FX Commentary – US Dollar Weaker On Expectation Of A Stimulus Relief Package

Market Talk
– The dollar was down on Monday morning in Asia, starting the week on a down note as disappointing U.S. jobs data raised expectations of fresh economic stimulus measures, and pound investors monitored Brexit trade talks between the U.K. and the EU.

– In November, jobs created were much lower and was also the smallest gain recorded since May. The unemployment rate fell to 6.7%, below the forecast 6.8% and October’s 6.9% rate. The data suggested that job recovery is losing speed as the U.S. continues to battle a third wave of COVID-19 cases.

– Investors are hopeful that the disappointing data will be a catalyst for Congress to pass the latest round of stimulus measures to aid the economic recovery, with a bipartisan group of lawmakers working on perfecting their $908 billion bill, which they hope will be passed within the week. Congress has until Dec. 11 to pass the measures to avoid a government shutdown.

– The pound retreated from the two-and-a-half year high of $1.3540 seen on Friday, as all eyes are on the talks between the U.K. and the EU as the end-of-year deadline to reach a deal draws closer.

– Gold fell as investors booked profits from sharp gains in the previous sessions but with disappointing US jobs data and expectation of a US stimulus in the near future, gold is expected to regain its upward momentum.

Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation
2. Buy GBP/USD at 1.3390. Stop at 1.3355 and profit target at 1.3500
3. Optimism of a Brexit deal and expectation of a stimulus relief package in the US is weighing on the US dollar.
4. Price is supported by a strong support zone with MACD hinting of a bullish price trend ahead.

Fundamental Comments
1. Optimism of a Brexit trade deal is giving a boost to the British pound.
2. Expectation of a stimulus relief package is weighing on the US dollar.

Technical Comments
1. Price is likely to be supported by a 20EMA line as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price has been trading within a range of 103.85 to 104.75 since 23 November and we are expecting this range to continue. Price tested the lower boundary last Thursday and we are expecting price to move up to test the upper boundary at 104.75 in the next few days. Stochastic has a bullish crossover and MACD has remained bullish. First resistance lies at 104.25 and a break will lead to a test of 104.75.

Support 103.95103.65103.90
Resistance 104.25104.75105.10

EUR/USD – Price had reached a high of 1.2178 on Friday and has fallen to a low of 1.2104. This is where the 20EMA support lies as well. MACD remains bullish with both its lines above the zero line. Although Stochastic is declining from the overbought zone, we think this is likely a corrective decline and another attempt to test the high of 1.2178 is likely in the next couple of day ahead.

Support 1.21051.20701.2040
Resistance 1.21401.21751.2210

EUR/JPY – We had a buy call for this pair on Friday but it was not filled as price only declined to a low of 126.10. Price had rallied on Friday night to a high of 126.67. Price is currently at 126.30 and we may see another test of the high again as MACD remains bullish and is rising. 20EMA is providing support at 126.10 and is bullish. However, a decline below 126.00 is likely to confirm the top at 126.67 and a reversal in trend.

Support 126.00125.65125.10
Resistance 126.40126.70127.05

XAU/USD – Price has broken above a V shaped chart pattern last Wednesday and we have been anticipating a test higher to $1872 in the next few days. MACD remains bullish and rising, hinting of a bullish trend. Stochastic is in the overbought zone and is moving lower after a bearish crossover.  20EMA is supporting price at $1828.80. If price is supported at this point, we are looking for a test of $1852 within the next couple of days and over the longer period, a test to $1870.

Support 1837.301828.851817.50
Resistance 1848.051860.601873.70

EUR/AUD – We had a buy recommendation at 1.6325 on this pair which was filled on Thursday. On Friday, we had recommended bringing stop higher to 1.6295 while keeping profit target at 1.6415. Price rallied to a high of 1.6408 which was just below our profit order before declining lower to 1.6289, triggering our stop order. We lost 40 pips on this trade. MACD remains bullish but we are not sure if price has really reached a top and a reversal has formed.

Support 1.62951.62501.6200
Resistance 1.63401.63701.6420

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