday as a wave of new coronavirus infections in the United States and the world pushed more investors to seek protection with the safe haven.  A slide in global equity markets also contributed to the yellow metal rally.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3610. Stop at 1.3565 and target at 1.3675
3. Rising coronavirus cases and lower crude oil price are weighing on the Canadian dollar
4. Price trend is turning bullish and MACD is also hinting of a bullish trend and further price advances ahead.

Fundamental Comments
1. Rising U.S. coronavirus cases have boosted demand for safe haven U.S. dollar
2. Oversupply fear is driving crude oil price lower and weighing on the Canadian dollar

Technical Comments
1. Price has broken out of a Ichimoku reversal and is about to break above the cloud, hinting of a trend reversal
2. MACD is rising and is turning bullish, hinting of a bullish trend.

Key Levels

Support 1.35901.35451.3515
Resistance 1.36251.36601.3715

Technical Overview
USD/JPY – Price has been in a 54 pips range for the past two days and we are expecting price to stay within 107.24 to 107.78 again for today. MACD is flat around the zero line and not showing any trend at the moment. Stochastic is declining. 20EMA is also flat and showing no trend. We would prefer to stay aside for today and wait for better trading idea tomorrow.

Support 107.30106.80106.45
Resistance 107.75108.15108.50

EUR/USD – Price has been trading in a range of 1.1167 to 1.1350 for the past eight trading days. Price tested the range’s high of 1.1350 yesterday but was unable to move above this resistance and as a result, we have seen a price decline to 1.1260. MACD is bearish and we may see a test of the range low at 1.1167 over the next few days. Stochastic is turning up from the oversold zone. We think price is likely to stay within the bigger range for the next few days.

Support 1.12501.12201.1165
Resistance 1.12801.13151.1350

GBP/USD – Our long position from last Friday was filled on the profit side at 1.2560 last night. We are out with a 120 pips profit. Price reached a high of 1.2591 but has been holding very well near the high around 1.2560 currently. However MACD could be showing bearish divergence. Stochastic is also near to the overbought zone. We remain bullish but would be cautious of a possible reversal.

Support 1.25301.24801.2440
Resistance 1.25901.26301.2685

XAU/USD – Price broke above Tuesday’s high of $1786.95 last night and moved higher to $1797. We saw a price pullback to $1790 this morning, which is also the 20EMA support. As long as price stays above the 20EMA support, we are likely to see another test to $1800. MACD remains bullish and rising but Stochastic is currently in the overbought zone.

Support 1788.951777.901769.80
Resistance 1797.001802.701825.05

USD/CNH – Our buy order was not filled yesterday. Price had rallied to 7.0293 and has pulled back to 7.0170. If price is unable to move above 7.0293, we are likely to see another test of the low of 6.9950 to complete the downtrend. MACD is bearish and the fast line is turning down near to the zero line, hinting of more price declines ahead. Stochastic is weak after rising from oversold extreme.

Support 7.01056.99506.9750
Resistance 7.02957.04107.0560

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