FX Commentary – Investors Remain Optimistic Despite Negative Brexit Comments

Market Talk

The dollar was up on Tuesday morning, with doubts over the status of the U.S. stimulus measures continuing to linger, while the Chinese yuan continued to a near two-year high against the dollar over signs of continued economic recovery in China.

The Chinese yuan rose as high as 6.6695 per dollar on Monday, surpassing its 2019 peak and hitting its strongest level since July 2018. Data on Monday showed a recovery in China’s consumer sector which helped to boost not only the yuan but other currencies, including the euro.

U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin “continued to narrow their differences” in a telephone conversation on Monday, but investors remain unconvinced that a deal will be reached before the deadline.

Britain’s chief Brexit negotiator David Frost said there was no basis to resume trade talks with the EU unless there is a fundamental change in Brussels’ approach to negotiations. However, investors still think both sides might be able to reach an agreement to prevent disruptions that a no-deal Brexit would cause.
The yellow metal reached a high of $1918.40 but was unable to hold above $1912 resistance as a new coronavirus stimulus deal between the White House and Congress remained elusive and keeping the US dollar strong.

Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation
2. Sell NZD/USD at 0.6580. Stop at 0.6610 and target at 0.6510.
3. US election uncertainty and rising COVID-19 cases in US and Europe are likely to keep the safe haven US dollar strong.
4. Price breaking below a price channel with bearish MACD is a hint of a bearish price trend ahead.

Fundamental Comments
1. Ahead of US election uncertainty, US dollar is likely to stay strong.
2. Rising COVID-19 cases in the US and in Europe is likely to send investors into the safe haven US dollar.

Technical Comments
1. Price breaking down from a rising trend channel is a hint of a bearish price trend ahead.
2. MACD has a bearish crossover in the bearish zone which is a hint of a bearish price trend ahead.

Key Levels

Support	0.6555	0.6510	0.6485
Resistance	0.6585	0.6610	0.6645

Technical Overview

USD/JPY – Price moved above 105.50 this morning which complicated our view of a direct decline to 105.02. We could be in an ongoing consolidation at the moment. The boundaries of this consolidation would be wider than we anticipated. The boundaries could be 106.15 while the Fibonacci 50% correction point of 105.02 could be the lower boundary. MACD and 20EMA are both flat and neutral

Support	105.20	104.90	104.40
Resistance	105.60	105.80	106.10

GBP/USD – Price could be consolidating and forming a Triangle pattern at the moment. The Triangle boundaries are at 1.3025 and at 1.2860. Watch the breakout of these two boundaries for trend direction. MACD is bullish but is rather flat and near to the zero line. This is an indication of a weak trending market. Stochastic is in the middle of its range. 20EMA is flat and not indicating any trend.

Support	1.2920	1.2860	1.2805
Resistance	1.2965	1.3025	1.3065

EUR/USD – Price has failed to move below 1.1690 but has moved higher to 1.1780 instead. We changed our view as price was unable to move below 1.1690, which is also the Fibonacci 62% of the advance from 1.1612 to the high of 1.1828 on 9 October 2020. As long as price stays above 1.1745, we are looking at a price move to 1.1830 and later to the Fibonacci 127% projection point of 1.1895. MACD is bullish but Stochastic is near to the overbought zone. 20EMA is rising and pointing higher at the moment.

Support	1.1750	1.1725	1.1690
Resistance	1.1795	1.1830	1.1870

XAU/USD – We saw a break of the upper boundary at $1912 last night but the rally only reached a high of $1918.40 before declining back below $1912 again. Stochastic has a bullish crossover and has turned up from the oversold zone. MACD has a bullish crossover and is about to move above the zero line. Both momentum indicators are hinting of a bullish price trend ahead but we think price is likely to be capped by the boundaries $1918 to $1882 again.

Support	1901.50	1894.25	1882.20
Resistance	1909.40	1918.40	1932.80

AUD/USD – We had a sell call on this pair yesterday which was filled at 0.7105 when price rose to a high of 0.7114 overnight. Price has fallen to 0.7036 at the point of writing and we would like to recommend bringing stop loss lower to 0.7070 while keeping profit order at 0.7010. Stochastic is still declining but MACD is starting to warn with divergence of a potential price low forming.