FX Commentary – US Dollar Caught In Between Rising COVID-19 Cases And Vaccines

Market Talk
– The safe-haven Japanese yen sat near a one-week high and a steady U.S. dollar held commodity currencies in check on Wednesday, as worries about rising coronavirus cases tempered optimism around promising COVID-19 vaccine.

– Surging cases have driven record hospitalization and fresh restrictions on gathering in the United States and Europe, while new outbreaks vex authorities in Japan, South Korea and Australia. This news has dampened risk appetite.

– Federal Reserve Chair Jerome Powell said on Tuesday that there was “a long way to go” to economic recovery and soft retail sales data in the United States weighed on dollar sentiment. US Retail Sales came in at 0.3% against expectation of 0.5% while the previous month figure was 1.6%.

– Strong industrial output in China sent the yuan to an almost 29-month high of 6.5457 per dollar in offshore trade. The yuan has gained nearly 9% against the dollar since late May, despite the central bank taking various actions to temper its strength.

– Gold traders continue to weigh conflicting themes of increasing coronavirus infections globally which re-ignited concerns about the economic toll from the pandemic COVID-19 vaccine optimism. Loose global monetary policies also kept the yellow metal bid.

Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation
2. Sell AUD/USD at 0.7295. Stop at 0.7325 and target at 0.7220.
3. A coronavirus outbreak in Australia and global increase in cases is weighing on the Aussie and favouring the US dollar
4. A possible Double Tops chart pattern could be forming with Stochastic also hinting of more price declines ahead.

Fundamental Comments
1. New coronavirus outbreak in Australia is weighing on the Aussie dollar.
2. Global increase in coronavirus cases is sending investors into safe haven US dollar, offsetting the optimism in COVID-10 vaccines.

Technical Comments
1. Price maybe forming a Double Tops chart pattern.
2. Stochastic has a bearish crossover in the overbought zone and is turning down

Key Levels


Technical Overview

USD/JPY – The sharp rally on Monday managed to unwind the low readings in both MACD and Stochastic indicators and has allowed price to decline below 104.00. A break of this support is likely to send price lower to 103.20 in the next few days. 20EMA remains bearish and is pointing down with a steep slope hinting of a strong bearish price trend as well. Price will need to move above 104.60 to reverse the trend to bullish from currently bearish mode.

Support 103.70103.45103.15
Resistance 104.00104.30104.60

EUR/USD – Price did not reached our buy level yesterday and our buy entry was not filled. Price moved higher overnight to 1.1893 and we are expecting the rally to continue towards the previous high of 1.1920. MACD is still bullish and rising but Stochastic has a bearish crossover and is moving lower from the overbought zone. 20EMA is still bullish and rising. A decline below 1.1800 would negate our bullish view.

Support 1.18301.17951.1745
Resistance 1.18801.19201.1950

GBP/USD – Our view remains the same as yesterday. We saw price moved to a high of 1.3272 last night and we are likely to see a continuation of the rally to 1.3310 in the next couple of days. 20EMA is acting as support at 1.3250 while MACD is still bullish and rising. Stochastic has a bullish crossover and is moving towards the overbought zone. A decline below 1.3230 would negate our bullish view.

Support 1.32351.32001.3165
Resistance 1.32751.33101.3345

XAU/USD -Price has a sharp decline to $1864.40 on news of COVID-19 vaccine on Tuesday but has bounced back to $1891.00. While the decline did not alter our bullish view, price has been unable to hold its gains and has dropped lower to $1875.45. There is now a danger of a price decline to test the low at $1850.10 if price is unable to move above $1892. Stochastic has a bearish crossover and is moving lower from the overbought zone and MACD is neutral at the moment. 20EMA also has lost its strong bearish tone.

Support 1873.651861.001850.10
Resistance 1883.351898.901907.70

USD/CAD – Our sell order at 1.3115 was filled when price reached a high of 1.3123 Monday night. Our view remains the same as yesterday and we are looking for a movement lower to 1.2990. Stochastic is moving up from the oversold zone. MACD and 20EMA are neutral at the moment. Momentum and trend indicators are mixed at the moment. We would keep stop at 1.3130 and profit target at 1.2990.

Support 1.30901.30551.3010
Resistance 1.31251.31551.3190

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