FX Commentary – Gold Dropped 5% on COVID-19 Vaccine

Market Talk
– The dollar was down on Tuesday morning in Asia following overnight news that a COVID-19 vaccine could become available relatively soon and increased hopes that a COVID-19 cure would become available soon.

– U.S. drug maker Pfizer Inc. said on Monday night that its vaccine candidate, which is being developed in partnership with Germany’s BioNTech, was more than 90% effective in preventing COVID-19. The claim was based on data from the first 94 people in a large-scale clinical trial to be infected with the virus.

– The safe-haven Japanese yen clawed back some of its losses against the greenback, edging higher to 105.07, after seeing its biggest loss since March during the previous session. It fetched 76.42 against the Australian dollar, having lost more than 2% overnight

– Data released earlier in the day showed that China’s October’s CPI and PPI, both saw smaller-than-expected growth year-on-year, and the CPI also saw smaller-than-expected growth month-on-month. The yuan weakened to $6.60 against the US dollar.

– Gold plunged 5% for its biggest meltdown in a day since August after Pfizer’s announcement of progress in its Covid-19 vaccine program surprised markets, redirecting money from safe havens into risk assets.

Chart Focus USD/CNH
Key Points
1. Sell USD/CNH recommendation
2. Sell USD/CNH at 6.6050. Stop at 6.6300 and profit target at 6.5550.
3. With COVID-19 vaccines, the US dollar’s safe haven demand is likely to be under pressure.
4. Price is capped by a strong resistance zone and MACD is hinting of a bearish price trend ahead. Both are signs of a likely price declines ahead.

Fundamental Comments
1. With a COVID-19 vaccine, the US dollar is likely to lose its safe haven value.
2. With COVID-19 situations in China under control, the Chinese economy is in a better recovery mode compared to the US economy.

Technical Comments
1. Price is capped by a previous resistance zone as well as a falling 20EMA.
2. MACD is bearish and the fast line could be turning down, which is a sign of a bearish price trend.

Key Levels


Technical Overview

USD/JPY – Price rose to a high of 105.64 overnight on COVID-19 vaccine news causing the yen to lose it safe haven status. However the high reached last night was still below a previous resistance point at 105.75. If price is unable to move above this resistance, it is likely to decline to 104.45 in the next couple of days. Stochastic is near to the overbought zone but MACD is turning bullish. 20EMA is also hinting of a strong bullish price trend ahead.

Support 104.70104.40103.85
Resistance 105.15105.65106.00

EUR/USD – Our view is the same as yesterday. We think that after rising for 3 consecutive days, the market may be overbought. We are looking at a pullback to 1.1790 to get into the longer term bullish trend. Price reached a low of 1.1795 overnight and this may be the correction and price could be heading higher again to 1.1910 again in the next few days. MACD is still bullish and Stochastic has declined close to the oversold zone while 20EMA is supporting price at the moment. Below 1.1760 would negate our bullish view.

Support 1.17901.17601.1715
Resistance 1.18451.18701.1915

GBP/USD -Price is hanging around the previous high at 1.3175. Price was not able to move much above this resistance but the decline was also well supported by the 20EMA. Stochastic has a bearish crossover and is moving down from the overbought zone. MACD is still bullish and 20EMA is pointing higher with a steep slope. We think if price is supported at 1.3120, we can see a move to 1.3250.

Support 1.31601.31201.3080
Resistance 1.32101.32651.3315

XAU/USD – Price suffered a 5% decline yesterday on news of a COVID-19 vaccine. We think the overnight low of $1850.10 could be a low and price could be heading higher in a corrective rally to $1907.70. MACD is bearish but Stochastic has a bullish crossover in the oversold zone. This could be a sign of a possible low and a price correction ahead. 20EMA is bearish with a steep slope.

Support 1882.751870.801859.50
Resistance 1894.101907.751920.35

EUR/AUD – Price rose to a high of 1.6335 yesterday and our sell order was filled at 1.6330. Price fell to a low of 1.6204 and our profit order was filled as well. We are out of this position with a 110 pips profit. MACD and Stochastic have given divergence warnings of a possible price low and we are likely to see a price movement higher to 1.6290. This could be a corrective rally as 20EMA is still bearish.

Support 1.62301.61901.6165
Resistance 1.62651.63051.6345

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