FX Commentary – US Dollar Keeps Gain Ahead Of Election Result

Market Talk

  • The dollar was up on Wednesday morning in Asia, continuing its gains as polls closed on Election Day in the U.S. and results from the U.S. Presidential election showed an agonizingly close race with no clear winner yet in sight
  • Investors had initially wagered a win by Joe Biden could ease political risk while promising a huge boost to fiscal stimulus, hitting the safe-haven dollar but investors are now hedging against a drawn-out process as mail-in ballots were counted.
  • The Aussie edged down to 0.7100 a day after the RBA cut its interest rate to 0.10% from 0.25% and said that the board would buy AUD100 billion of government bonds in its monetary policy handed down on Tuesday, adding to the tidal wave of cheap money flooding the global financial system.
  • The British pound declined below 1.30 due to a strong US dollar, with the U.K. and the European Union continuing Brexit trade talks and with the Bank of England due to hand down its monetary policies on Thursday evening.
  • Expectations that whoever wins the election will try and push forth an urgently needed financial relief package to stimulate the economy is keeping Gold strong with many analysts expecting the yellow metal to return to record highs above $2,080 once initiative for a new stimulus resumes.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.3190. Stop at 1.3145 and target at 1.3275
3. Rising coronavirus cases and uncertainty from the US election are keeping the US dollar strong.
4. A strong support coupled with bullish MACD is likely to send price higher.

Fundamental Comments
1. Rising coronavirus cases globally has led investors to seek refuge in safe haven US dollar.
2. U.S. Presidential election is showing an agonizingly close race with no clear winner yet in sight is likely to keep the US dollar strong.

Technical Comments
1. Price is likely to be supported by the Fibonacci 50% correction point as well as the 20EMA.
2. MACD has turned bullish and is likely to continue rising, hinting of more price upsides ahead.

Key Levels

Support1.32101.31851.3135
Resistance1.32501.32951.3325

Technical Overview

USD/JPY – Yesterday, we had expected price to be capped below 105.05 for another decline to 104.25. However price went to a high of 105.34 and has remanded above the precious resistance turned support now at 105.05. As long as price stays above 104.80, we are likely to see the rally continues its way higher to 105.75. MACD is bullish and Stochastic may see a bullish crossover soon to confirm the bullish price trend.

Support 104.80104.35104.00
Resistance 105.05105.35105.75

EUR/USD – Price rose to a high of 1.1770 overnight but has declined to 1.1601 this morning. The 20EMA is pointing lower and has a steep slope hinting of a strong bearish trend ahead. MACD is about to turn bearish but Stochastic has a bullish crossover in the oversold zone and is heading higher. We are inclined to go with the 20EMA. If price is capped at 1.1680, we think price is likely to break below 1.1601 to a 1.1575 in the next couple of days.

Support 1.16001.15751.1540
Resistance 1.16501.16951.1730

GBP/USD – Price reached a high of 1.3138 overnight but has declined lower to 1.2933 this morning. Stochastic has a bearish crossover and is heading lower. MACD is bullish but is declining from its extreme high point. If price were to move below the 20EMA support at 1.2970, price is likely to decline to 1.2875 in the next couple of days. If price stays above 1.2970, we will likely re-visit 1.3145 again

Support 1.29701.29301.2885
Resistance 1.30251.30601.3120

XAU/USD – Price reached a high of $1916.20 overnight but declined to $1882.75. MACD is bullish and could be moving higher but Stochastic is moving lower and coming down from the overbought extreme. 20EMA is still bullish and is supporting price at $1893.35. We see price staying above this support and moving higher to $1931 over the next few days. A move below $1882.35 would negate our bullish view.

Support 1893.351882.351874.35
Resistance 1903.351916.201926.20

NZD/USD – Yesterday we had recommended a quick trade in this pair ahead of the US Election Day. Both our entry and profit order was filled before the polling closed. We made 55 pips on this quick trade. Price reached a high of 0.6743 before declining to 0.6613. There was a bearish divergence warning given respectively by MACD and Stochastic when the high was made. If price is capped at 0.6680, we are likely to see a decline to 0.6590. Above 0.6680 will target the overnight high at 0.6743.

Support 0.66400.66100.6585
Resistance 0.66800.67150.6745

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