FX Commentary – Fading Hopes Over Stimulus Package Drives US Dollar Higher

Market Talk

  • The dollar was up on Thursday morning in Asia, reversing losses from the previous session as the focus remains squarely on the U.S. Congress’ progress towards passing the latest stimulus measures.
  • President Donald Trump and House of Representatives Speaker Nancy Pelosi had made remarks that raised hopes of the measures’ passage before the Nov. 3 presidential election, whetting investor appetite for riskier assets and a retreat from the greenback.
  • Optimism faded as continuous opposition from Senate Republicans reduces the chances of the measures being passed before the election. Pelosi remained optimistic about reaching a deal despite the Republican opposition but admitted that the measures might not pass before Americans head to the polls.
  • The pound steadied against the dollar on Thursday, after rising to a six-week high during the previous session as U.K. chief Brexit negotiator David Frost announced the resumption of talks with the European Union.
  • Gold rallied for a third straight day on Wednesday as optimism on COVID-19 stimulus send the yellow metal higher but declined as hopes faded that measures could be passed before the US election date later in the day.

Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation
2. Buy EUR/AUD at 1.6670. Stop at 1.6630 and target at 1.6790
3. Worries about monetary easing and narrowing yield differentials are weighing on the Aussie dollar
4. Price is supported by the 20EMA in an uptrend and MACD is hinting of more price upsides ahead.

Fundamental Comments
1. Worries about monetary easing by the RBA is weighing on the Aussie dollar.
2. A narrowing of the yield differentials is favourable for the Euro dollar

Technical Comments
1. Price is supported by the 20EMA which is hinting of a strong bullish price trend.
2. MACD is bullish with the fast line turning around from the zero line hinting of more price upsides ahead

Key Levels


Technical Overview

USD/JPY – Price broke below 105.02 and went to a low of 104.34 yesterday. This morning we saw a correction to 104.75 but price has been unable to break above this point. MACD is bearish and is hinting there could be another decline lower to test the 104.34 low. However Stochastic is near to the oversold extreme and is hinting of a limited downside ahead. However, 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend. We tend towards the bearish view for a test of 104.35 again.

Support 104.35104.90104.40
Resistance 104.75105.05105.40

GBP/USD – Price broke out of a Triangle chart pattern and has reached a high of 1.3176. Stochastic has reached the overbought extreme and could be turning down. MACD is also at its extreme and is hinting of a possible correction ahead. However 20EMA is pointing higher with a steep slope, which is a hint of a strong bullish price trend ahead. A pullback to 1.3090 would be a good location to get into a long position.

Support 1.31251.30801.3035
Resistance 1.31751.32151.3255

EUR/USD – Price has reached the Flag chart pattern price target at 1.1875 but has failed to reach our target at 1.1895. Price reached a high of 1.1880 and we could be looking at a correction after 3 days of rally. 20EMA is pointing higher with a steep slope which is a hint that the trend is still strong. MACD is declining from its extreme but MACD is still high up above the bullish zone.

Support 1.18301.17951.1755
Resistance 1.18801.19151.1950

XAU/USD – Yesterday we had a buy call on this pair. Price went to a low of $1914.21 which allowed us to get into a long position. Our profit order was not filled as price went to a high of $1931.20. Price has declined lower to $1910.50 as at the time of this writing. We would recommend keeping stop at $1908.60 and profit order at $1933.00. MACD is bullish but Stochastic has a bearish crossover near to the overbought zone. Momentum indicators are hinting there is a correction in this bullish trend.

Support 1907.951894.351882.20
Resistance 1920.101931.20194480

USD/CNH – Last week, the Chinese yuan strengthened to a two and a half year high at 6.6695 but there was a correction back to 6.7650. Since then, a price move has brought price to 6.6810 but this move may not be above to surpass the 6.6695 low as MACD and Stochastic are moving to their extreme and are unlikely to support a move below the 6.6695 low. We could see a bounce back up to 6.7350 again

Support 6.68106.66956.6500
Resistance 6.70106.71906.7430

Related Posts

Leave a Reply

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