Market Talk
- The dollar was down in Asia on Wednesday morning, as hopes of a U.S. economic recovery from COVID-19 continues to diminish and as U.S. Congress failed to reach a consensus over the country’s latest economic stimulus measures.
- A hardening perception that the U.S. rebound is lagging Europe has helped the Euro to just below a two-year high against the US dollar and an increasing number of coronavirus cases in the States also weigh on the dollar.
- The USD/CNH dropped below key support at 6.9615 as U.S. and Chinese officials are reported to be meeting to review the implementation of the phase 1 trade deal between the two countries, as well as discussing mutual grievances during an August 15 video conference.
- The Australian and New Zealand dollars edged ahead, climbing back towards multi-month highs hit last week. The NZ dollar also won support from an unexpected fall in unemployment and was stronger at $0.6639.
- Gold was up on Wednesday morning in Asia, breaking past the $2,000 an ounce mark as the bond market’s dim view of the U.S. recovery sent real yields further into negative territory and nominal yields close to record lows as investors rushed into safe havens.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 105.75. Stop at 106.20 and target at 104.80
3. Diminishing hopes of a US economic recovery and Congress failure to reach a consensus over a economic package are both weighing on the US dollar.
4. Price is capped by Fibonacci 62% correction point and Stochastic is hinting of a price decline.
Fundamental Comments
1. Diminishing hopes of a U.S. economic recovery from COVID-19 induced pandemic is weighing on the US dollar.
2. U.S. Congress failure to reach a consensus over the country’s latest economic stimulus measures is also weighing on the US dollar.
Technical Comments
1. Price is capped by the Fibonacci 62% of the decline from 107.52 to 104.17 and has declined lower
2. Stochastic has a bearish crossover and is turning down from the overbought zone.
Key Levels
| Support | 105.50 | 105.15 | 104.75 |
| Resistance | 105.95 | 106.45 | 106.85 |
Technical Overview
USD/CHN – Price broke below the previous support at 6.9615 to reach a low of 6.9550 this morning. 20EMA trend is bearish and MACD is bearish as well. Stochastic is also heading lower. Momentum and trend indicators are hinting of more price declines ahead. We expect the decline to continue lower to 6.9400 in the next couple of days. Above 6.9900 would negate our bearish view.
| Support | 6.9950 | 6.9385 | 6.9190 |
| Resistance | 6.9640 | 9.9785 | 6.9915 |
EUR/USD – Price had declined to 1.1695 on Monday but a test on Tuesday only reached a low of 1.1720. 20EMA has turned bullish again and price is also above it. Stochastic is rising but MACD is still bearish. We think the correction is over and price is likely to test the high of 1.1908 again over the next few days. A move below 1.1690 would negate our bullish view.
| Support | 1.1790 | 1.1750 | 1.1695 |
| Resistance | 1.1840 | 1.1880 | 1.1910 |
GBP/USD -Our view remains the same as yesterday. We see another test of the 1.3170 again over the next few days. We think the correction is over after a move to 1.2970 yesterday. MACD is bullish and Stochastic is turning up again and both are hinting of more price advances ahead. 20EMA will be the first support at 1.3050. A move below 1.2970 would negate our bullish view.
| Support | 1.3045 | 1.3000 | 1.2945 |
| Resistance | 1.3095 | 1.3130 | 1.3170 |
XAU/USD – Yesterday our view on Gold was wrong. We thought price has reached a short term peak but price has made another historical high at $2036. Stochastic is into the overbought zone but MACD has started to move up again and is bullish. 20EMA is also pointing up after going flat over the past 2 days. The next resistance is Fibonacci 261.8% point at $2047.
| Support | 2021.10 | 2009.35 | 2000.15 |
| Resistance | 2036.20 | 2047.00 | 2063.60 |
NZD/USD – We had a sell recommendation yesterday at 0.6610 and price is currently close to our stop placement at 0.6650. MACD is still bearish but Stochastic is rising. 20EMA is flat at the moment. We would recommend keeping stop at 0.6650 and profit order at 0.6530. If price is capped below 0.6650, there is still a chance of seeing 0.6525 again. Above 0.6650 would negate our bearish view.
| Support | 0.6620 | 0.6595 | 0.6550 |
| Resistance | 0.6650 | 0.6685 | 0.6715 |
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