Market Talk
- The dollar held tight ranges against its peers on Monday as investors awaited clarity on the health of U.S. President Donald Trump after he tested positive for the coronavirus, sending markets into safe-haven assets.
- Non-Farm Payroll data released on Friday showed the recovery of the labour market could be losing steam. The U.S. economy added 661,000 jobs in September, fewer than expected and the slowest increase since the recovery began in May weighing on the US dollar.
- Sterling investors awaited cues from final round of Brexit trade negotiations as the expiry of the transition period at the end of December approached. Both sides agreed on Saturday to step up negotiations on a post-Brexit deal.
- Expectations that U.S. Congress will pass a stimulus package to support the pandemic-stricken economy remain low ahead of the presidential election on 3 November.
- Gold’s standing as a safe-haven became more questionable on Friday as its prices dipped despite President Donald Trump testing positive for the coronavirus. Gold fell sharply after the news about Trump broke, before its partial recovery later in the day.
Chart Focus Gold
Key Points
1. Sell Gold recommendation
2. Sell Gold at $1896.50. Stop at $1904.00 and target at $1875.20
3. An increase in risk appetite and Trump’s recovery from COVID-19 are both likely to move investors away from Gold
4. Price is capped by a strong resistance with momentum indicators warning of a possible high are signs of a bearish trend ahead.
Fundamental Comments
1. Trump’s COVID-19 recovery is likely to send investors out of safe haven into riskier assets.
2. An increase in risk appetite is likely to weigh on Gold.
Technical Comments
1. Price is capped by a previous high resistance and has moved below the 20EMA.
2. Both MACD and Stochastic have bearish divergence warnings of a possible price high and a reversal to follow.
Key Levels
| Support | 1887.60 | 1875.30 | 1864.30 |
| Resistance | 1897.40 | 1907.50 | 1916.90 |
Technical Overview
USD/JPY – The bearish Engulfing candlestick price pattern has brought price lower to 104.94, aided by news of Trump’s COVID-19 inflection. However price was unable to break below 104.90 and we have seen a bounce up to 105.60 at the point of writing. Stochastic is turning up from near the oversold zone and MACD is neutral at the moment. We are likely to see a test of 105.80. A break above this resistance will send price higher but a failure to move above is likely to send price back to 104.90 again and continue the sideways movement.
| Support | 105.40 | 104.90 | 104.40 |
| Resistance | 105.80 | 106.15 | 106.55 |
EUR/USD – Price is likely to continue in this 100 pips sideways movement for the next few days unless we see a break of this range. Stochastic and MACD have both given divergence warning at the upper end of the range but both momentum indicators have moved lower with price decline. We are likely to see a bullish crossover on Stochastic and see price test the upside at 1.1770 again.
| Support | 1.1695 | 1.1645 | 1.1615 |
| Resistance | 1.1735 | 1.1770 | 1.1815 |
GBP/USD – Price has been volatile lately but there is no clear trend. In fact price is caught in a wide range of 1.2980 to a low of 1.2820. Price is likely to remain volatile as both sides tried to negotiate a post-Brexit trade deal with December 2020 approaching. We would recommend play the range on the short term basis and following the breakout of the range when it happens.
| Support | 1.2905 | 1.2875 | 1.2835 |
| Resistance | 1.2945 | 1.2980 | 1.3010 |
AUD/JPY – We had a sell call on this pair but our stop was triggered on this morning at 75.85. Both MACD and Stochastic are forming divergence warning of a possible price high. Price is also unable to move above the Fibonacci 50% correction point of the decline from 77.70 to 73.95. 20EMA is bullish. We think the topside could be limited to 76.05 and we remain bearish. A move above 76.05 would negate our bearish view.
| Support | 75.40 | 74.90 | 74.60 |
| Resistance | 75.90 | 76.40 | 76.85 |
USD/CAD – Our sell call on was filled on Thursday and we had raised our profit target higher to 1.3265. Price is currently at 1.3270 and should be moving to our profit target. We would recommend taking profit as price is only 5 pips away from our target. MACD and Stochastic could both be forming a divergence warning while a decline in crude price is also likely to weigh on the Canadian dollar.
| Support | 1.3265 | 1.3230 | 1.3190 |
| Resistance | 1.3295 | 1.3330 | 1.3370 |
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