FX Commentary – Optimism Over Stimulus Package Moved Investors Away From Safe Haven US Dollar

Market Talk

  • The dollar was down on Wednesday morning in Asia as optimism over the U.S. Congress passing the latest stimulus measures before the Nov. 3 presidential election, boosted risk sentiment and pushed the dollar down to a near one-week low.
  • The White House and Democrats have moved closer to agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party.
  • Stimulus measures are seen as a short-term weight on the greenback, as spending supports the economy and increases investors’ risk appetite. The euro led gains to hit a one-month high of $1.1841 and held at $1.1828 in Asia.
  • Antipodean currencies were weighed down by the prospects of negative rates in New Zealand and monetary easing in Australia while Brexit worries kept a lid on the pound.
  • Gold prices rose for a second straight day on Tuesday as speculation that the White House and Congress will reach a deal for a new coronavirus stimulus before the Nov. 3 U.S. election inspired bulls in the yellow metal to chase the market higher again.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at $1915.00. Stop at $1908.60 and target at $1933.00
3. Optimism of a stimulus package is likely to drive up inflation and led investors into riskier assets like Gold
4. A Triangle chart pattern breakout and bullish momentum indicators are hinting of a bullish price move ahead.

Fundamental Comments
1. Optimism of a stimulus package is likely to drive up inflation and benefit Gold as a hedge of inflation
2. Optimism of a stimulus package is likely to send investors away from safe haven US dollar into riskier assets.

Technical Comments
1. Price has moved above a Triangle chart pattern and which is hinting of a move to the previous high of $1933.
2. MACD is bullish and rising while Stochastic is rising. Both momentum indicators are hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – This pair could be in an ongoing consolidation at the moment with the boundaries of this consolidation wider than we had anticipated. The boundaries could be 106.15 high while the Fibonacci 50% correction point of 105.02 could be the lower boundary. MACD is flat and neutral but Stochastic has a bearish crossover and is declining from the overbought zone. Watch the boundaries for clues.

Support 105.20104.90104.40
Resistance 105.60105.80106.10

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 but has a bullish crossover. 20EMA is flat and not indicating any trend.

Support 1.29501.29051.2865
Resistance 1.29901.30301.3080

EUR/USD – Our view remains the same as yesterday where we said 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. Price has moved above 1.1830 and we are now targeting 1.1895 in the next 24 hour. MACD is bullish but Stochastic is near to the overbought zone. 20EMA is rising and pointing higher with a steep slope, which is a hint of a strong bullish trend.

Support 1.18301.17951.1755
Resistance 1.18651.18951.1920

NZD/USD – We had a sell call yesterday on this pair but price rallied to a high of 0.6612 this morning, taking out our stop. We are out of this position with a loss of 30 pips. Stochastic is rising from the low and there could be more upsides ahead. Price has also moved inside the trend channel, which has removed the downside pressure. We may see the rally continues higher to 0.6645 in the next 24 hours.

Support 0.65850.65500.6510
Resistance 0.66150.66450.6680

AUD/USD – Yesterday, we had raised stop higher to 0.7070 and this was triggered. Last night, price reached a low of 0.7019 and bounced up to 0.7082 and our stop was triggered. We still managed to take a 35 pips profit. Price is testing the 20EMA resistance and a break of this will push price higher to 0.7115. However, inability to move above this resistance is likely to send price lower to 0.7010 again.

Support 0.70500.70150.6975
Resistance 0.70850.71150.7150

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