FX Commentary – Strong US Jobs Data Keeps US Dollar Strong

Market Talk

  • The dollar drifted higher on Friday, helped by strong U.S. jobs data overnight as well as firmer global demand for safe-havens amid concerns about the coronavirus recovery after an increase in coronavirus cases, setting the currency up to potentially snap a seven-week losing streak.
  • Weekly number of applications for unemployment benefits in the United States dropped below one million for the first time since the start of the coronavirus pandemic, with 963,000 claims coming in which was below analysts’ expectations for 1.1 million, keeping the US dollar strong.
  • The kiwi was under pressure at $0.6537 as the country faces a fresh COVID-19 outbreak and after dovish comments from the central bank this week. New Zealand is due to announce on later on Friday whether a lockdown in the country’s biggest city will be eased or extended.
  • Gold traded up 1% on Thursday, rebounding from near a 3-week low to post its first significant gain in a week after a near $200 bloodbath triggered by ramping U.S. Treasury yields and a rebounding dollar.
  • Chinese officials are widely expected to bring up Trump’s ban of the TikTok and WeChat apps, due to be enforced in September, during an online meeting with U.S. officials this coming Saturday. The two sides will also discuss trade, as well as air other grievances, during the meeting.

Chart Focus XAU/USD- Gold
Key Points
1. Sell Gold recommendation
2. Sell Gold at $1954. Stop at $1979 and target at $1860
3. A better U.S. job data and a firmer demand for safe haven are both keeping the U.S. dollar strong.
4. Price is capped by Fibonacci 50% correction point with MACD hinting of a price reversal, are hints of a price decline ahead.

Fundamental Comments
1. U.S. jobs data released last night was better than expectation and the lowest since the start of the pandemic, fuelling hopes of a US economic recovery.
2. A firmer global demand for safe-havens amid concerns about the coronavirus recovery after an increase in coronavirus cases, is aiding the safe haven US dollar

Technical Comments
1. Price is likely forming the fourth leg of a 5 leg downtrend and Fibonacci 50% is capping price advance.
2. MACD is bearish and could be turning down after touching the zero line, hinting the end of a correction and resumption of the bearish trend.

Key Levels

Support 1948.901937.401929.80
Resistance 1966.351977.251988.35

Technical Overview
USD/JPY – Price made a marginal new high at 107.05, just above the Wednesday’s high of 107.00. However, MACD and Stochastic have given bearish divergence warning of a possible price high. If price were to dip below the 20EMA support at 106.60, it could open the door for a decline to the previous low of 105.50. We see limited upside and favour a drop to 105.50.

Support 106.75106.45106.15
Resistance 107.05107.30107.55

EUR/USD – Our buy order was filled yesterday at 1.1820. Price went up to a high of 1.1863 but has declined to 1.1792. Our view remains unchanged. We are looking at a price rally to 1.1915. MACD is bullish but Stochastic has a bearish crossover in the overbought zone and is moving lower. 20EMA is currently providing support at 1.1800. Stick with stop and profit target.

Support 1.17951.17551.1720
Resistance 1.18201.18651.1895

GBP/USD – For the past 4 days, price has been caught in last week’s range of 1.3185 to 1.2980. MACD is getting flatter while Stochastic is caught in the middle of its range. 20EMA is also getting flat and not indicating any trend. These are signs of price moving into a consolidation. We feel that the support is more vulnerable to a breakout. Watch the support for clue to the next direction.

Support 1.30401.30001.2965
Resistance 1.30801.31301.3185

NZD/USD – Price is close to the support at 0.6520 at the moment. While 20EMA is pointing lower and its slope is steep, hinting of a bearish trend, MACD is hinting of a possible price reversal with bullish divergence warning. If price break the low of 0.6520, we are likely to see a move to 0.6480. We would prefer to wait for test of this support to get clues to the next price direction.

Support 0.65200.64900.6445
Resistance 0.65650.66000.6630

USD/CAD – Price made a low of 1.3190 overnight. When making this low, MACD and Stochastic has not followed suit and has given divergence warning of a potential low in place. 20EMA is now flat and could be turning up. We think price may have made a temporary low and a corrective rally higher to 1.3275 is likely within the next couple of days. A decline below 1.3190 would extend the decline further.

Support 1.32201.31901.3150
Resistance 1.32601.32951.3325

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