FX Commentary – US Dollar Steady Ahead Of US Presidential Debate

Market Talk

  • The dollar was steady on Tuesday morning in Asia, as the U.S. presidential debate and developments on the latest U.S. stimulus measures seen vital to support the pandemic stricken US economy, continue to remain in the spotlight.
  • House of Representatives Speaker Nancy Pelosi said on Monday that Democratic lawmakers would unveil a new $2.2 trillion COVID-19 relief bill, with the package’s price tag reduced as a compromise measure.
  • The pound rallied to a one-week high on Monday as Bank of England’s Ramsden pushed back the prospect of negative rates, while hopes the UK and EU can reach a deal post-Brexit deal also improved sentiment.
  • Gold rose almost 1% overnight, its first decent pop in almost a week, boosted by a weaker dollar but avoiding big moves ahead of the U.S. presidential debate and the latest developments in U.S. stimulus measures.
  • All eyes are on the first U.S. presidential election debate where Democrat Joe Biden and Republican Donald Trump will square off later on Wednesday morning Singapore time.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at $1877.00. Stop at 1871.45 and target at 1900.00
3. Coronavirus cases and stimulus package if not approved by Congress could weigh on the US dollar
4. Double Bottom chart pattern and bullish momentum indicators are all hinting of more price rally ahead.

Fundamental Comments
1. Coronavirus cases remain high in the US and could impede US economic recovery and weigh on the US dollar.
2. U.S. stimulus measures seen vital to support the pandemic stricken US economy need to be passed if not it is likely to affect US economic recovery.

Technical Comments
1. Price moving off the neckline of a mini Double Bottom chart pattern is hinting of a price rally ahead.
2. MACD and Stochastic are both rising and hinting of more price rally ahead.

Key Levels

Support 1875.101864.251848.40
Resistance 1888.251902.751918.65

Technical Overview

USD/JPY – Price has been in a range for the past three days with its upper boundary at 105.70 and the lower boundary at 105.20. This 50 pips range could be breaking out on the topside as Stochastic is rising and MACD is bullish and rising at the moment. 20EMA is also pointing higher. We think price is likely to break above the upper boundary but we are not confident price can move above 105.90. Wait for clearer trading idea.

Support 105.20104.80104.40
Resistance 105.70106.15106.55

EUR/USD – Yesterday, price managed to break above the 20EMA resistance at 1.1640 but the rally was limited to 1.1682. Both Stochastic and MACD are showing weaker momentum on the new high which is a worry sign. It could be a warning of a possible price high and a decline to follow. If price is unable to move above 1.1690 we think the next direction will be down to 1.1610 over the next 2 days.

Support 1.16401.16101.1580
Resistance 1.16901.17351.1770

GBP/USD – The Triple Bottom we talked about yesterday saw a price break above 1.2790 and price actually moved higher than our target to a high of 1.2929. Price has a mini correction back to 1.2827 this morning. We think this is just a correction and price is likely to test the high of 1.2925 again within the next 48 hours. The next higher target is at 1.2995. Both MACD and Stochastic are bullish and rising.

Support 1.28201.27701.2725
Resistance 1.28651.29251.2965

AUD/USD – We had a buy call on this pair yesterday at 0.7050 which was filled when price dropped to a low of 0.7046. Price had rallied higher to 0.7095 this morning. We remain bullish and would recommend bringing stop higher to cost at 0.7050 while keeping profit target at 0.7130. Both momentum indicators are bullish and are supportive of further price rally.  20EMA is providing support at 0.7075.

Support 0.70700.70350.7000
Resistance 0.71000.71350.7175

USD/CNH – We had a buy call that was filled on Friday when price dropped to a low of 6.8080.  Price has moved higher to 6.8445 on Monday’s morning but is lower at 6.8260 on Tuesday. Our view remains unchanged but we would recommend closing the position at current 6.8250 for a small profit of 60 pips as China will be having a week long holiday and price may be moving sideways as a result.

Support 6.82356.81906.8070
Resistance 6.83506.85156.8675

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