FX Commentary – US Dollar Rose On Souring Risk Sentiment

Market Talk
– The dollar rose as broad risk sentiment soured again, with investors disheartened by weakening U.S. economic data and the absence of any traction on another stimulus. The rising number of COVID-19 cases globally has also provided some support to the dollar.

– Promising data from COVID-19 vaccine developers have driven investors towards riskier currencies and higher-yielding assets with expectations growing that the Fed will step into boost the economy ahead of the vaccines.

– The risk-sensitive Australian and New Zealand dollars clawed back some of Monday’s losses, each rising roughly 0.2% early in the Asia session, although both remained just below milestone peaks hit a day ago.

– Hopes that the U.K. and the European Union (EU) will reach a Brexit deal before the end of the month boosted the pound. Both sides warned the other that time was of the essence and talks between EU chief negotiator Michel Barnier and U.K. chief negotiator David Frost continue.

Goldslipped as optimism over a swift vaccine-fuelled economic recovery dented allure for safe havens and rising number of COVID-19 cases globally has also not provided much support to the yellow metal.

Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation
2. Sell USD/CHF at 0.9090. Stop at 0.9125 and profit target at 0.9020
3. Poor US PMI data and absence of any traction on another US stimulus relief package are both weighing on the US dollar
4. Price is capped by a former strong resistance point with MACD hinting of a bearish price trend.

Fundamental Comments
1. Investors are disheartened by weakening U.S. PMI data and the absence of any traction on another stimulus.
2. Optimism over COVID-19 vaccines has driven investors towards riskier currencies and out of the US dollar.

Technical Comments
1. Price is capped by a former strong resistance point inside a downtrend channel.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels


Technical Overview

AUD/USD – Our sell call was not filled at 0.7390 as price only reached a high of 0.7385. Price has declined to 0.7340 and has broken out of the Rising Wedge chart pattern. Our view remains unchanged and we are looking for a price decline to 0.7320 and later to 0.7230. Stochastic is still declining but MACD remains bullish at the moment. 20EMA is also above price and bearish.

Support 0.73350.73000.7265
Resistance 0.73650.73900.7415

EUR/USD – Price broke above 1.20 to reach a high of 1.2003 and declined to 1.1923. Price may have reached a high and declined but MACD is still indicating a bullish trend and there were no divergence warnings. Stochastic is still declining but 20EMA managed to support price. Indicators are hinting that the bullish trend may not be over as yet. If price stays above 1.1923, we may see another test of the 1.2003 high.

Support 1.19251.18851.1840
Resistance 1.19651.20051.2065

GBP/USD – After reaching a high of 1.3397 last Thursday, price has been in a consolidation. Price is confined by 1.3397 and the low on Friday at 1.3280. We will need to see a break of these boundaries to get a clear direction of the trend. MACD remains bullish and Stochastic is rising after a bullish crossover. Both momentum indicators are hinting there is likely a test of 1.3397 to come in the next few days.

Support 1.33451.33101.3275
Resistance 1.33801.34001.3475

XAU/USD -Price had dropped to a low of $1764.40 which is close to the Fibonacci 50% correction point of the rally from $1450 to $2075. MACD has started to warn with divergences. Stochastic is also rising after a bullish crossover. 20EMA is bearish and has capped price rally recently.  If price can hold above $1760.40, we may see a rally to test the previous resistance point at $1818.60.

Support 1775.301764.401747.40
Resistance 1789.851799.801818.20

USD/CAD -We had a sell call on this pair last Friday and price reached to our profit target last night. We are out of this position with a 90 pips profit. Price has rebounded higher to 1.2980 after hitting a low of 1.2922. However, price will need to move above 1.3030 to negate the bearish view. MACD is warning with a divergence and Stochastic is climbing up from the oversold zone.

Support 1.29651.29201.2885
Resistance 1.29951.30251.3070

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