FX Commentary – The Gold Rally Continues Unabated

Market Talk

  • The dollar was down on Thursday morning in Asia, continuing its retreat over worries about the pace of the U.S. economic recovery from rising COVID-19 cases and with the latest rise in unemployment indicating a slowdown in U.S. economic recovery.
  • Data from ADP released on Wednesday showed an increasing unemployment as it reported a sharp decrease in payrolls growth in July, with 167,000 jobs created during the month compared to the 4.314 million jobs created in June.
  • Another cause for concern is the continuing deadlock in the U.S. Congress over the latest stimulus measures. With both Republicans and Democrats hardening their stances as the end-of-week deadline to reach an agreement nears, doubts remain as to whether the two sides will reach an agreement.
  • The bull run in gold and silver showed no sign of slowing on Wednesday as the dollar declined its most in over a week, catapulting gold to a fresh record high above $2,055 an ounce and silver to a seven-year high above $27.
  • The Bank of England kept benchmark interest rate at 0.1% which is a record low. BOE makes no changes to its bond-buying stimulus program at Sterling 475b pound. The central bank will continue to monitor the situation closely and stand ready to adjust monetary policy accordingly.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation
2. Buy NZD/USD at 0.6640. Stop at 0.6615 and target at 0.6690
3. Worries about the pace of US economic recovery after rise in COVID-19 cases and latest ADP data are weighing on the US dollar
4. Price is supported above an important support and momentum indicators are bullish are hints of a possible price rally ahead.

Fundamental Comments
1. Worries about the pace of the U.S. economic recovery from increasing COVID-19 cases are weighing on the US dollar
2. Latest rise in unemployment data from ADP indicating a slowdown in U.S. economic recovery is also weighing on the US dollar

Technical Comments
1. Price ability to stay above important support at 0.6620 is an indication of strength in the rally
2. Both Stochastic and MACD are turning around and rising again, hinting of a possible price rally after the correction.

Key Levels

Support 0.66200.65950.6550
Resistance 0.66600.66900.6715

Technical Overview
USD/JPY – Our sell call was filled yesterday at 105.75 when price reached a high of 105.86. However there was not much price movement as price is still hovering just below the 20EMA at 105.55. Our view remains unchanged. We are looking for a move to 104.75. Keep stop at 106.20. Stochastic is now near to the oversold zone. MACD is still bullish. A move beyond 106.50 would negate our bearish view.

Support 105.30104.95104.65
Resistance 105.85106.15106.50

EUR/USD – Price reached a new 2-year high at 1.1915 on Thursday morning and with divergence warning from MACD indicator. However price trend looks strong and is likely to continue higher. Stochastic is also at the overbought extreme. On the 4-hourly chart, a possible Shooting Star candlestick could be forming which is a reversal warning. Watch the closing at 5pm for clue to the next direction.

Support 1.18601.18201.1790
Resistance 1.18901.19151.1950

GBP/USD -Price broke above 1.3170 to reach a high of 1.3182 but with a divergence warning from MACD. Stochastic is also at the overbought extreme. MACD is still bullish at the moment. 20EMA is bullish and rising as well. Price will need to stay above 1.3110 to continue the bullish trend and move above 1.32. A move below 1.3110 would negate the bullish view.

Support 1.31301.30951.3045
Resistance 1.31851.32101.3245

XAU/USD – The price rally continues into a third day and reached a new historical high at $2055.30. There are still no signs of a reversal of trend as yet. MACD is still bullish and rising. Stochastic is in the overbought extreme but is not moving lower. 20EMA is rising and its slope is steep, which is a hint of a strong bullish trend. Price is likely to try $2060 today. This is the Ascending Triangle price target.

Support 2041.202027.502012.45
Resistance 2060.002082.002100.00

USD/CNH – Price broke below the previous support at 6.9615 to reach a low of 6.9318 overnight. 20EMA trend is bearish and MACD is bearish as well. Stochastic is in the oversold zone. Price recovery is likely to be capped at 20EMA resistance point at 6.9615 which is also the previous support but turned resistance now. Failure to move above this point is likely to send price lower again to 6.931

Support 6.93156.91906.9040
Resistance 9.94956.96150.6715

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