FX Commentary – Rekindled Expectation Of Stimulus Weakened US Dollar

Market Talk

The dollar was down on Friday morning in Asia, drifting towards a second consecutive weekly loss over higher commodity prices and rekindled expectations that the U.S. Congress will pass the latest stimulus measures.

Talks between House of Representative Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over the stimulus resumed on Thursday, with President Donald Trump announcing that talks with Congress have resumed despite slapping a ban on the talks until the Nov. 3 presidential election.

The AUD was up to 0.7180, despite expectations of more monetary easing from the RBA in the wake of its policy statement handed down on Tuesday. The NZ dollar recouped Thursday’s losses after another dovish signal from the RBNZ

The Chinese yuan broke the support at 6.7070 as the Chinese market re-opened after a long holiday, with September Caixin Services PMI data released earlier in the day increased to 54.8 from August’s reading of 54, showing the economy recovery from COVID-19.

Gold was up on Friday morning in Asia, boosted by a weaker dollar as well as uncertainty about the US presidential election and bets that stimulus if passed would drive inflation higher.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation
2. Buy NZD/USD at 0.6595. Stop at 0.6560 and target at 0.6660
3. Weaker job data and hopes of a stimulus package has increased risk appetite and reduced demand for safe haven US dollar
4. Price has broken above a resistance point and both MACD and Stochastic are rising and hinting of more price upsides

Fundamental Comments
1. US stimulus talk has increased investors risk sentiment leading to less demand for US dollar.
2. Weaker job data has dimmed investor hope of a quick recovery in US economy

Technical Comments
1. Price has broken above an important resistance line and the 20EMA, hinting of more price upsides ahead.
2. Stochastic is rising and hinting of more price upsides ahead and MACD is rising as well.

Key Levels

Support	0.6590	0.6550	0.6510
Resistance	0.6630	0.6660	0.6695

Technical Overview

USD/JPY – Price broke above the range’s high of 105.80 on Wednesday but only rose to a high of 106.10. We saw a price correction back to the breakout point at 105.80. If price can hold above this support, we are expecting a rally to 106.40 but a break of this breakout support is likely to send price back to 105.40. Stochastic is declining and MACD has turned bearish which hints of a break of support.

Support	105.80	105.45	104.95
Resistance	106.15	106.55	106.90

GBP/USD – Price is caught in a range from 1.3005 to 1.2844 and there is at the moment no sign that a breakout is imminent. Stochastic is rising and hinting of more price upsides but MACD is neutral and close to the zero line. MACD is also bearish at the moment, just below the zero line. 20EMA is flat. We would recommending watching the range and follow the breakout when it happens.

Support	1.2905	1.2880	1.2845
Resistance	1.2955	1.3005	1.3050

EUR/USD – After declining to 1.1723, price has recovered to 1.1780 this morning. MACD is bullish and rising. Stochastic has a bullish crossover and is rising as well. Both momentum indicators are hinting of more price upsides ahead. 20EMA is also bullish and is currently providing the first level of support. We think price should continue its rally to the previous high at 1.1810.

Support	1.1735	1.1695	1.1645
Resistance	1.1780	1.1815	1.1845

XAU/USD – We had a sell call on this pair yesterday but this morning our stop order was triggered. MACD is still bearish at the moment but is close to the zero line. Stochastic has continued to rise and 20EMA has turned bullish. Price is likely to test the high of $1921.20 and a break of this resistance is likely to target the next resistance at $1940.70. A move below $1875 would negate our bullish view.

Support	1906.15	1894.40	1883.10
Resistance	1920.95	1934.20	1944.70

USD/CNH – Price broke the low of 6.7074 this morning and we are expecting price to continue its decline to 6.6750. MACD has turned bearish and there is a bearish crossover as well. Both of MACD’s lines are pointing up with a steep slope, hinting of a strong trend. Stochastic also has a bearish crossover and is pointing lower. Even 20EMA has a steep slope and is pointing lower, hinting of a strong bearish trend.