FX Commentary – US Dollar Weakness Is likely To Continue

Market Talk

  • The dollar struggled to recoup heavy overnight losses on Wednesday after it slipped to 27-month low against most major currencies overnight as uncertainties about an economic recovery and as the ongoing effects of the Federal Reserve’s stimulus programmes weakened the greenback broadly
  • The pound extended its advance into a fifth day, rising to eight-month high of 1.3265 in a dramatic turnaround after plummeting in March to the lowest level in more than three decades on possibility that the UK will transition out of the European Union without a trade deal.
  • The Euro cracks above its August 6 high at 1.1915 reaching a high of 1.1965, its highest since May 2018 in the previous session on the back of a weak US dollar with the Dollar Index (DXY) hitting a 28-month low.
  • Gold was down on Wednesday morning in Asia, after climbing back above the key $2,000 level in overnight trades, as investors await the release of the minutes from the U.S. Federal Reserve’s last policy meeting.
  • Minutes from the Federal Reserve’s recent meeting due on Thursday early morning may provide some insight into how the central bank sees the recovery playing out. The Fed has cut rates to near zero to bolster business through the pandemic.

Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 105.80. Stop at 106.10 and target at 105.10
3. Uncertainties about a U.S. economic recovery and ongoing effects of the Federal Reserve’s stimulus programmes are both weighing on the US dollar.
4. A strong resistance with a bearish MACD are both signs of more price declines ahead.

Fundamental Comments
1. Uncertainties about an U.S. economic recovery is weighing on the US dollar
2. Ongoing effects of the Federal Reserve’s stimulus programmes with low interest rate and bond buying is weighing on the US dollar.

Technical Comments
1. Resistance provided by 20EMA and a previous support turned resistance are both likely to cap price advance.
2. MACD is bearish and far away from the zero line which is a hint of a strong bearish trend.

Key Levels

Support 105.10104.70104.30
Resistance 105.65106.05106.45

Technical Overview
EUR/JPY – Our order was filled yesterday when price reached a low of 125.33. Price has rallied to a high of 126.05 this morning. We think the rally should continue and may move up to 126.40. Stochastic is rising and has not reached the overbought extreme as yet. MACD is bullish and rising. 20EMA is also bullish. Bring stop higher to 125.60 and profit target higher to 126.35.

Support 125.80125.50125.15
Resistance 126.15126.45126.75

EUR/USD – Price broke above the previous high at 1.1915 to reach a high of 1.1965 in overnight trades. MACD is bullish and is rising. Stochastic is near to the overbought zone but both momentum indicators are hinting of more price upsides. The next resistance above 1.1965 comes in at 1.1995. We think price can reach this level in the next 24 hours. Below 1.1880 would negate our bullish view.

Support 1.19151.18801.1830
Resistance 1.19651.19951.2025

GBP/USD – Price broke above the 1.3185 high last night and rose to a high of 1.3265. We think the rally can continue higher to 1.3335. MACD is bullish and rising. Stochastic is into the overbought zone but has shown no signs of turning down. 20EMA is also bullish and its slope is steep, which is a hint of a strong bullish trend. A move below 1.3185 would negate our bullish view.

Support 1.32301.31851.3130
Resistance 1.32701.33151.3350

XAU/USD – Price rose to a high of 2015.45 last night but did not managed to manage to negate the bearish view. There is still a possibility of another decline to 1859 to complete the downtrend. Momentum indicators are inconclusive. MACD is still bullish but Stochastic is decline after a bearish crossover from the overbought zone. A price move below 1972 would strengthen the bearish view.

Support 1985.351972.201957.65
Resistance 1996.802005.302015.45

NZD/USD – Price reached a high of 0.6624 after moving up from a Double Bottom chart pattern which is close to the Double Bottom price projection target. However, the rally does not seem complete. We think there will be a correction and another rally will follow after the correction to complete the uptrend. MACD and 20EMA are both strong and bullish. Correction is likely to be halted by 20EMA at 0.6575.

Support 0.66000.65600.6530
Resistance 0.66300.66700.6715

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