FX Commentary – US Dollar Weaker On COVID-19 Vaccine News

Market Talk
– The dollar was down on Tuesday morning in Asia on optimism over the latest positive news on the COVID-19 vaccine. However as more U.S. states introduce restrictive measures to curb the virus and increasing infections in Britain, Europe, and Japan, the US dollar weakness was kept in check.

– The coronavirus pandemic is showing no signs of slowing with cases ramping up in US and Europe forcing governments imposing various measures in an attempt to restrict the spread of the virus which could delay an economic recovery.

– The AUD held onto its overnight gains against the dollar despite the RBA’s minutes from its latest policy meeting, indicated that the RBA was ready to provide even more policy stimulus if necessary, in the wake of cutting interest rates to record lows during the meeting.

– The British pound edged up on a media report that the U.K. and the EU could reach a Brexit divorce agreement soon. The Sun newspaper reported that UK’s chief negotiator told PM Boris Johnson to expect a Brexit trade deal early next week.

– Gold was down on Tuesday morning in Asia, boosted by rising concern over the number of COVID-19 cases globally offsetting optimism over the latest vaccine development despite a weaker US dollar.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1830. Stop at 1.1795 and target at 1.1915
3. Optimism on another COVID-19 vaccine and news of a possible Brexit trade agreement has moved funds into riskier currencies and away from safe haven US dollar.
4. Price is supported by a strong support zone and momentum indicators are hinting of a bullish price trend.

Fundamental Comments
1. Optimism over another COVID-19 vaccine send capital flows into the riskier currencies instead of safe haven US dollar.
2. News of a possible Brexit trade agreement has buoyed the Euro dollar.

Technical Comments
1. Price is supported by the 20EMA as well as a previous resistance turned support line.
2. MACD is bullish and rising while Stochastic has a bullish crossover hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price had a sharp movement to 105.13 overnight but has declined lower to 104.50 again. The movement was a result of news on COVID-19 vaccine. The sharp rally does not alter our bearish view for 104.00 but had managed to unwind the low reading in both MACD and Stochastic indicators. 20EMA remains bearish and is pointing down with a steep slope hinting of a strong bearish price trend.

Support 104.30104.00103.60
Resistance 104.60104.90105.15

USD/CAD – Our sell order at 1.3115 was filled when price reached a high of 1.3123 last night. Price is currently at 1.3075 and our view remains the same as yesterday. Stochastic is still moving lower and is near to the oversold zone. MACD is bullish at the moment. 20EMA has turned bearish and is pointing lower. We would suggest lowering stop to 1.3130 while keeping profit target at 1.2990.

Support 1.30551.30101.2985
Resistance 1.30901.31251.3155

GBP/USD – The decline managed to reverse at 1.3105 on Thursday, 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. This morning we saw price moved to a high of 1.3225 and we are likely to see a continuation of the rally to 1.3310 in the next couple of days.

Support 1.32001.31651.3110
Resistance 1.32401.32751.3310

XAU/USD – Yesterday, price has a sharp decline to $1864.40 on news of COVID-19 vaccine but has bounced back to $1891.00. The decline does not alter our chart view and we see a continuation of the rally to $1907.70 and then to $1922. However if price is unable to move above $1907 in the next few days, we think there will be a decline to $1850. MACD and Stochastic are both warning of a possible price decline in the next few days.

Support 1883.351874.901865.70
Resistance 1898.901907.701921.90

AUD/JPY – On Friday, we had a sell call which was filled at 76.15. We kept stop at 76.50 and profit order at 75.15. Last night our stop order was triggered when price reached a high of 76.75. We lost 35 pips as a result. Stochastic is rising and has not yet reached the overbought zone but MACD is still bearish at the moment. As long as price stays below 77.00, there is still a chance of a decline to 75.10.

Support 76.4076.0575.75
Resistance 76.7577.1077.40

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