FX Commentary – Early Rollout Of Vaccine Offset By Rising Coronavirus Cases

Market Talk
– The dollar was down on Monday morning in Asia, with optimism over a potential early rollout of COVID-19 vaccines in the UK and US overshadowed by global economic restrictions to curb the spread of the virus.

– The FDA is looking to grant approval in mid-December for distribution of BNT162b2, the vaccine candidate produced by Pfizer Inc. However millions of Americans are expected to flout warnings to stay home for the upcoming Thanksgiving holiday, raising fears of a second wave cases in the country.

– Across the Atlantic, Germany is dealing with its own second wave which could see its current lockdown extended until mid-December. However the euro edged up against the dollar, but continues to struggle to break above the $1.1895 resistance level.

– A holiday in Japan kept most majors contained, though the New Zealand dollar stormed to a two-year top of $0.6962 as super-strong retail sales data quashed the risk of further policy easing and left yields attractively high

– Gold was down on Monday morning in Asia. Price had picked up on Friday after US Treasury Secretary Mnuchin proposed that COVID-19 stimulus discussion be continued but stimulus measures soon petered out as there was little certainty on offer.

Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation
2. Buy AUD/JPY at 75.85. Stop at 75.55 and target at 76.65
3. COVID-19 vaccine and Australia’s improvement in COVID-19 situation is likely to benefit the Aussie dollar
4. Price is supported by the 20EMA and Stochastic is hinting of a bullish price trend ahead.

Fundamental Comments
1. COVID-19 vaccine has increased risk appetite which should favour the NZ dollar.
2. Australia’s COVID-19 situation has improved and lockdown has been eased, which is likely to benefit its economy and currency.

Technical Comments
1. Price is supported by the 20EMA after finishing a 3-wave correction
2. Stochastic is rising, hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price is little changed from last Friday as Tokyo is on holiday for today. Our view remains the same as last week. As long as price is below 104.20, we are looking for another decline to 103.20. Stochastic is close to the oversold zone but MACD is still bearish and below the zero line at the moment. 20EMA is pointing down and hinting of a strong bearish trend.

Support 103.65103.30103.00
Resistance 103.95104.25104.60

EUR/USD – We had a sell call on this pair last Thursday which was filled at 1.1860. Price is close to our stop at 1.1895 but the high so far has been capped at 1.1891. We would recommend keeping stop and profit order unchanged at 1.1895 and 1.1780 respectively. MACD is flat and Stochastic is also not indicative of a direction but a move above 1.1895 is likely to see a test of the previous high at 1.1920.

Support 1.18601.18301.1795
Resistance 1.18951.19201.1950

GBP/USD – A break of 1.3310 is likely to send price higher to 13380 in the next 48 hours. However a decline below 1.3280 is likely to indicate a top in place and a decline ahead. Stochastic has turned bullish and is rising. MACD is still bullish. Both momentum indicators are hinting of a bullish price trend ahead. 20EMA is also hinting of a strong bullish price trend ahead.

Support 1.33101.32651.3230
Resistance 1.33501.33801.3415

XAU/USD -Price has been caught in a range of $1850 to $1898 for the past 2 week. Stochastic is rising but has not reached the overbought zone as yet. MACD is mildly bearish and 20EMA is also not indicating a trend. We are expecting price to stay with the above-mentioned range. After testing the low, we are expecting price to test the upper limit of the range at $1898 over the next few days.

Support 1868.601860.151850.10
Resistance 1879.651885.351898.90

USD/CAD – We had a sell call on this pair which was filled on Friday. Price is little changed from last Friday and our view remains unchanged. We would suggest keeping stop and profit order unchanged at 1.3145 and 1.3000 respectively. MACD is flat at the moment, hinting of a sideways direction. 20EMA is also flat and not indicating a trend. Stochastic is still rising at the moment but looks weak.

Support 1.30451.30001.2980
Resistance 1.30951.31201.3150

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