FX Commentary – US Dollar Weakened On Trump’s Hospital Discharge

Market Talk

  • The dollar was softer against riskier currencies on Tuesday on rising optimism that U.S. lawmakers could agree on new stimulus to blunt the economic impact of the coronavirus and Trump’s discharged from hospital after a 3-day stay following treatment for COVID-19.
  • Risk appetite improved after U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone, continuing their work towards a deal on coronavirus relief spending. Bonds and the dollar nursed losses amid the improving risk appetite, while oil extended gains.
  • The pound moved higher against the dollar on rising expectations the EU and UK will agree on a trade deal, with Goldman Sachs forecasting both parties “likely” to reach an accord by early November. A better UK PMI also helps to boost Sterling’s sentiment.
  • The Australian dollar jumped to $0.7205 after the Reserve Bank of Australia kept interest rates on hold at 0.25% despite widespread expectations of a rate cut. Currency traders are also focused on the government’s annual budget with Canberra widely expected to keep the fiscal tap open for years to come.
  • Gold was down on Tuesday morning in Asia but managed to stay above $1900, as U.S. President Donald Trump was discharged from hospital and raised optimism for the latest stimulus measures to be passed by Congress.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1785. Stop at 1.1745 and target at 1.1865
3. Improving risk appetite as a result of Trump’s discharge from hospital and optimism over a stimulus package have blunted US dollar.
4. Price pattern and momentum indicators are both hinting of more price upsides ahead.

Fundamental Comments
1. Trump’s discharge from hospital has improved risk sentiment driving US dollar lower.
2. Rising optimism that U.S. lawmakers could agree on new stimulus has also reduced risk and send US dollar lower.

Technical Comments
1. Price breakout of a recent high and a V-shaped Ichimoku formation is hinting of more price upsides ahead.
2. MACD is bullish and Stochastic is rising. Both momentum indicators are hinting of more price upsides ahead.

Key Levels


Technical Overview

USD/JPY – We saw a test of 105.80 last night but price did not managed to move above this resistance. A break above this resistance is likely to send price higher to 106.40 but a failure to move above is likely to send price back to 104.90 again and continue the sideways movement. MACD is still bullish but Stochastic is already in the overbought zone and a bearish stochastic crossover is likely. We are expecting price to move back into its previous range trading scenario.

Support 105.40104.90104.40
Resistance 105.80106.15106.55

AUD/USD – We saw a push in price to 0.7205 after RBA’s announcement but price has declined lower. The push higher has created a potential Double Tops chart pattern and a break of 0.7130 is likely to send price lower to 0.7055. A break above 0.7205 is likely to see a price movement to 0.7285. We prefer the downside as MACD and Stochastic are both giving divergence warnings of a possible price high.

Support 0.71550.71100.7095
Resistance 0.72050.72350.7275

GBP/USD – Price moved above 1.2980 overnight but the breakout only brought price to a high of 1.3005. If price can stay above 1.2965, we may see a test to 1.3055 as MACD is still bullish but Stochastic is already in the overbought zone. 20EMA is bullish with a steep slope, which is a hint of a strong bullish trend. Be prepared for volatility as UK and EU negotiated a post Brexit trade deal.

Support 1.29651.29251.2875
Resistance 1.30101.30501.3090

XAU/USD – Our call yesterday to short Gold was wrong. Price moved to a high of $1918.50 but MACD and Stochastic are showing divergence warnings of a potential price high in the making. Price could also be forming a Rising Wedge chart pattern which is also a hint of a price decline ahead back to $1875. 20EMA is currently providing the first support at $1902.70. A break of this support would be bearish for the chart outlook

Support 1907.501897.401887.60
Resistance 1918.501930.701944.50

USD/CAD – We had a sell call which we recommended to take profit at 1.3270 yesterday. With crude oil price jumping $4 on improved risk sentiment after Trump’s discharge and optimism of a stimulus package, Canadian dollar has strengthened again to 1.3241. We see limited downside for this pair as MACD is starting to form divergence warning.

Support 1.32401.32051.3175
Resistance 1.32751.33051.3330

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