FX Commentary – Rising Global COVID-19 Cases Keep US Dollar Strong

Market Talk

  • The dollar held on to gains on Friday morning in Asia, with next Tuesday’s U.S. presidential election and rising global coronavirus cases keeping investors focused on the US dollar.
  • The euro hovered near a four-week low against the dollar over hints from the European Central Bank that it could roll out further monetary easing by the end of the year. Increasing coronavirus cases in Europe and lockdown are also weighing on the Euro.
  • Data on Thursday showed the U.S. economy grew at a record pace for the third quarter. Separately, a report showed 751,000 people in the United States filed for state unemployment benefits in the week ended Oct. 24, compared with 791,000 the previous period.
  • The Aussie dollar slipped to a three-month low of $0.7002 overnight. The Kiwi fell to a low of 0.6595 but managed to recover to 0.6640. The British pound was undermined by a strong US dollar and a lack of Brexit related news.
  • Gold prices dropped to one-month lows, hurt by a stronger dollar and lack of clarity on a U.S. stimulus agreement, while concerns over a spike in COVID-19 cases and uncertainty ahead of U.S. elections limited losses.

Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation
2. Buy AUD/JPY at 73.15. Stop at 72.85 and profit target at 73.75.
3. Australia is one of few place not badly affected by coronavirus and interest rate differential is in the Aussie favour.
4. A possible Double Bottom with oversold Stochastic is hinting of a possible corrective rally.

Fundamental Comments
1. Interest rate differential is in the Aussie dollar favour.
2. Australia is one of new pocket globally not badly affected by coronavirus.

Technical Comments
1. A possible Double Bottom could be forming which hints of a bottom in the making.
2. Stochastic is in the oversold extreme and hints of a possible corrective rally ahead.

Key Levels


Technical Overview

EUR/JPY – We had a sell call on this pair yesterday but price did not reached our entry price. Price declined overnight and this pair reached a low of 121.61 this morning. MACD is starting to warn with divergence warnings. Stochastic is into the oversold extreme. Price may have reached a low and could see a bounce from current low in a corrective move.  20EMA is still bearish with a strong bearish trend.

Support 121.60121.35120.95
Resistance 121.90122.20122.50

EUR/USD – Price was capped at 1.1760 and had fallen to a low of 1.1650. Stochastic is in the oversold extreme but MACD is still bearish. 20EMA is also pointing down with a steep slope which hints of a strong bearish price trend ahead. We remain bearish. We expect price to be capped at 1.1690 for another decline to 1.1610 in the next couple of days. A move above 1.1735 would mean a low is in place and price rally to 1.1830.

Support 1.16501.16101.1580
Resistance 1.16951.17301.1760

GBP/USD – Our view remains the same as yesterday. As price was capped at 1.3020, price has declined to 1.2880 overnight on the back of a firmer US dollar. The decline does not look completed. MACD is still bearish but there is a possible divergence warning from Stochastic. Resistance at 1.2940 will be important. If price stays below this resistance, we will see 1.2840. Above could warn of a low in place.

Support 1.29051.28751.2840
Resistance 1.29401.29901.3025

XAU/USD – After price broke below the Triangle trend line, we were expecting a move to $1848. Yesterday, we saw a price move to $1859.60 but we do not think this is the low. We think price is likely to be capped at $1882 and another decline to $1848 will follow. MACD is still bearish but Stochastic is in the oversold extreme. However, 20EMA is pointing lower and hints of a strong bearish trend ahead.

Support 1866.251859.301848.35
Resistance 1874.351884.901896.85

NZD/USD – Our sell call from Wednesday is still valid. Price reached a low of 0.6595 overnight, missing our profit order at 0.6590. We saw a bounce to 0.6642 this morning but we think price is likely to decline today below 0.6595. Stochastic is still declining and has not yet reached the oversold extreme and MACD is still bearish. 20EMA is also bearish. Keep stop and profit order the same as yesterday at 0.6670 and 0.6590

Support 0.65900.65500.6510
Resistance 0.66250.66550.6690

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