FX Commentary – Wall Street Losses Lifted US Dollar

Market Talk

  • The dollar clung to small gains from the previous session on Tuesday after soaring global coronavirus cases and shrinking hopes for a U.S. stimulus deal took a toll on Wall Street and drove the steepest stock market selloff in a month and drove up the U.S. dollar.
  • The euro nursed losses at $1.1809, having borne the brunt of worries about fresh coronavirus lockdowns and slipping after the German IFO business climate index fell by more than expected and for the first time in six months in October.
  • The Canadian dollar weakened against the US dollar as resurgence of coronavirus cases globally hit prospects for crude oil demand while increasing crude oil supply from Libya also hurt sentiment leading to a slump in crude oil prices.
  • The Chinese yuan nursed a 0.5% loss as Sino-U.S. tensions flared over arms sales to Taiwan with China imposing sanctions on Lockheed Martin, Boeing Defence and Raytheon.
  • A meltdown in stocks a week before the U.S. election as a result of an alarming rise in new COVID-19 cases sent investors scurrying to safe havens gold and sending the yellow metal above $1,900 an ounce.

Chart Focus Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at $1905.00. Stop at $1895.70 and target at $1924.20
3. Rising coronavirus cases and Sino-U.S. tensions have sent investors scurrying into safe haven gold.
4. A successful test of the lower trend line is likely to send price to test the upper trendline of a Triangle chart pattern with Stochastic likely to support a price rally.

Fundamental Comments
1. Rising coronavirus cases has sent investors scurrying to safe havens gold.
2. Sino-US tensions flared over arms sales to Taiwan and are likely to send investors into safe haven gold.

Technical Comments
1. A rebound from the Triangle lower trendline is likely to send price to the upper Triangle trendline.
2. Stochastic has moved up from the oversold zone and is rising which is a hint of more price upsides ahead.

Key Levels


Technical Overview

USD/JPY – Price was capped by 105.05 and we have seen a move back lower to 104.70. We think for the next couple of days, price is likely to be capped at 105.05 and supported by the previous low at 104.15. Price is likely to test the low for today as Stochastic has a bearish crossover and is continuing to move lower. MACD is also about to turn bearish and 20EMA has also started to turn down.

Support 104.60104.15103.95
Resistance 104.95105.35105.75

EUR/USD – We had a sell call at 1.1840 yesterday which was filled. Price only declined to a low of 1.1802 and has rallied to 1.1833 at the time of writing. Stochastic has reached the overbought zone but MACD is still bearish. However 20EMA has started to turn bullish. The signals are not clear and we will wait another day to see the next direction. We would suggest keeping stop at 1.1885 and profit target at 1.1765

Support 1.18151.17851.1755
Resistance 1.18451.18801.1920

GBP/USD – Our sell call from Friday was stopped out last night when price dropped lower to 1.2990. This could be the bottom as price could be rising with Stochastic due to continuing rising after a bullish crossover near the oversold extreme. MACD is about to have a bullish crossover, which is also a hint of more price upsides ahead. We could see price moving higher to 1.3080 today.

Support 1.30151.29751.2925
Resistance 1.30601.30951.3140

USD/CHF – A price bounce from the low of 0.9015 was capped by a resistance zone at 0.9080 to 0.9090 this morning and price could be turning down again as Stochastic is about to see a bearish crossover near the overbought zone. MACD is still bearish and is also about to turn down. If price is unable to move above 0.9100, we could see another test of the low at 0.9015 again.

Support 0.90500.90150.8985
Resistance 0.90900.91300.9160

USD/CAD – Price broke above 1.3160 and moved to a high of 1.3224 overnight but has declined to 1.3170 again at the time of this writing. The rally to last night’s high at 1.3224 from the low of 1.3085 looks like a 3-wave corrective movement. Stochastic has a bearish crossover in the overbought zone and is declining, hinting of a price decline ahead. However MACD is still in the bullish zone

Support 1.31551.31151.3080
Resistance 1.32051.32401.3275

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