FX Commentary – US Dollar Recovers From Low After FOMC

Market Talk

  • The dollar was up on Thursday, slowly emerging from a two-year low as selling pressure faded after the U.S. Federal Reserve stuck to a widely-expected script after its two-day meeting concluded on Wednesday. Investors will be looking to see if Republicans and Democrats can finally reach an agreement, with one day left before some earlier stimulus measures expire on Friday.
  • The Fed kept interest rates near zero and vowed to use all available tools to support the recovery from the most severe economic downturn Fed Chairman Jerome Powell said. He warned that there are signs that an increase in the number of COVID-19 cases are starting to weigh on economic activity.
  • The common currency hit a 24-month high of $1.1806 and is on course to post its biggest monthly gain in 10 years, having risen about 5% so far this month. Sterling also held firm against the dollar, just below Wednesday’s 4-1/2-month high of $1.3013.
  • The New Zealand dollar touched an eight-month top of $0.6702 and then dipped back to $0.6656. The Japanese yen weakened 105.15, to sit just below its strongest since mid-March. The Aussie dollar gave up early gains at sit at 0.7166.
  • Gold climbed but failed to break above its previous high of $1981.10 after the Federal Reserve repeated a vow to use all tools to support the U.S. economy and extended emergency measures to ensure the global financial system has access to a ready supply of U.S. dollars.

Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation
2. Sell AUD/USD at 0.7170. Stop at 0.7205 and target at 0.7080
3. FOMC monetary policy stance and an increase in coronavirus cases are both likely to aid the US dollar.
4. Price high with bearish divergence warning and Stochastic turning down are signs of more price declines ahead.

Fundamental Comments
1. FOMC stance on monetary policy was within expectation and is likely to ease selling pressure on US dollar.
2. An increase in coronavirus inflection is likely to aid the US dollar

Technical Comments
1. Price reached a high with bearish MACD divergence warning is a sign of a possible price high
2. Stochastic has a bearish crossover in the overbought zone and is starting to decline, hinting of more price declines ahead.

Key Levels

Support 0.71400.71100.7065
Resistance 0.71700.72000.7235

Technical Overview
USD/JPY – Price reached a low of 104.77 overnight but has managed to move higher to 105.30 this morning. If price can stay above 105.10, it can confirm a low in place at 104.77 and hint of a possible move to 105.68. 20EMA has turned bullish and is pointing higher. MACD has also turned bullish with both its lines above the zero line. Stochastic is rising as well. A move below 104.77 would negate our bullish view.

Support 105.10104.75104.45
Resistance 105.60105.95106.35

EUR/USD – Price reached a low of 1.1717 and our buy order was filled. Price reached a high of 1.1806 but has pulled back to 1.1765. We would recommend bring stop higher to 1.1740 while keeping profit target unchanged at 1.1840. MACD is showing signs of weakness and the next rally could be the last rally. Stochastic is declining after reaching the overbought zone

Support 1..17451..16951.1645
Resistance 1.17801.18151.1845

GBP/USD – Price rally continues to a high of 1.3013 overnight despite a divergence warning from MACD. We are still bullish but are wary of a reversal as MACD has started to give divergence warnings and Stochastic is starting to turn down from overbought zone. As long as price stays above the bullish 20EMA at 1.2910, the trend remains bullish and can move above 1.3015 again. Below would negate our bullish view.

Support 1.29151.28751.2840
Resistance 1.29751.30151.3045

XAU/USD – Price tested the high at $1981 following FOMC announcement but was unable to move above this resistance. Price has now dropped to $1960. MACD is still bullish on the 4-hourly chart but is starting to warn with divergence on the 1-hourly chart. Stochastic is turning down from the overbought zone. If price can stay above the 20EMA at $1945, the trend remains bullish for a test of $2000.

Support 1947.601934.601922.85
Resistance 1961.501970.051981.10

USD/SGD – Price reached a low of 1.3727 overnight and our long position was stopped out at 1.3745. We lost 35 pips on this trade. MACD has a bullish divergence and price has moved higher to 1.3770. Stochastic also has a bullish divergence warning and is moving up from the oversold zone. There is a 20EMA resistance at 1.3780 and price will need to move above this point to be bullish.

Support 1.37251.36901.3640
Resistance 1.37751.38151.3865

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