FX Commentary – US Dollar Caught In A Range

Market Talk
– The dollar was hemmed into a narrow range on Monday; with the ever-increasing number of COVID-19 cases counterbalancing hopes that a working vaccine will become available soon and kick start the economic recovery from the virus.

– Global markets surged last week on vaccine optimism, with the dollar sinking to a multi-month low as traders quit their safe haven positions in favour of riskier currencies. But the currency market had turned risk averse towards the end of the week as global infections spread.

– The Chinese yuan strengthened to 6.5859 as China industrial production rose 6.9% year-on-year in October, above the forecast 6.5% growth but remaining on par with September’s reading. The unemployment rate fell to 5.3% from September’s 5.4%.

– The British pound steadied against the dollar, changing hands at 1.3209, with the ongoing post-Brexit trade deal talks in focus. Britain’s top Brexit negotiator David Frost said on Sunday that Britain and the EU have made some progress in their post-Brexit trade deal negotiations but might not succeed in getting an agreement.

– Gold rose as increasing coronavirus infections globally re-ignited concerns about the economic toll from the pandemic, while scepticism over the reach of a potential COVID-19 vaccine further boosted the safe-haven metal.

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation
2. Sell USD/CAD at 1.3110. Stop at 1.3145 and target at 1.2990
3. News of a COVID-19 vaccine and rising crude oil prices are both weighing on the US dollar
4. Price capped at the Fibonacci 50% correction point and a bearish Stochastic reading are both hints of a bearish price trend ahead.

Fundamental Comments
1. Crude oil price is on the rise which is good for the Canadian dollar.
2. News of COVID-19 vaccine has offset rising coronavirus cases, helping to reduce demand for the safe haven US dollar.

Technical Comments
1. Price was capped by the Fibonacci 50% correction point of the decline from 1.3389 to 1.2927, which is a hint of a bearish price trend ahead.
2. Stochastic has a bearish crossover and is moving lower, hinting of a bearish price trend.

Key Levels


Technical Overview

USD/JPY – A move below 104.80 last Friday confirmed a Double Tops chart pattern and call for a movement to 104.00. Price reached a low of 104.48 this morning and we are expecting price to continue its movement to 104.00 in the next couple of days. MACD is still bearish but looks like it will turn bullish. Stochastic is in to the oversold zone but there is a bullish crossover. Both momentum indicators are hinting that price is likely to move higher. However, 20EMA is bearish and with steep slope, hinting of a bearish price trend ahead.

Support 104.45104.00103.60
Resistance 104.80105.15105.45

EUR/USD – Our view remains the same as last week. As long as price stays above 1.1725, we are bullish for 1.1920. Our first target at 1.1845 has been reached and we are now targeting 1.1920 in the next couple of days ahead. MACD is bullish and rising. Stochastic is rising as well but is already in the overbought zone. 20EMA is rising and is likely to support price as it moves higher.

Support 1.18351.17951.1745
Resistance 1.18601.18951.1920

GBP/USD – The decline managed to reverse at 1.3105, which was the Fibonacci 50% of the rally from 1.2915 to the high of 1.3310. As long as price stays above 1.3105, we are likely to see a test of 1.3235 and later to 1.3310. Stochastic is still rising and has not reached the overbought zone. MACD is mixed but 20EMA is rising at the moment. A break of support at 1.3105 would negate our bullish view and calls for a movement to 1.2915

Support 1.32001.31551.3105
Resistance 1.32401.32751.3310

XAU/USD – Last Monday, gold fell 5% but spent the next 4 days, recovering only 38% of the decline. As such the rally looks corrective in nature and we are wary of another decline. However, the bigger picture is bullish for gold. Price reached a high of $1898 on Friday and if price above $1901.10, we can see a continuation of the rally to $1907.70 and then to $1922. If price is unable to move above $1902, we think there will be a decline to $1850.

Support 1889.101874.901865.70
Resistance 1898.901907.701921.90

AUD/JPY – On Friday, we had a sell call on their pair which was filled. Price moved to a high of 76.38 but is showing no signs of turning down at the moment. Stochastic indicator has a bullish crossover and is moving higher. MACD also has a bullish crossover and is moving higher. 20EMA is currently capping the rally at 76.20. We would suggest keeping stop at 76.50 and profit order at 75.15.

Support 75.9575.5575.10
Resistance 76.3576.7077.10

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