FX Commentary – US Dollar Higher On Safe Haven Demand

Market Talk

  • The dollar was up on Wednesday morning in Asia, holding onto gains from the previous session as renewed questions about a COVID-19 vaccine and lack of an agreement among various parties on additional U.S. fiscal stimulus prompted a shift back to safe havens.
  • Hopes that Congress would pass the latest stimulus bill ahead of the Nov. 3 presidential election continue to fade, dampening the economic outlook while 2 US companies involved in vaccine development suffered further setbacks in developing a COVID-19 treatment.
  • Although the AUD was little changed on Wednesday morning, an ongoing coal imports spat between Canberra and Beijing sparked concern about the AUD adding to the 1.5% decline it saw during Tuesday’s session.
  • The pound fell sharply on Tuesday as concerns about a no-deal Brexit after a stark warning from the French government and fears over a looming lockdown following a spike in coronavirus cases in the UK hurt sentiment.
  • Gold prices slumped as much as 2% on Tuesday, falling beneath key $1,900 support, as negotiations hit a snag again for an economic stimulus to help millions of Americans financially distressed by the coronavirus pandemic. Any fiscal plan that ends up issuing more money props up gold in theory via inflation fear.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.6645. Stop at 0.6615 and target at 0.6700.
3. Bleaker economic outlook and a second wave of COVID-19 inflections are likely to weigh on the US dollar.
4. A Triangle chart pattern with bullish MACD is a hint of price rally ahead.

Fundamental Comments
1. Second wave of inflection in the U.S. is likely to weigh on the US dollar while New Zealand has been relatively free of COVID-19.
2. Bleaker economic outlook due to a delay in economic package is likely to weigh on the US dollar.

Technical Comments
1. A Triangle chart pattern is hinting of a price rally ahead.
2. MACD is bullish and rising which is hinting of more price upsides ahead.

Key Levels


Technical Overview

USD/JPY – Price broke down to a low of 105.23 on Monday night and a rally last night was capped by the 20EMA at 105.60. We think the downtrend is likely to continue on its way to our target at 104.90 in the next few days. MACD is still bearish and could be turning down soon. Similar, Stochastic has been rising but we could see a bearish crossover soon as well. Only a move above 105.90 will negate our bearish view.

Support 105.20104.95104.40
Resistance 105.60106.10106.55

GBP/USD – Price reached a high of 1.3082 on Monday but has fallen below 1.2900 at the point of writing. The decline may not be over as both Stochastic and MACD has not yet shown any signs of a turnaround. Stochastic has not yet reached the oversold zone, which is hinting there could be more rooms for decline. 20EMA is also bearish with a steep slope, hinting of a strong bearish trend to 1.2840.

Support 1.28801.28401.2800
Resistance 1.29201.29751.3010

EUR/USD – A move below 1.1760 has negated our bullish view. We are now bearish on this pair. Price reached a low of 1.1729 overnight but we think there will be corrective rally to 1.1760-70 to test the trigger point as Stochastic and MACD are both turning up from their extreme point in a corrective move. 20EMA remains bearish and has a steep slope, hinting of a strong bear trend.

Support 1.17301.16951.1660
Resistance 1.17651.17951.1830

XAU/USD – Price has declined overnight below $1902, which negates our bullish view. Price went to a low of $1882.21 last night after breaking below $1902. Stochastic and MACD are both turning up from extreme level, which could mean we are likely to see a rally ahead. This is likely to be a corrective rally as the trend is now bearish. The bearish trend could send price lower to $1848 in the next few days.

Support 1889.651881.951872.45
Resistance 1900.501913.551925.60

XAG/USD – We had a buy recommendation yesterday but we were stop out of this position for a loss of $0.60. Price has declined to a low of $23.85 but MACD is still in the bullish zone and the fast line has already turned up. Stochastic is also into the oversold zone. We think the downside could be limited to the lower uptrend line as well as the previous resistance turned support at $23.70

Support 23.8023.4022.95
Resistance 24.4024.9525.50

Related Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.