FX Commentary – US Dollar Holds Near A Two-Month High.

Market Talk

  • The dollar hovered near a two-month peak against a basket of currencies on Monday, as doubts about an economic recovery persisted ahead of a barrage of economic data and political developments in the United States.
  • Few investors now expect the U.S. Congress to pass any stimulus package, seen as vital to support the pandemic-stricken economy, before the election. However, House Speaker Nancy Pelosi remained optimistic that the Democrats and Republicans could reach a deal soon, adding that talk between the two sides was continuing.
  • U.S. Commodity Futures Trading Commission data showed speculators held a net short position of $33.989 billion, up from $31.524 billion the week before and near the highest level in almost ten years.
  • The euro changed hands at $1.1635 against the greenback; having dropped to its lowest in two months at $1.1612 on Friday. U.S. currency futures positions released by the CFTC on Friday showed a large net long position in the euro, which increased slightly during the previous week to $27.922 billion.
  • Gold was down on Monday morning in Asia, as investors sought shelter in the dollar from rising coronavirus cases and uncertainties over the next U.S. stimulus to aid the economy.

Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation
2. Buy AUD/USD at 0.7050. Stop at 0.7005 and target at 0.7130
3. Improving COVID-19 situations in Melbourne is in contrast to the US and is likely to be good for the Aussie dollar
4. Price has reversed from a low and is moving higher with both momentum indicators hinting of a potential price low forming.

Fundamental Comments
1. Melbourne easing of COVID-19 restrictions is a sign of improving COVID-19 situation and is likely to be good for Aussie dollar
2. A counter-trend move could be in store as US dollar has strengthened to a near two-month high

Technical Comments
1. Price has made a marginal new low and is moving up again in an attempt to break above the 20EMA.
2. Both MACD and Stochastic are showing divergence warnings of a potential price low.

Key Levels

Support 0.70350.70000.6970
Resistance 0.70700.71000.7135

Technical Overview

USD/JPY – Our sell call from Thursday was stopped out at 105.65 on Friday night when price rose to a high of 105.69. Our view remains unchanged and we are bearish on this pair. Stochastic has a bearish crossover on the 4-hourly chart and is turning down, hinting of further price declines. MACD is currently bullish but MACD is declining from its extreme. Price is currently sitting on 20EMA. A move below the 20EMA is likely to hint of a price decline to 104.85 initially and later to 105.10. Above 105.85 would negate our bearish view.

Support 105.20104.80104.40
Resistance 105.70106.15106.55

EUR/USD – There was no rally last Friday. Instead, price fell lower to 1.1612 after it failed to surpass 1.1687. 20EMA point at 1.1640 is currently providing resistance and if price fails to move above this point, it is likely to test the next support point at 1.1590. Both MACD and Stochastic are warning of a possible price low with divergence. We could be near to a price low and a reversal to 1.1750 could happen over the next few days

Support 1.16101.15801.1540
Resistance 1.16401.16901.1735

GBP/USD – Price may have formed a Triple Bottom and is trying to break above the high of this chart pattern. A movement above 1.2790 could trigger a move to 1.2890. MACD has turned bullish and is moving higher, hinting of more price upsides ahead. Stochastic has a bullish crossover on the 4-hourly chart and is also hinting of more price upsides. A move below 1.2670 would negate our bullish view.

Support 1.27351.26751.2620
Resistance 1.27901.28251.2870

XAU/USD – There was a price rally to the 20EMA resistance point at $1876 but price was unable to move above this resistance point. Instead, price has fallen back. We could see another test of the low of $1848 again in the next few days ahead. MACD is still bearish and could be turning down soon near the zero line. Stochastic is rising but looks weak at the moment. 20EMA is bearish and pointing lower.

Support 1855.601848.301838.40
Resistance 1865.951876.201888.40

USD/CNH – Our buy call was filled on Friday when price dropped to a low of 6.8080, which was just above our stop loss at 6.8050. Price has moved higher to 6.8445 on Monday’s morning. Our view remains unchanged and we would recommend keeping stop and profit at 6.8050 and 6.8490 respectively.  While Stochastic is pointing lower, MACD is still bullish. 20EMA is also bullish and pointing higher.

Support 6.81906.80706.7895
Resistance 6.83506.85156.8675

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