FX Commentary – Gold And Silver Hit Multi-year Highs

Market Talk

  • The dollar crept off lows against other majors on Thursday, as heightened Sino-U.S. tension put a bit of caution into currency markets. The United States gave China until Friday to close its consulate in Houston amid accusations of spying and China has vowed to respond.
  • Tensions between the world’s two largest economies sent the Yuan on its sharpest slide in nearly two months on Wednesday. The Yuan is a barometer of Sino-U.S. relations and it fell 0.6% to a one-week low of 7.0174 per dollar in offshore trade on Wednesday.
  • The euro sat at $1.1571, just below a 21-month high of $1.1601, which it hit overnight in the afterglow of Europe’s leaders agreement on a coronavirus rescue package which spurred renewed demand for the region’s assets.
  • The Australian dollar pulled back from a 15-month peak at 0.7181 and was steady at $0.7143, while the kiwi retreated slightly from a six-month top to sit at $0.6657 after investors moved out of riskier currency in favour of safe haven U.S. dollar.
  • Gold hit a new 9-year high at $1876.60 on Wednesday, propped up by promises of stimulus in the trillion dollars from global central banks to beat the new wave of the coronavirus pandemic while Silver rallied for a third straight day to a new seven-year high at $23.14.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation
2. Sell EUR/AUD at 1.6235. Stop at 1.6285 and target at 1.6100
3. RBA’s governor Lowe had said Aussie fundamental is strong and interest rate differential is in the Aussie dollar favour, keeping the Aussie stronger against the Euro.
4. Price is capped by strong resistance zone and MACD is bearish and hinting of more price declines ahead.

Fundamental Comments
1. RBA’s Lowe said AUD/USD exchange rate was broadly in line with its fundamental determinants and is likely to keep Aussie dollar strong.
2. Interest rate differential is in the Aussie dollar favour.

Technical Comments
1. Price is capped by Fibonacci 38% correction point as well as the 20EMA
2. MACD is bearish with both its lines below the zero line and the faster could be turning down hinting of more price declines ahead.

Key Levels

Support 1.61751.61301.6095
Resistance 1.62201.62751.6325

Technical Overview
USD/JPY – Yesterday, price was closer to the lower end of the range from 106.65 to 107.53 but today, price is nearer to the upper boundary of this range. While we expect price to move closer to the upper boundary at 107.53, we do not expect price to move above the boundary. MACD is still bullish but not strong. Stochastic is still rising but is near to the overbought zone.

Support 107.05106.65106.35
Resistance 107.50107.80108.15

EUR/USD – Price broke above 1.1470 on Tuesday and the rally has reached a high of 1.1609 last night despite a rise in tensions between the US and China. MACD is still bullish and the rally should be able to move higher to 1.1650. However, Stochastic is in the overbought zone. 20EMA is rising and its gradient is steep. We remain bullish unless price move below 1.1470.

Support 1.15601.15101.1470
Resistance 1.16051.16551.1695

GBP/USD – Our order was filled overnight when price declined to a low of 1.2644. Price has moved higher to 1.2743 this morning. We would recommend bringing stop higher to cost at 1.2670 while keeping target at 1.2760. Stochastic has moved into the overbought zone and MACD is showing weakness. The topside could be limited to 1.2810. A move below 1.2745 would negate our bullish view

Support 1.27051.26701.2625
Resistance 1.27601.28101.2845

XAU/USD – The rally that started on Monday continues into Thursday and brought price to a high of $1876.60. Over the past 3 days, the 20EMA has supported price decline and currently the 20EMA support point lies at $1864. Price will need to stay above this support to remain bullish. MACD is starting to show weakness while Stochastic has a bearish crossover and is declining. We would prefer to exit long position and wait for a correction to re-enter long.

Support 1863.551854.051844.05
Resistance 1876.601884.451900.00

USD/CNH – Price jumped from 6.9690 to a high of 7.0170 on news of Sino-U.S. tensions and at the same time, negates our bearish view. It also confirms a low at 6.9614 and a new uptrend in place. However, MACD is showing bearish divergence and warning of a possible high while Stochastic is declining from overbought extreme. The correction would give a clue to the new trend. The correction needs to hold above Fibonacci 50% to be bullish while a move beyond 62% would mean a downtrend going forward

Support 7.00006.98956.9610
Resistance 7.01707.03107.0315

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