FX Commentary – Market Is Waiting For Powell’s Speech at 9PM Tonight

Market Talk

  • The dollar was down on Thursday morning in Asia, as investors await further guidance for the U.S. economic recovery from COVID-19 from the U.S. Federal Reserve. Investors are betting the U.S. central bank will introduce a new policy framework to fight persistently low inflation as early as next month.
  • US durable goods data was much better than expected, coming in at +11.2% against expectation of +4.7%, while the previous month was +7.6% but the US dollar was unable to maintain its strength gained from the positive data.
  • The dollar slipped to 105.90 against the yen with Japanese Prime Minister Shinzo Abe due to address concerns over his health, and potentially tenders his resignation, at a press conference on Friday. The yen is likely to gain should Abe decide to resign, given Abenomics, has been one reasons for a weak yen.
  • The euro changed hands at $1.1837 near its highest level so far this week, though few market players expect a clear break from its range so far this week ahead of Powell’s speech. The British pound stood firm at $1.3211.
  • Gold jumped on the eve of a speech from Federal Reserve Chairman Jerome Powell, and as investors bet on further stimulus from the Fed to mitigate the impact of the coronavirus pandemic, which is likely to keep the greenback weak.

Chart Focus USD/JPY
Key Points
1.  Sell USD/JPY recommendation
2. Sell USD/JPY at 106.10. Stop at 106.50 and target at 105.10
3. Further stimulus and Abe’s resignation are both likely to keep the yen stronger against the U.S. dollar
4. A price break below the trend line together with declining Stochastic is a hint of further price declines ahead.

Fundamental Comments
1. Further stimulus from the Fed to mitigate the impact of the coronavirus pandemic is likely to keep the U.S. dollar weak.
2. The yen is likely to gain should Japan’s PM Abe announce his resignation

Technical Comments
1. Price has broken below a rising trendline and is capped by the 20EMA line.
2. Stochastic is declining and moving lower but has not yet reached the oversold extreme which means there could be more downside ahead.

Key Levels

Support 105.80105.50105.15
Resistance 106.10106.55106.90

Technical Overview
EUR/JPY – We had a buy call on this pair yesterday which was filled when price declined to 125.25. Price is currently weak at 125.30 at the moment. Stochastic could be about to see a bullish crossover. MACD’s fast line is turning around at the zero line. 20EMA is flat at the moment. Our view remains unchanged. Keep stop at 125.15 and target at 126.45.

Support 125.25124.85124.45
Resistance 125.65125.95126.35

EUR/USD – Price has been in an 80 pips range for this week. The top of this range is 1.1850 to 1.1770. We are expecting this range to persist at least until 9pm tonight when Powell speaks. MACD is about to have a bearish crossover but Stochastic is still rising. Both momentum indicators are in opposite views at the moment. 20EMA is flat. We would prefer to stay aside for the moment.

Support 1.18101.17801.1750
Resistance 1.18501.18801.1915

GBP/USD – Price broke above a mini Double Bottom chart pattern yesterday and is pushing higher towards 1.3250, which is the Double Bottom price target. MACD has turned bullish with both its lines above the zero line. Stochastic is still moving higher but is in the oversold extreme zone. 20EMA has a steep slope, hinting of a strong bullish trend. A move below 1.3115 would negate our bullish view.

Support 1.31851.31301.3100
Resistance 1.32201.32651.3310

XAU/USD – Price broke the support at $1911.35 last night but bounced back to $1954.55. There is a pullback to the 20EMA and we expect the 20EMA to halt the decline. If the decline stops at $1937, we are likely to see another rally higher to $1975. Stochastic is still rising but MACD is neutral at the moment. A move below $1901 would negate our bullish view and calls for a deeper correction to $1888.90.

Support 1936.851923.251911.35
Resistance 1954.601965.701975.40

USD/CNH – We had a long position from two days ago but our stop was triggered yesterday at 6.8925. Price continues to move lower to 6.8746. We think the downside is limited as MACD is starting to turn up while Stochastic is already in the oversold extreme. However, 20EMA trend is still strongly bearish. We see a corrective rally to 6.8950 but if price moves below 6.8746, the decline is likely to continue lower to 6.8450.

Support 6.87406.85706.8440
Resistance 6.88506.89806.9040

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