FX Commentary – US Dollar Hang On To Gains After 7 Weeks Of Decline

Market Talk

  • The U.S. dollar held on to overnight gains on Tuesday morning trades after hitting a seven weeks low on Friday after a relentless fall as investors clung to hopes of a bipartisan stimulus deal in Washington and U.S. bond yields rebounded from multi-month lows.
  • U.S. congressional leaders and Trump administration officials said on Monday they were ready to resume negotiations on a coronavirus aid deal, although it was unclear whether Democrats and Republicans would be able to bridge their differences.
  • Investors are also keeping an eye on the rapidly deteriorating relationship between Washington and Beijing. China imposed sanctions on 11 U.S. citizens in retaliation, including Republican lawmakers, following Washington’s sanctions on Hong Kong and Chinese officials.
  • The pound held onto the bulk of its gains against the dollar on Tuesday at 1.3085 but the Euro eased to 1.1740 from last Thursday’s 2-year high of 1.1915. The dollar stood little changed against the yen at 105.96 yen.
  • Spot gold prices retreated from an all-time high of $2074.98 hit in overnight session as the dollar rose, as investors clung to hopes of a bipartisan agreement on a U.S. relief bill to help the pandemic-hit US economy.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3330. Stop at 1.3290 and target at 1.3430
3. Optimism of a bipartisan stimulus deal and deteriorating Sino-U.S. tension is keep the US dollar strong
4. Likely support at Fibonacci 50% correction point and MACD turning up are hints of a possible price rally ahead

Fundamental Comments
1. Optimism of a bipartisan stimulus deal to help the pandemic- hit US economy is keeping the US dollar strong.
2. Deteriorating Sino-U.S. tensions is keep safe haven US dollar strong.

Technical Comments
1. Fibonacci 50% correction point is likely to limit price fall and provoke a rally after the correction
2. MACD is bullish and the fast line is turning around the zero line, hinting of a rally ahead

Key Levels

Support 1.33151.32801.3235
Resistance 1.33551.33951.3430

Technical Overview
USD/JPY – Price is close to the Fibonacci 62% at 106.25 of the decline from 107.55 to 104.17. If price is unable to move above the Fibonacci 62% resistance at 106.25, it is likely to decline back to 105.35. If price is above to move above 106.25, it is likely to test the next resistance point at 106.60. MACD is bullish and rising but Stochastic is close to the overbought zone. We prefer a move higher.

Support 105.75105.30104.95
Resistance 106.25106.65107.20

EUR/USD – Price is likely to be capped by the 20EMA at 1.1765. As MACD is still bearish and declining but we see a limited decline to 1.1700 as Stochastic is close to the oversold zone. However a movement below 1.1695 would negate our limited downside view and call for a movement to 1.1620. 20EMA is bearish and declining, hinting that the trend is still bearish.

Support 1.17201.16801.1630
Resistance 1.17601.17951.1820

GBP/USD – Price is capped by the 20EMA at 1.3085 and with MACD still bearish and likely to decline and we think price is likely to head lower for today. Stochastic is rising but weak at the moment. The first support is at 1.2985. A break of this support is likely to confirm a Double Top chart pattern and indicate a movement to 1.2785. If price moves above 1.3085, it is likely to test the previous high of 1.3185.

Support 1.30551.30151.2950
Resistance 1.30951.31401.3185

XAU/USD – After reaching a high of $2074.98, price has been declining and we have seen a low below 2,000 in early afternoon. If price stays below $2014, we are likely to see a continuation of the decline to 1983 over the next couple of days in a deeper correction. MACD is bearish and continuing to decline. Stochastic is declining but is near to the oversold zone at the moment.

Support 1984.851970.951955.30
Resistance 2005.152020.802036.95

AUD/USD – A price rally was capped at the Fibonacci 38% correction point at 0.7185 and if price is unable to move above this resistance, price is likely to move lower to 0.7110 in the next couple of days. MACD is bearish and moving lower. Stochastic is in the oversold zone and weak at the moment. A move above 0.7185 would negate our bearish view and indicate a test of 0.7245.

Support 0.71400.71100.7075
Resistance 0.71850.72100.7245

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