FX Commentary – US Dollar In Demand From Coronavirus Lockdown Worries

Market Talk

  • The U.S. dollar held steady on Monday in a holding pattern as investors readied for Tuesday’s U.S. presidential election, while a surge in global coronavirus cases continued to weigh on sentiment leading investors to seek the safe-haven US dollar.
  • Data from China showed factory activity expanded at its fastest pace in a decade as China’s Caixin/Markit Manufacturing Purchasing Managers’ Index offered hope the region’s success in containing the coronavirus could spare it the economic pains being inflicted on Europe and the United States.
  • Oil prices continued to fall more than 3% on Monday on worries a swathe of coronavirus lockdowns across Europe will weaken fuel demand leading the USD/CAD to its highest level in over a month.
  • The Euro steadied in early Asian trade but was close to hitting long-term lows against the greenback and Japanese yen with European COVID-19 lockdowns pushing the Euro lower after U.K. Portugal, and Italy followed France and Germany with lockdowns to contain the spread of the virus.
  • Gold was up slightly on Monday morning in Asia despite a stronger dollar. Investors are wary of a possible contested U.S. election, and further European COVID-19 lockdowns are also pushing the safe-haven metal higher.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3315. Stop at 1.3280 and profit target at 1.3415
3. Rising coronavirus cases globally and weaker crude oil demand have benefited the US dollar but is weighing on the Canadian dollar.
4. Price is supported by the 20EMA in a bullish trend with momentum indicators bullish and pointing higher as well.

Fundamental Comments
1. Slump in crude oil price due to weak demand as a result of European lockdown has weighed on the Canadian dollar.
2. Rising coronavirus cases globally has led investors to seek refuge in safe haven US dollar.

Technical Comments
1. Price is supported by the 20EMA line and is in a bullish trend.
2. MACD is bullish and Stochastic has a bullish crossover and is turning up

Key Levels

Support1.33101.32751.3235
Resistance1.33501.33901.3420

Technical Overview

AUD/JPY – Price did not reached our entry price level last Friday but instead moved higher to 73.91. Stochastic has a bullish crossover but MACD is still bearish with both its lines below the zero line. 20EMA is flat at the moment. Price has since declined to 73.25 this morning. We think price may be moving in a sideways range for the next couple of days until we can see a break of either 73.00 or 74.00

Support 73.1572.8072.55
Resistance 73.5073.8074.15

EUR/USD – Last Friday, we had expected price to be capped at 1.1690 for another decline to 1.1610. Price rallied to a high of 1.1705 last Friday but has declined lower to 1.1630. Our view remains the same as last Friday but we are wary today that 1.1631 could be the low and a reversal could follow. MACD has given a divergence warning of a possible price low while Stochastic has a bullish crossover and is heading higher.  Above 1.1660 would confirm a low at 1.1630 is in place.

Support 1.16251.15801.1540
Resistance 1.16601.16951.1730

GBP/USD – Price has rallied higher than our expectation, reaching a high of 1.2990 but has since moved lower to 1.2905 at the point of this writing. Our bearish view for 1.2840 remains unchanged. MACD is still bearish and Stochastic has a bearish crossover after barely moving out of the oversold zone. 20EMA is also bearish and has a steep slope hinting of a strong bearish trend ahead.

Support 1.29001.28601.2825
Resistance 1.29401.29901.3025

XAU/USD – After reaching a low of $1859.60, price has rallied higher to $1889.60 which is also near to the 20EMA resistance point while the previous support turned resistance lies at $1891.05. Unless price can move above $1889.60 to $1889.05, we remain bearish for $1848. Above this resistance zone, we could see price going to $1926. MACD is still bearish but Stochastic has a bullish crossover and is rising up.

Support 1874.351866.251859.30
Resistance 1884.901894.901906.30

NZD/USD – Last Friday, our stop at 0.6670 was triggered when price reached a high of 0.66702. We are out of this pair with a 45 pips profit. Price reached a low of 0.6591 this morning and MACD has given a divergence warning hinting of a possible price low in the making. Stochastic is also in the oversold zone but 20EMA is still strongly bearish. We think the downside could be limited to 0.6570.

Support 0.65900.65500.6510
Resistance 0.66250.66550.6690

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