FX Commentary – US Dollar Plumbed To A 2-Year Low

Market Talk

  • The dollar nursed losses on Tuesday, after slumping to a two-year low, as investors worry about the damage from the coronavirus to the U.S. economy and await the latest outlook from the Federal Reserve and the passage of a new fiscal rescue package from Congress.
  • The U.S. currency’s drop has put a rocket under gold prices and has sent the yen to near its highest in four months.  The euro is just below a 22-month high and the NZD/USD is close to its strongest since January 2020.
  • The British pound surged to a five-month high against the dollar, but signs that Brexit negotiations have stalled could prompt bearish bets. EU chief negotiator Barnier has emphasized that negotiations needed to be completed by October as the process to ratify a potential deal would be lengthy.
  • The Federal Open Market Committee is set to kick off its two-day meeting on Tuesday and result announcement on Thursday morning (SG Time). Policy members are expected to vote to keep rates unchanged within the 0% to 0.25%
  • Gold rocketed to record peaks at $1,981 on Tuesday while the U.S. dollar plumbed to two-year lows as investors wagered the Federal Reserve would reaffirm its super-easy policy outlook this week, and a tolerance for higher inflation.

Chart Focus USD/SGD
Key Points
1. Buy USD/SGD recommendation
2. Buy USD/SGD at 1.3780. Stop at 1.3745 and target at 1.3860
3. A second wave of coronavirus inflection and worsening U.S.-China tensions are both likely to prompt a correction of US dollar weakness over the past few days
4. Bullish Engulfing candlestick pattern and MACD are both warning of a possible price low in place.

Fundamental Comments
1. The U.S. dollar has been slipping for the past few days and we could see a correction of this decline.
2. A second wave of coronavirus inflection as well increasing U.S.-China tensions is likely to aid the U.S. dollar

Technical Comments
1. There is a bullish Engulfing candlestick price pattern hinting of a possible price bottom
2. MACD has a divergence warning of a possible price low

Key Levels

Support 1.37801.37501.3700
Resistance 1.38201.38701.3915

Technical Overview
USD/JPY – Price reached a low of 105.11 which is the Fibonacci 200% of the price move from 108.15 to 106.66. This could be a possible Fibonacci ABC price bottom and we could see a price rebound to 106.20 to 106.45 over the next few days. Stochastic is rising from the oversold zone and MACD, while bearish, is also rising. The 20EMA at 105.95 would be the first resistance to the rally. 

Support 105.10104.50104.10
Resistance 105.65105.95106.20

EUR/USD – The rally continues into a 7th trading day, reaching a fresh 22-month high of 1.1780 on Monday. There are no divergence warnings from either MACD or Stochastic at the moment. The rally could continue higher over the next couple of days. 20EMA on the 4-hourly chart support lies at 1.1675, which is likely to determine the trend. As long as price stays above this support, the trend is bullish.

Support 1.17151.16751.1640
Resistance 1.17451.17801.1815

GBP/USD – Price rally continues to a high of 1.2904 this morning but there were divergence warnings from both MACD and Stochastic of a possible price high. MACD is still bullish but Stochastic is in the overbought zone. 20EMA slope on the 4-hourly chart is steep and hinting of a strong bullish trend. Price will need to move above 1.2905 to maintain its bullish stance but if price drops below 1.2840, there is a chance of a bigger correction in store.

Support 1.28401.28101.2770
Resistance 1.28751.29051.2945

XAU/USD – Price reached a high of $1981.10 this morning and while there are no divergence warnings as yet, a sharp pullback from the high is hinting of more correction and consolidation ahead before the uptrend resumes again. We are anticipating a price pullback towards the previous high of $1921. If price is able to hold above this support, another rally could resume for a test of $2000.

Support 1931.401919.651906.55
Resistance 1947.601965.851981.10

AUD/USD – We had a buy recommendation for this pair overnight but price did not reached our buy level and our order was not filled. Price has moved higher and is close the previous high of 0.7182. MACD while bullish is not strong and Stochastic is near to the overbought zone. A potential Double Top will be formed if price is unable to breach the previous high and if price declined below 0.7060.

Support 0.71200.70700.7035
Resistance 0.71800.72050.7240

Related Posts

Leave a Reply

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