FX Commentary – COVID Vaccine And Recovery Fund Agreement Put Dollar Under Pressure

Market Talk

  • The dollar was down on Tuesday morning in Asia, with investors retreating from the safe-haven U.S. dollar over fresh hopes of 3 COVID-19 vaccines. A fiscal rescue package agreement in Europe put the dollar under pressure and supported commodity currencies and the euro.
  • European Union leaders are a step closer in reaching a consensus for its proposed massive stimulus plan for the EU bloc at its summit. Hopes for a breakthrough pushed the EUR/USD to a fresh 4-month high of 1.1467.
  • The British pound held its overnight gains over the progress made at the EU Summit, with investor sentiment further boosted over fresh Brexit negotiations between the EU and the U.K. slated to begin later in the day.
  • The Australian dollar clung on above 70 U.S. cents after RBA offered few surprises from its minutes from last month’s meeting from Governor Philip Lowe’s speech. Lowe said Australia’s monetary policy would remain accommodative for as long as necessary and there was no case for intervention as exchange rate is broadly aligned with its fundamental determinants.
  • Gold shot to a nine-year high at $1820.45 on Monday while Silver hit four-year peaks in a rally many thought was long overdue. Silver’s biggest new use is in the manufacture of conductors for 5G cellular technology beyond the usual making of jewellery, cutlery and coins.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation
2. Sell EUR/AUD at 1.6270. Stop at 1.6325 and target at 1.6150
3. Euro is likely to weaken after strengthening ahead of EU’s recovery fund agreement while RBA’s Lowe has endorsed Aussie strength, leading to a weaker EUR/AUD
4. A Double Top chart pattern, bearish Evening Doji Star candlestick pattern and bearish momentum warning are signs of a likely price decline.

Fundamental Comments
1. Euro has strengthened for the past few days on news of EU recovery fund and may have run its course.
2. RBA’s Lowe said AUD/USD exchange rate is broadly in line with its fundamental determinants is likely keep to Aussie dollar strong.

Technical Comments

1. A Double Top chart pattern couple with an Evening Doji Star candlestick price pattern is a strong case for price reversal.
2. MACD and Stochastic have been declining from their high. MACD also has a bearish divergence warning of a possible price high.

Key Levels

Support 1.62401.62001.6145
Resistance 1.62851.63251.6365

Technical Overview
USD/JPY – Price continues to move within a range of 106.65 to 107.53, which was Monday’s marginal new high. MACD is getting flat and neutral while Stochastic is in the middle of its range. Both momentum indicators are not providing much information of a possible range breakout. We would prefer to wait for better trading idea and for price to move out of its range

Support 107.20106.90106.65
Resistance 107.55107.80108.15

EUR/USD – A break of the 4-month high at 1.1452 was supposed to lead price higher to the next resistance at 1.1490 but price was capped at 1.1469 high. As long as the recent price decline can manage to hold above the 20EMA at 1.1420, we remain bullish and for price to test the high of 1.1490 again. However MACD may be forming a bearish divergence while Stochastic is near to its overbought zone.

Support 1.14201.13751.1345
Resistance 1.14701.15151.1560

GBP/USD – Price range had been narrowing towards the end of last week and yesterday, price broke above the range and rose to a high of 1.2692. MACD is still bullish and rising. Stochastic is rising and is in the overbought zone but is still strong and rising. 20EMA is strong and rising as well. All these point to more price upsides for today. We think the price rally can continue higher to 1.2750.

Support 1.26601.26251.2575
Resistance 1.27051.27451.2795

XAU/USD – Price stayed above the 20EMA yesterday and we saw a rally to a new 9-year high at $1820.47. We think the rally can continue higher to $1825 as Stochastic has not given a bearish crossover as yet. MACD is still bullish and rising. 20EMA is rising and its gradient is steep, which is a hint of a strong bullish trend. We remain bullish unless price goes below $1805.

Support 1814.651805.601793.70
Resistance 1828.551837.901851.10

AUD/USD -Price dropped to a low of 0.6971 this morning filling our buy order at 0.6980. Price reached a high of 0.7043 in early afternoon, hitting our profit order. We are out with a 60 pips profit. MACD is bullish and rising. Stochastic is also rising. Both momentum indicators are hinting of more price upsides. 20EMA is also pointing higher. Price is likely to target the recent high at 0.7060.

Support 0.70000.69600.6920
Resistance 0.70500.70850.7135

Related Posts

Leave a Reply

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