FX Commentary – US Dollar Softer As Investor Awaits Important Developments This Week

Market Talk

  • The dollar was down on Monday morning in Asia as investors looked ahead to a slew of U.S. Federal Reserve speakers this week, awaited developments on U.S. fiscal stimulus and coronavirus vaccines amid resurgence of infections in Europe.
  • European countries from Denmark to Greece announced new restrictions on Friday to curb surging coronavirus infections in some of their largest cities, while Britain was reported to be considering a new national lockdown.
  • The yen looked to break new ground, extending a week of solid gains amid trepidation about the global economic outlook and perhaps a shift in the yen’s drivers as central banks pin rates around the world at or below zero.
  • Analysts said the Fed’s lower-for-longer commitment on rates would drag on the dollar, though close attention will be paid to remarks from committee members this week for any more clues on the new approach to inflation.
  • Gold prices rose, en route to a second straight weekly gain, as the dollar weakened on concerns about economic recovery from the coronavirus crisis and as European nations experience second waves of inflections.

Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation
2. Sell GBP/USD at 1.2990. Stop at 1.3040 and target at 1.2830
3. A second wave of coronavirus inflections and a controversial bill are both likely to weigh on the British pound.
4. Price is heading into a strong resistance zone with momentum indicators not able to confirm a possible break above

Fundamental Comments
1. A second wave of coronavirus inflection in UK is likely to force UK to reconsider a new lockdown, which is likely to affect its economic recovery
2. A UK controversial bill aimed to violate the Brexit deal is likely to lead to a messy Brexit and is likely to drag the pound lower.

Technical Comments
1. Price is heading into a strong resistance zone and Fibonacci 38% of the previous decline.
2. MACD is showing weakness while Stochastic is turning down from the overbought zone.

Key Levels

Support 1.29501.29101.2870
Resistance 1.29951.30401.3070

Technical Overview

USD/JPY – The downtrend continues and price made a new low at 104.27 on Friday night as well as this morning. MACD is warning with divergence about a possible price low but Stochastic is weak at the moment. 20EMA is showing a strong bearish trend. 20EMA is pointing down with a steep slope. 104.10 would be an important support to watch. A break will call for a deeper decline to 103.05 while a bounce above 104.10 is likely to create a Double Bottom chart pattern.

Support 104.25103.95103.45
Resistance 104.50104.85105.20

EUR/USD – Since the low at 1.1736, price has moved higher but the rally to 1.1880 seems laborious and MACD is weak and neutral at the moment, staying around the zero line. Stochastic is pointing higher and is not near to the overbought zone as yet. 20EMA is providing the first support at 1.1860 and if price stays above 1.1825, we are likely to see another attempt to test the high of 1.1915 again.

Support 1.18401.17951.1735
Resistance 1.18801.19151.1965

NZD/USD – Price broke above a 2-week high at 0.6788 to move to a new high of 0.6796 on last Friday. Price has not been able to sustain above the high and has declined lower to 0.6754. Stochastic has a bearish crossover and is turning lower. MACD is bullish but is close to the zero line. 20EMA is bullish with a steep slope. If price is unable to move above 0.6796, price is likely to decline back to 0.6670.

Support 0.67500.67100.6675
Resistance 0.67950.68400.6900

XAU/USD – Price is currently consolidating within the Triangle chart pattern. We are likely to see the breakout of the Triangle range soon as price is near to the apex of the chart pattern and the range are getting narrower. These are signs of a potential breakout of the Triangle pattern ahead. The range to watch out for are $1960 on the upside and $1932 on the downside. Stochastic is rising but MACD is flat and neutral at the moment. Watch for the breakout of either range.

Support 1944.901932.101924.15
Resistance 1959.951973.501987.40

EUR/JPY– Our sell call on this pair was not filled on Friday as price only reached a high of 124.26, missing our order at 124.40. Price declined to a low of 123.43 on Friday night but has bounced higher to 123.85 this morning. If price is capped by the 20EMA at 124.10, we are likely to see another attempt at 123.30 in the next couple of days. MACD is still bearish and Stochastic is weak.

Support 123.60123.30122.95
Resistance 123.95124.45124.80

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