FX Commentary – US Dollar Strengthened on Risk-Adverse Mood

Market Talk
– The dollar steadied against a basket of major currencies in choppy trading on Tuesday after increasing COVID-19 cases and restrictions gave rise to a broadly risk-averse mood lifting the US dollar in Monday’s night trading.

– Concerns at surging coronavirus cases in the United States provided a bid for dollars which tempered optimism about vaccinations and possible new COVID-19 U.S. stimulus deal to fight the pandemic.

– White House economic adviser Larry Kudlow on Monday said talks on another round of stimulus funding to deal with the deadly coronavirus pandemic are moving in the right direction, and President Donald Trump’s administration and Congress are getting closer to agreement.

– Sterling clung to hopes on Tuesday of a meeting between British PM Boris Johnston and EU President Ursula von der Leyen salvaging a Brexit trade deal, after an overnight a joint statement from both leaders that sealing a new trade deal was impossible now “due to remaining differences on critical issues”.

– Gold gained on Tuesday boosted by the increasing likelihood that the U.S. government will reach a budget deal and another round of stimulus package to shore up a flagging economic rebound from a surging COVID-19 pandemic.

Chart Focus USD/SGD
Key Points
1. Sell USD/SGD recommendation
2. Sell USD/SGD at 1.3380. Stop at 1.3420 and profit target at 1.3305
3. Possible agreement on a stimulus package and vaccines are both weighing on the US dollar as a safe harbour.
4. Price is facing a strong resistance zone with momentum indicators indicating a bearish trend.

Fundamental Comments
1. President Donald Trump’s administration and Congress are getting closer to agreement on a stimulus package  to shore up a flagging economy
2. COVID-19 vaccines are likely to temper rising coronavirus cases giving hope of impending end to the pandemic.

Technical Comments
1. Price is facing a double resistance provided by a downtrend line and a price resistance
2. MACD remains bearish while Stochastic has a bearish crossover. Both indicators are hinting of a price decline.

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. However, after hitting a high of 104.35, price seems likely to head lower again. Stochastic has a bearish crossover and MACD has remained bearish. If price is unable to move above the 20EMA resistance at 104.10, we are likely to see a test of 103.75 in the next couple of days.

Support 103.70103.45103.15
Resistance 104.10104.50104.75

EUR/USD – Price’s decline was supported by the 20EMA for the past 2 days and if price were to move below this support, price is likely to head lower to 1.2035. However, if price continues to be supported by the 20EMA, we are likely to test the high of 1.2178 again. MACD and Stochastic are suggesting we are likely to see a test of the high.

Support 1.21051.20701.2040
Resistance 1.21401.21751.2210

GBP/USD – We had a buy call on this pair which was stopped out when price fell on news that a Brexit deal was not impossible. We lost 35 pips on this trade. Stochastic has a bullish crossover but MACD remains bearish. 20EMA is also pointing lower, hinting of a bearish trend. Price is likely to be volatile ahead of Brexit negotiation. We will avoid this pair for the moment.

Support 1.33651.33151.3265
Resistance 1.34051.34651.3500

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 past few days. Price is approaching the target price and MACD may be forming a divergence warning. Stochastic is approaching the overbought zone. 20EMA is bullish and pointing up with a steep slope, which is a hint of a strong bullish trend.

Support 1861.801852.401839.10
Resistance 1873.451884.551894.15

NZD/USD – Price reached a high of 0.7103 on 3 December and has declined to 0.7028 currently. Support lies at 0.7000 and if price is supported at this level, we are likely to see another attempt at the previous high again. Stochastic is rising and hinting of a rally but MACD is still bearish. A price break below 0.7000 is likely to bring price down to 0.6945. Watch the support at 0.7000 for clues.

Support 0.70250.70000.6945
Resistance 0.70600.71000.7150

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