FX Commentary – US Dollar Weaker On Stimulus Deadlock

Market Talk

  • The dollar was down on Thursday morning in Asia, reversing its gains from the day before over U.S. Congress’ inability to reach a consensus for the country’s latest COVID-19 stimulus package while COVID-19 cases continue to rise and to impact U.S. economic recovery.
  • Although investors have swung between optimism and pessimism over the stalled package, some argued that U.S. economic recovery depended on a compromise between Republicans and Democrats over additional economic stimulus.
  • The Aussie dollar was up after the Australian Bureau of Statistics released a positive jobs report for July earlier in the day. 114,700 jobs were added in July, beating analysts’ expectations of 40,000. Australia’s July unemployment rate of 7.5% also beat expectations.
  • The Japanese yen strengthened 0.04% versus the greenback at 106.85 per dollar, while Sterling was last trading at $1.3033. The Euro edged higher above 1.1800. German wholesale prices and inflation data released at 2pm (Singapore time) were within expectations and provoke little movement.
  • Gold swung from going down to a low of $1,859.53 to $1,917, a day after its biggest daily fall in seven years. Silver fell as much as 5.5% and rose as much as 6% after a 15% plunge the day before, the largest in over a decade.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1820. Stop at 1.1780 and target at 1.1910
3. Congress’ inability to reach stimulus package and an increasing number of coronavirus in the US are both weighing on the US dollar.
4. Price is supported at a support zone and rising momentum indicators are hinting of a price rally ahead.

Fundamental Comments
1. U.S. Congress’ inability to reach a consensus for the country’s latest COVID-19 stimulus package is weighing on the US dollar.
2. Rising number of coronavirus cases in the US is also weighing on the US dollar.

Technical Comments
1. Price has been supported at the support zone and has started to move above a resistance high, hinting of a price rally ahead.
2. Both MACD and Stochastic are rising and hinting of a price rally ahead.

Key Levels

Support 1.18051.17601.1720
Resistance 1.18451.18801.1915

Technical Overview
USD/JPY – Price moved to a high of 107.00 last night and there were divergence warnings from MACD indicator. MACD is still bullish but is declining at the moment. Stochastic is in the overbought zone and is declining after a bearish crossover. If price is unable to hold above the 20EMA at 106.45 which is also the previous breakout point, it is likely to decline back to 105.25 again over the next few days.

Support 106.45106.15105.75
Resistance 106.90107.20107.55

USD/CNH – Price reached a low of 6.9272 this morning and we think this could be a temporary low. Both MACD and Stochastic have given divergence warnings of a possible price low and a possible reversal ahead. However 20EMA is still above price and capping its rally. If price can move above 20EMA point at 6.9450, we think price can go higher to the next resistance point at 6.9760.

Support 6.93406.92656.9040
Resistance 6.94606.95706.9760

GBP/USD – Last night a third price decline had managed to hold above the support area of 1.3015. Price is currently moving higher and away from this support zone. If price can hold above the 20EMA support at 1.3050, it could confirm a temporary low at 1.3015 and a possible movement higher to 1.3130. MACD is bullish and rising. Stochastic is also rising but is near to the overbought zone

Support 1.30601.30201.2980
Resistance 1.30901.31301.3185

XAU/USD – Price is in a corrective rally at the moment. The Fibonacci 50% point at $1954.75 is likely to cap the rally and provoke a decline back below $1859. The 20EMA resistance point is also nearby at $1959. MACD is still bearish and the bearish trend is strong as indicated by the slope of the 20EMA. Stochastic is rising but the strength of this rally looks weak. We favour a decline to $1859.

Support 1916.801898.601880.50
Resistance 1937.051949.101964.40

USD/CHF – We had a buy order yesterday on this pair which was stop out last night. We lost 30 pips as a result. Price reached a low of 0.9095 currently and looks destined to move lower to the previous low point of 0.9050. Stochastic is moving lower into the oversold zone. MACD has turned bearish and is declining and showing no signs yet of a price reversal. We expect the decline to continue lower.

Support 0.90800.90500.9010
Resistance 0.91150.91600.9195

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