FX Commentary – Strong US Data Lifted US Dollar

Market Talk
– The dollar gave up some overnight gains on Tuesday morning, after bouncing off an almost three-month low against a basket of currencies on Monday as data showed that U.S. business activity expanded at the fastest rate in more than five years in November and COVID-19 vaccine progress shored up global sentiment.

-News that U.S. President-elect Joe Biden was given the go-ahead to begin his White House transition and Biden’s plan to nominate former Federal Reserve Chair, Janet Yellen, to become the next Treasury Secretary boosted sentiment.

– News that Trump has finally allowed the official presidential transition to take place, means the new administration will have time to prepare and ensure an orderly transition, avoiding a lengthy, and possibly disruptive, period where it comes to grips with the functions of governing

– The pound was staying close to a near 12-week high against the dollar thanks to investor bets that the U.K. and the EU will finally seal a Brexit trade deal soon. Negotiations between the two parties continue this week, racing to beat the end-of-year deadline for a deal.

– Gold fell to its lowest level in four month as better-than-expected U.S. business data showed activity rises at the quickest rate in five years and promising COVID-19 vaccine trials boosted hopes for a swifter economic recovery.

Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation
2. Buy USD/JPY at 104.20. Stop at 103.90 and target at 104.90
3. Strong US economic data and COVID-19 vaccine has boosted hopes for a swifter economic recovery, dampening demand for safe haven yen
4. Price support is likely to halt the decline and provoke a rally with momentum indicators hinting of a bullish price trend ahead.

Fundamental Comments
1. Strong US data has lessened worries about a fragile US economy
2. COVID-19 vaccine has countered the rising coronavirus cases and boosted hopes for a swifter economic recovery

Technical Comments
1. Price pullback is likely to be supported by the rising 20EMA as well as a previous resistance turned support.
2. Momentum indicators are both hinting of a bullish price trend ahead.

Key Levels


Technical Overview

AUD/JPY – Yesterday, our buy call was filled at 75.85 when price dropped to a low of 75.80. Price has risen to a high of 76.53 this morning. Stochastic is in the overbought zone but MACD is still bullish and rising. 20EMA is also rising and bullish. The uptrend should continue for today. We think price should be able to reach our profit target at 76.65. We would suggest lifting stop loss order higher to 75.95.

Support 76.3076.0075.70
Resistance 76.6576.9077.10

EUR/USD – Our long position from last Thursday was stopped out when price moved to a high of 1.1905. Price suffered a sharp decline after the release of a good US data to a low of 1.1799. Price has since recovered to 1.1855. MACD is still bearish at the moment and Stochastic is still declining. 20EMA is also bearish. Technical indicators are bearish but the sharp bounce and ability to stay above 1.1795 is warning that the bearish trend will need to go below 1.1795 to regain its bearish trend.

Support 1.18301.17951.1745
Resistance 1.18651.18951.1920

GBP/USD – After breaking above 1.3310, price reached a high of 1.3397 before US data sent it lower to 1.3263. Stochastic has a bearish crossover in the overbought zone and is moving lower. MACD is still bullish. 20EMA is also bullish and hinting of a strong bullish price trend. We think the decline yesterday could be a correction and price may test the high of 1.3397 again in the next few days.

Support 1.33101.32651.3230
Resistance 1.33501.33951.3425

XAU/USD -Yesterday, price broke below $1850 and declined to a low of $1821. MACD is bearish but is not strongly bearish. Stochastic has reached the oversold zone but 20EMA is hinting of a strong bearish price trend ahead. If $1816 can halt the decline, we can see a strong recovery but if price breaks below this support, it is likely to move lower to $1780. A price move above $1853 will negate our bearish view.

Support 1821.101811.901802.10
Resistance 1835.251843.151852.50

USD/CAD – We had a sell call on this pair which was filled at 1.3110 on Friday. Price went to a low of 1.3044 before a good US data sent price higher to 1.3112. Price has declined to 1.3045 again at the point of writing. We would suggest lowering stop to cost at 1.3110 while keeping profit order at 1.3000. MACD is bearish but Stochastic is already in the oversold zone. 20EMA is bearish.

Support 1.30351.30001.2980
Resistance 1.30601.30901.3125

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