FX Commentary – US Stimulus Led To Demand For Riskier Currencies

Market Talk

The dollar flirted with three-week lows on Tuesday as investors stuck to hopes that there will be large U.S. fiscal stimulus after the Nov. 3 election to shore up a pandemic-hit economy regardless of the winner in the presidential election which is supporting riskier currencies.

A widening lead by Democratic presidential candidate Joe Biden over President Donald Trump is leading investors to expect big stimulus after the U.S. election. A Biden victory is also seen as negative for the dollar partly because his pledge to hike corporate tax would reduce returns from investments in the United States.

Sterling traded above the key $1.30 level as hopes for a Brexit deal offset concerns about pressure on the economy from new coronavirus restrictions that British Prime Minister Boris Johnson has announced.

The Australian dollar dropped to $0.7183, not helped by media reports China has stopped taking shipments of Australian coal. The Chinese yuan nursed losses after China’s central bank removed reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading, a move seen as a bid to curb recent yuan appreciation.

Gold was down on Tuesday morning in Asia following a flat overnight session as a rapid rise in U.S. tech stocks also drew investors’ interest away from the safe haven precious metal and into the equity market.

Chart Focus Silver XAG/USD
Key Points
1. Buy Silver recommendation
2. Buy Silver at $24.75. Stop at $24.15 and target at $26.10
3. Optimism of a large US stimulus has led to hopes of better economic growth and led to higher risk appetite which will benefit Silver.
4. Price is supported in a rising uptrend and MACD is bullish and hinting of more price upsides ahead.

Fundamental Comments
1. Hopes of a large stimulus after the US election are likely to lead to better economic growth which is likely to benefit Silver.
2. Optimism of US stimulus has led to an increase in risk appetite and is benefiting Silver

Technical Comments
1. Price is supported by the 20EMA in a rising trend channel, which is a hint of a bullish trend.
2. MACD is bullish and rising, which is hinting of more price upsides ahead.

Key Levels

Support	24.75	24.40	24.05
Resistance	25.15	25.50	25.80

Technical Overview

USD/JPY – Price broke down to a low of 105.23 last night and we think it is on its way to our target at 104.90 in the next few days. MACD is still bearish which is hinting there is more price downside ahead but Stochastic is already in the oversold extreme and is turning up. We may see a small price rally before the downtrend resumes again. We expect 105.60 to cap the rally for a test to 104.90

Support	105.20	104.95	104.40
Resistance	105.60	106.10	106.55

GBP/USD – The price rally continues and we saw a new high overnight at 1.3082. Stochastic is still rising but is approaching the overbought zone. MACD is turning bullish and rising at the moment. 20EMA is pointing higher and has a steep slope, which is a hint of a bullish trend ahead. We think the rally can continue to move higher to 1.3170. Only a move below 1.2990 would negate our bullish view.

Support	1.3005	1.2965	1.2905
Resistance	1.3055	1.3105	1.3160

EUR/USD – Our view remains the same as yesterday. We are bullish on this pair and we are looking at 1.1890 over the next few days ahead. The first resistance lies at 1.1830. MACD is bullish and the fast line is turning up from the zero line, which is a sign of a bullish trend ahead. 20EMA is also bullish and rising and is currently providing support at 1.1795. Only a move below 1.1760 would negate our bullish view at the moment.

Support	1.1795	1.1765	1.1735
Resistance	1.1830	1.1870	1.1915

XAU/USD – Price has declined overnight but had stayed above $1902 which would have negated our bullish view. We remain bullish for $1940 over the next few days, unless price moved below $1902. MACD is still bullish and the fast line is turning up from the zero line which is a hint of a bullish trend ahead. 20EMA is also bullish and rising and is providing the first support at $1914.

Support	1909.75	1900.55	1889.65
Resistance	1919.10	1933.05	1944.70

AUD/USD – We had a buy recommendation for this pair yesterday but it was stop out this morning on news that China had stopped Aussie coal imports. We lost 30 pips as a result. On the 4-hourly chart, in the last candlestick, we saw a Hammer candlestick price pattern, which is a hint that price, may have found a low. MACD is also bullish and the fast line is turning around from the Zero line, which is also another hint of more price upsides ahead. If price stays above 0.7160, we see price going up to 0.7240 again.