FX Commentary – US Dollar Weaker On Stimulus Impasse

Sorry for the late update as we had issues with our blog yesterday’s evening.

Market Talk

  • The dollar was down on Thursday morning in Asia, despite the ever-rising number of COVID-19 cases and the lack of progress towards passing the latest US stimulus measures ahead of the Nov. 3 presidential election continuing to dampen investor sentiment.
  • The impasse over the COVID-19 relief measures continues after Munchin acknowledged that he and House Speaker Nancy Pelosi remain “far apart” on their spending priorities. With the election only weeks away, investors’ risk aversion only gave the greenback a short-term boost.
  • The Aussie dollar declined to 0.7144, in the wake of Reserve Bank of Australia (RBA) Governor Philip Lowe’s hint of bond buying and a small rate cut among RBA’s options for policy support on the road to recovery.
  • The pound gained over signs of progress in the U.K.’s Brexit talks with the EU. The two parties are also likely to extend the talks past UK PM’s Boris Johnson’s self-imposed Oct.15 deadline to reach a deal, in order to work through their remaining differences.
  • Gold was down on Thursday morning in Asia as the dollar gained against the yellow metal with deadlocked U.S. stimulus talks and increasing likelihood of no U.S. COVID-19 relief measures being in place before the Nov U.S. elections.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3150. Stop at 1.3105 and target at 1.3240
3. Impasse over relief stimulus and rising COVID-19 cases with no vaccine in sight is likely to keep risk high and the US dollar strong.
4. Price is turning up from a base building chart pattern with bullish momentum indicators also hinting of a bullish price trend ahead.

Fundamental Comments
1. A lack of progress towards passing the latest US stimulus measures is weighing on risk appetite and is likely to keep the US dollar strong.
2. Rising COVID-19 cases and a lack of vaccine progress is likely to keep the greenback up.

Technical Comments
1. Price is rising from a base and 20EMA has turned bullish, hinting of a change in trend.
2. MACD is turning bullish while Stochastic is rising and moving higher. Both are hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – The price decline continued lower to 105.02 yesterday but this could be the base as both Stochastic and MACD are showing bullish divergence warnings and hinting of a possible low in place. This is also close to our price target of 104.90. However, 20EMA is still bearish. If the support zone at 105.02-104.90 holds we could be seeing a bounce back up to 105.80 in the next few days ahead.

Support 105.20104.90104.40
Resistance 105.60106.10106.55

GBP/USD – Price reached a low of 1.2860 yesterday and had rallied on news of further Brexit talks to a high of 1.3063. 20EMA is neutral and in between prices. Momentum indicators are looking weak at the moment. If price is unable to move above 1.3063, we think price is likely to move lower to 1.2920 again in the next 24 hours. A move above 1.3063 is likely to target the previous high of 1.3160.

Support 1.29601.29051.2865
Resistance 1.30151.30651.3115

EUR/USD – Yesterday, we had forecasted a corrective rally to 1.1770 to test the trigger point. We had seen this rally overnight and the 20EMA had halted that rally. We are now looking at another decline to 1.1695 in the next few days ahead. MACD is still bearish and is starting to turn down again. Stochastic had moved out of the oversold zone but is starting to turn lower again. Only a move above 1.1775 would negate our bearish view for the next few days.

Support 1.17201.16851.1645
Resistance 1.17701.18251.1870

XAU/USD – We saw a strong rally from the low of $1882.10 to a high of $1912.64 but we think this rally is only part of a corrective movement. We think there may be another decline to $1868 to end the correction. MACD is still in the bearish zone and Stochastic has a bearish crossover and is moving down again. 20EMA is still bearish and above price at the moment.

Support 1894.951882.201872.70
Resistance 1902.101912.651923.95

NZD/USD – We had a buy recommendation on this pair yesterday. Our order was filled and price went to a high of 0.6680 but has now fallen back to 0.6640. Both Stochastic and MACD have given bearish divergence warnings when price hit the high of 0.6680, which is a strong hint of a possible price high. 20EMA has also turned bearish. We would recommend exiting at current 0.6640 for a 5 pips loss.

Support 0.66300.65950.6545
Resistance 0.66800.67050.6750

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