FX Commentary – US Dollar Gained On Rising COVID-19 Worries

Market Talk
– The US dollar was up on Thursday morning in Asia, clawing back gains from earlier losses after slipping for five straight sessions as positive vaccine news offset the surge in coronavirus cases and tighter economic restrictions across the United States and Europe.

– The currency market saw small moves as the number of COVID-19 cases globally continues to rise incessantly and economic data underscored the fragility of the U.S. recovery.  A lack of progress on a fiscal stimulus bill after the US election has fuelled speculation the Federal Reserve would have to expand its asset-buying campaign at a December policy meeting.

– The euro has had pandemic problems of its own as lockdowns spread across the continent, keeping it capped at $1.1844 and short of the recent peak of $1.1919. The pound had been boosted by hopes of the U.K. and the European Union reaching a post-Brexit trade deal ahead of the end-of-year deadline.

– The AUD saw a slight lag as South Australia imposed a lockdown to curb a fresh COVID-19 outbreak in the state, which overshadowed positive labour data released earlier in the day. Aussie employment increased by 178K against an expectation of a 30K contraction. The unemployment rate was 7% against a forecast of 7.2%.

– Gold was down on Thursday morning in Asia as optimism about Pfizer’s successful vaccine trials countered concerns over rising coronavirus infections and bets for further economic support.

Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation
2. Sell EUR/USD at 1.1860. Stop at 1.1895 and target at 1.1780
3. Rising coronavirus cases, lockdown and interest rate differential are all against the Euro dollar
4. An Evening Star candlestick pattern with bearish Stochastic reading is pointing to a price decline.

Fundamental Comments
1. Rising coronavirus cases and lockdown in Europe are likely to weigh on the Euro dollar.
2. Interest rate differential are in favour of the US dollar.

Technical Comments
1. An Evening Star candlestick pattern is predicting a reversal in trend.
2. Stochastic has a divergence warning of a reversal in price trend.

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 to currently 103.80 this morning. A break of 104.00 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.  However both Stochastic and MACD are near to their extreme point and may not be able to support a direct decline to 103.20. We may see some correction before the final decline.

Support 103.65103.40103.15
Resistance 103.95104.30104.60

XAG/USD – Price has broken below a short term trend line support at $24.20, a trend line, which started from 4 November 2020. A break of this support is likely to send price lower to $23.30 in the next couple of days. 20EMA has turned bearish and is pointing lower with a steep slope, hinting of a strong bearish trend ahead. MACD is also bearish but Stochastic is already in the oversold zone.

Support 23.9023.5523.15
Resistance 24.2024.5524.80

GBP/USD – Our view remains the same as yesterday. Price has reached the previous high of 1.3310 and has declined to 1.3230. This is also the edge of the uptrend channel. A break of this channel is likely to send price lower to 1.3110. MACD is still bullish but Stochastic has a bearish crossover and is declining from the overbought zone. Watch the break at 1.3230 for 1.3110 in the next 24 hours.

Support 1.32301.31851.3150
Resistance 1.32701.33101.3345

XAU/USD -Price has been not able to move past an important resistance at $1898 over the past few days. As a result, we think price is likely to head lower to $1850 over the next couple of days. MACD is currently bearish and is hinting of a bearish price trend ahead. Stochastic is approaching the oversold zone. 20EMA is now pointing down with a steep slope, which is a hint of a strong bearish trend.

Support 1856.101848.401838.50
Resistance 1870.501883.351898.90

AUD/USD – Our call was wrong on this pair. We lost 40 pips on this pair yesterday. However our view remains unchanged. We still think price is heading lower to 0.7210 in the next few days if price stays below 0.7345. MACD is still bullish but Stochastic is still declining. 20EMA has turned bearish but the slope is not steep and the trend is not strong.

Support 0.72700.72400.7200
Resistance 0.73000.73400.7370

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