Market Talk
- The dollar held onto gains against most currencies on Thursday as disappointing data from both the U.S. and Europe revived concerns about the economic fallout from a second wave of coronavirus infections.
- Fed Chairman Jerome Powell led the charge during a congressional hearing, where he stated that more support was likely to be necessary to sustain the recovery, as investors continue to lose hope that the U.S. Congress would pass the latest support measures.
- A general slowdown in Europe with PMI in September slipping below 50, indicating a contraction in economic activity as a second wave of COVID-19 cases continue to rise, has diminished investor optimism.
- Some investors are watching the Australian and New Zealand dollars, which have come under pressure on growing expectations their central banks could deliver more monetary stimulus.
- Gold dived US$50 on Wednesday, pulling silver down with it after a one-day breather, as a further strengthening of the US dollar send the yellow metal to its lowest price in two months. Silver took an even worse pounding dropping 6.9% to a 2 months low of $21.68.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 105.35. Stop at 105.65 and target at 104.15.
3. A second wave of COVID-19 inflection and disappointing US economic data are likely to favour the safe haven yen.
4. A Rising Wedge chart pattern and Stochastic are both hinting that price is likely to decline.
Fundamental Comments
1. As a second wave of COVID-19 cases continue to rise, investors are likely to seek the safe haven yen.
2. Disappointing US economic data is likely to weigh on the US dollar
Technical Comments
1. A Rising Wedge chart pattern is hinting of a price reversal lower to 104.00
2. Stochastic is into the overbought extreme and could be turning down just like the MACD.
Key Levels
| Support | 105.15 | 104.85 | 104.40 |
| Resistance | 105.55 | 105.90 | 106.25 |
Technical Overview
NZD/USD – We had a sell recommendation yesterday which was filled when price reached a high of 0.6605. Price has declined to 0.6530 this morning and looks like it will continue to move lower. We would recommend bringing stop lower to cost at 0.6595 while keeping profit target unchanged at 0.6495. Stochastic is already in the oversold extreme but MACD and 20EMA is strongly bearish.
| Support | 0.6520 | 0.6485 | 0.6445 |
| Resistance | 0.6560 | 0.6610 | 0.6645 |
EUR/USD – Price has a corrective rally yesterday but the rally only reached a high of 1.1715 before a decline to 1.1650 this morning. Price looks like it will continue to move lower to 1.1595 over the next couple of days. This could be the final movement for the downtrend as Stochastic is already in the oversold extreme. MACD is also showing potential signs of a divergence, which is a warning of a potential price low. 20EMA is bearish and has a steep slope.
| Support | 1.1625 | 1.1595 | 1.1565 |
| Resistance | 1.1660 | 1.1690 | 1.1720 |
GBP/USD – Price reached a marginal low of 1.2670 on Wednesday compared to Tuesday’s 1.2678. Stochastic is in the oversold extreme and MACD could be about to show a divergence warning of a potential low in price. However 20EMA is bearish with a steep slope. There is a Fibonacci support at 1.2655. The trend is bearish but the market looks oversold at the moment. We are looking for a corrective rally if price can hold support at 1.2655. The corrective rally can price higher to 1.2760.
| Support | 1.2655 | 1.2610 | 1.2565 |
| Resistance | 1.2720 | 1.2760 | 1.2815 |
XAU/USD – The bearish trend continues and price reached a low of $1848.75 last night. 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 continue to stay bearish for $1834 over the next 48 hours. A move above $1883 would negate our bearish view and hint of a bottom in price.
| Support | 1843.60 | 1834.55 | 1817.95 |
| Resistance | 1861.35 | 1876.20 | 1894.50 |
USD/CNH – We had a buy recommendation on Tuesday and last night price moved above our profit target at 6.8090. We are out with a 290 pips profit. There are no signs of a reversal as yet from both Stochastic and MACD. 20EMA is also bullish with a steep slope. We may see a continuation of the rally to 6.8450. A move below 6.8070 would confirm a reversal movement lower to 6.7700.
| Support | 6.8120 | 6.7880 | 6.7610 |
| Resistance | 6.8330 | 6.8495 | 6.8610 |
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