FX Commentary – Gold Rose For A Second Day But Was Unable To Break Above $1900

Market Talk

  • The dollar was up on Wednesday morning in Asia, with investors digesting economic data from China as well as the presidential debate between U.S. President Donald Trump and Democrat Joe Biden, with neither candidate scoring a decisive advantage.
  • Investors are focusing on Congress’ progress towards passing the latest $2.2 trillion fiscal stimulus bill after U.S. House of Representatives Speaker Nancy Pelosi said on Tuesday that a deal with the White House could be possible by this week, with further talks scheduled with Treasury Secretary Steve Mnuchin later in the day.
  • Data showed China’s factory activity expanded at a faster pace in September, helped by a return to exports growth after several months of shrinking sales, bolstering a steady recovery for the economy as it rebounds from the coronavirus shock.
  • The Kiwis inched up to 0.6588 after an ANZ Bank survey showed that New Zealand business sentiment improved in September as COVID-19 numbers in the country remain low.
  • Gold prices rose for a second straight day on Tuesday, recovering close to the key $1,900 level. The rally in gold could gain further impetus, pushing it closer toward record highs at $2,073 hit in August, as a vote for Biden is seen as a vote against the dollar, which has become the default hedge for all that the Trump administration represents.

Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation
2. Buy EUR/USD at 1.6460. Stop at 1.6410 and target at 1.6575
3. ECB’s economic package is helping Euro zone while Australia has been weighed down by Melbourne’s recent lockdown 
4. Price correction has likely ended at Fibonacci 38% correction point with both momentum indicators bullish and pointing to a price rally.

Fundamental Comments
1. Euro zone economy was buoyed by a ECB stimulus package and has been recovering from the coronavirus pandemic.
2. Melbourne recent rise in coronavirus and lockdown is likely to weigh on the Aussie economy in the near future.

Technical Comments
1. Price has an A-B-C correction and was supported by the Fibonacci 38% correction point.
2. MACD and Stochastic are both turning up from their extreme and both are showing a possible price rally ahead.

Key Levels

Support 1.64501.63951.6350
Resistance 1.65251.65901.6630

Technical Overview

USD/JPY – Price moved to a high of 105.78 this morning but that high as followed by a bearish Engulfing candlestick price pattern. This is a hint of 105.78 being a possible high and a price decline to follow. MACD also support this view with a bearish divergence of its own. Stochastic also has a bearish crossover and is declining from the overbought extreme. We see price moving lower to 104.90 over the next few days ahead.

Support 105.30104.90104.40
Resistance 105.80106.15106.55

EUR/USD – Price moved to a high of 1.1754 this morning which was followed by a bearish Engulfing candlestick price pattern. This is a reversal pattern which means price has hit a high and a movement lower to the next support at 1.1680 is likely over the next couple of days. Stochastic is turning down from the overbought extreme but MACD is still on the bullish side at the moment. We are bearish for 1.1680. A move above 1.1760 would negate our bearish view.

Support 1.17251.16801.1645
Resistance 1.17551.17851.1810

GBP/USD – The decline from 1.2925 looks corrective and is currently sitting on the 20EMA support line. Stochastic is near to the overbought zone but MACD is still bullish. If price can stays above 1.2810, we are likely to see another test of the 1.2925 high again over the next few days. If price move below 1.2810, we are likely to see 1.2690 again.

Support 1.28201.27701.2725
Resistance 1.28651.29101.2965

AUD/USD – We had a buy call on this pair which was filled on Monday. Price had rallied higher to 0.7148 this morning and we are out with an 80 pips profit. MACD has given a bearish divergence warning. We think the decline is likely to continue lower to 0.7075 in the next 48 hours as Stochastic is still declining from the overbought zone. A break below 0.7075 will target 0.7000.

Support 0.71000.70700.7035
Resistance 0.71250.71500.7195

XAU/USD – Our order was not filled at $1877 as price fell to only a low of $1877.05 yesterday. Price has rallied during the day to a high of $1899.05. There is also bearish divergence warning from MACD, which is a hint we could be approaching a temporary top in Gold. Stochastic is also turning down from the overbought extreme. If price is capped below $1900, it is likely to move back to $1873 again.

Support 1885.951875.101864.25
Resistance 1902.751915.851930.95

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