FX Commentary – US Dollar Stayed Strong For a Second Day

Market Talk

  • The dollar was up on Wednesday morning in Asia, holding onto gains from the previous session on the back of positive economic data from the U.S. and concerns over the COVID-19 outbreak in Europe as well as in rising cases in the US.
  • US Existing Homes Sales surged to 6 million in August, the highest level in nearly 14 years but investors are also digesting comments from Chicago U.S. Fed President Charles Evans, who said on Tuesday that the U.S. economy risks a longer, slower recovery and “recessionary dynamics” if Congress fails to pass the latest fiscal stimulus package.
  • Analysts believe the greenback is likely to continue to grind higher in the short term as the coronavirus rattles sentiment in Europe, but uncertainty about this year’s U.S. presidential election means the dollar could be prone to more volatile swings.
  • New Zealand’s central bank maintained the size of its quantitative easing program and kept interest rates at a record low, and said it is making progress on additional tools including negative rates to use if more stimuli are required.
  • Gold fell on Wednesday following a rise in the greenback, which was supported by a strong U.S. housing market data, and rising global COVID-19 cases in America and Europe with France, Spain and the U.K. dealing with resurgence in coronavirus cases.

Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation
2. Sell NZD/USD at 0.6595. Stop at 0.6635 and target at 0.6495
3. Strong US housing data and rising COVID-19 cases are keeping the US dollar strong.
4. Price has broken below a Double Top chart pattern with MACD also hinting of more price declines ahead.

Fundamental Comments
1. Strong US housing data for August which was the highest in nearly 14 years, is keeping the US dollar strong.
2. Rising global COVID-19 cases is moving investors into the safe haven US dollar

Technical Comments
1. Price broke the neckline of a Double Top chart pattern, which is a hint of more price declines ahead.
2. MACD is bearish and is still declining, hinting there is more price declines ahead.

Key Levels

Support 0.65650.65200.6485
Resistance 0.66100.66450.6685

Technical Overview

USD/JPY – Climbing off the low of 103.98 in an ABC rally, price has reached the Fibonacci 127% projection target at 105.20. If price can penetrate above this resistance, it is likely to move towards the Fibo 161.8% projection target at 105.45. MACD is bullish and rising and Stochastic is rising but has not reached the overbought extreme. Both momentum indicators are hinting the upside price is still possible.

Support 104.85104.40103.95
Resistance 105.20105.55105.90

EUR/USD – Price has declined below our first target at 1.1695 this morning to 1.1672. On the shorter term basis, the market is oversold and price may be close to a temporary low and we may see a corrective rally to 1.1750. Stochastic is in the oversold extreme with a possible bullish crossover coming up. MACD is bearish but is turning higher. On a longer term basis, the Double Top chart pattern has a price target at 1.1490.

Support 1.16701.16401.1595
Resistance 1.17101.17501.1780

GBP/USD – Price actually move higher than our anticipation to a high of 1.2866, which was follow by a decline to 1.2678. We may have reached a temporary low as the market is oversold. MACD is warning with a divergence. Stochastic has also reached the oversold extreme for a 2nd time. However 20EMA is still bearish with a steep slope. Resistance at 1.2790 is likely to cap for another decline in the next few days for 1.2520.

Support 1.26601.26101.2565
Resistance 1.27201.27601.2815

XAU/USD – The bearish trend continues and price broke the High Wave candle’s low at $1882 last night and we are likely to see a continuation of the decline to $1860. 20EMA is pointing lower with a steep slope, hinting of a strong bearish trend. MACD is bearish and moving lower but Stochastic is in the oversold extreme. We are bearish for $1860 unless price moves above $1920, which will negate the bearish view.

Support 1871.651859.551843.60
Resistance 1884.451894.451902.70

USD/CNH – We had a buy recommendation which was filled at 6.7800 when price declined to 6.7722. Price has recovered this morning to a high of 6.8003. Our view remains unchanged. We would recommend keeping stop at 6.7705 and profit order at 6.8090. Stochastic is near to the overbought extreme but MACD is still bullish and rising at the moment. 20EMA is also bullish and rising.

Support 6.78306.76106.7490
Resistance 6.80006.81206.8255

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