FX Commentary – Rising COVID-19 Cases Lifted US Dollar

Market Talk

  • The dollar found support on Monday, as surging coronavirus cases in Europe and the United States plus a lack of progress toward a U.S. stimulus package put traders in a cautious mood, although hopes for a Brexit trade deal held sterling steady.
  • The US recorded its highest ever number of new COVID-19 cases for two consecutive days while France, Spain Italy implemented strict COVID-19 measures amid surging coronavirus cases, which are likely to undermine the global economic outlook
  • U.S. House Speaker Nancy Pelosi said on Sunday it was up to President Donald Trump to act, including talking to reluctant Senate Republicans on the latest stimulus spending aid on the table.
  • Hopes for a breakthrough in the trade-deal stalemate between Britain and Europe held the pound steady above $1.30. Over the weekend, Britain’s Northern Island minister said there was a good chance of a trade deal.
  • Gold prices fell to an over one-week low on Monday, as talks about the new U.S. coronavirus aid package showed no signs of progress, leading to a firmer US dollar as investors moved into the safe haven US dollar.

Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.1840. Stop at 1.1885 and target at 1.1765
3. A lack of progress in stimulus package talk and rising COVID-19 cases in Europe and US are both driving up demand for safe haven US dollar
4. A candlestick price pattern with momentum indicators hinting of a price decline is likely a hint of lower price movement ahead.

Fundamental Comments
1. A lack of progress toward a U.S. stimulus package put traders in a cautious mood and drives demand towards the US dollar.
2. Rising COVID-19 cases in both Europe and US which are likely to undermine the global economic outlook, sending investors into the safe haven US dollar.

Technical Comments
1. MACD is declining and Stochastic is also likely to decline from the overbought zone.
2. An Evening Star candlestick price pattern is hinting of a price reversal and a decline to 1.1760

Key Levels


Technical Overview

USD/JPY – Price reached a low of 104.16 but has bounced up to 104.87 this morning. There was also a bullish divergence warning given by the MACD and Stochastic indicators. This is a warning sign of a possible low made at 104.16 and price could be moving higher over the next couple of days. 20EMA has also turned up. Price could be heading to 105.35 or 105.75 in the next few days.

Support 104.60104.15103.95
Resistance 104.95105.35105.75

USD/CNH – After hitting a low of 6.6711 on 9 October, price had surged higher to 6.7649. Price was unable to sustain the rally and has come down to 6.6880 again. 20EMA is pointing lower but Stochastic is near to the oversold extreme. MACD is bearish but is losing its downwards momentum pace, which could be a hint of a possible price low. If price is unable to move below 6.6711, we are likely to see a break above 6.7650 for 6.8000.

Support 6.68656.67116.6600
Resistance 6.67006.72856.7435

GBP/USD – We can a buy call on this pair at 1.3035 on Friday which was filled when price declined to a low of 1.3018. A price rally was halted by the 20EMA at 1.3055 and price is now test Friday’s low of 1.3018 again. Stochastic is near to the oversold zone and looks weak. MACD is still bearish. 20EMA is bearish with a steep slope. Keep stop and profit order and be prepared for more declines.

Support 1.30151.29751.2925
Resistance 1.30601.30951.3125

XAU/USD -Price is lying at the lower edge of a big Triangle chart pattern. A close below this trend line is likely to send price lower to $1848. MACD has turned bearish but Stochastic is near to the oversold zone. 20EMA is pointing lower with a steep slope, which is a hint of a strong bearish price trend ahead. Indicators are hinting of a bearish price move ahead. Watch out for the break of the lower trend line.

Support 1894.501882.501872.60
Resistance 1907.951920.101931.20

USD/CAD – Price had reached a low of 1.3080 last Wednesday and MACD had given a bullish divergence warning which is a hint of a potential low in the making. Price has climbed higher to 1.3165 at the time of this writing and we are about to see a breakout. 20EMA has also turned bullish. On a breakout, we could see price moving to 1.3200 initially and later to 1.3225.

Support 1.31551.31151.3080
Resistance 1.32051.32401.3275

Related Posts

Leave a Reply

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