FX Commentary – US Dollar Stronger Ahead of Brexit’s Meeting And US Dec. 11 Deadline

Market Talk
– The dollar earned a reprieve from selling pressure on Wednesday as traders paused to weigh risks ahead, ranging from Brexit trade talks in Brussels to Congress’ wrangling over a pandemic relief package and a looming European Central Bank meeting.

– The pound whipsawed before steadying above recent lows, with Brexit talks currently deadlocked. It remains to be seen whether a dinner between British PM Boris Johnson and EC President Ursula von der Leyen in Brussels will achieve what negotiators could not.

– With only two days left until a Dec. 11 deadline to avoid a government shutdown, the latest developments increased hopes that Republicans and Democrats will reach a consensus ahead of the deadline, even as Democrats oppose McConnell’s insistence on protecting employers from lawsuits

– The Australian dollar found support, after receiving a boost from December’s Westpac Consumers Sentiment which came in at 4.1%, which was the highest in a decade, against November’s 2.5% increase, but struggled to advance very far and sat around $0.7440.

– Gold was down on Wednesday morning in Asia, after gaining to a two-week high overnight, buoyed by growing expectations of more U.S. fiscal stimulus to combat the economic impact of rising coronavirus cases.

Chart Focus AUD/JPY
Key Points
1. Buy AUD/JPY recommendation.
2. Buy AUD/JPY at 77.50. Stop at 77.20 and target at 78.15.
3. Aussie consumer sentiment and vaccine progress have boosted risk appetite.
4. Price is heading towards the Fibonacci 161.8% price projection with momentum indicators hinting of a bullish price trend.

Fundamental Comments
1. Aussie consumer sentiment at a decade high is boosting the Aussie dollar.
2. Vaccine progress has increased risk appetite and dented demand for safe haven Japanese yen.

Technical Comments
1. Price has broken above a recent high and Fibonacci 127% price projection and is expected to move to the next Fibonacci projection at 161.8%.
2. Stochastic has a bullish crossover and is rising. MACD is bullish.

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 contain trading until we see a breakout outside this range. Price tested the lower boundary and we were expecting price to move up to test the upper boundary at 104.75. However, after hitting a high of 104.35, price seems likely to head lower again. MACD has remained bearish but Stochastic is turning higher.

Support 103.95103.45103.15
Resistance 104.20104.50104.75

EUR/USD – Price’s decline was supported by the 20EMA for the past 3 days and we have seen price moved higher this morning. Stochastic has a bullish crossover near to the oversold zone and MACD has a bullish crossover. MACD has remained bullish. We are looking at another test of the high at 1.2178 in the next few days ahead as long as price stays above 1.2090.

Support 1.21201.20901.2040
Resistance 1.21501.21801.2210

GBP/USD – Price has managed to hold steady and has moved higher to 1.3390 on hopes of a Brexit deal soon. However MACD remains bearish but Stochastic has a bullish crossover and is heading higher. Price is likely to be volatile ahead of Brexit negotiation between the two leaders today. We will avoid this pair for the moment and wait for details of negotiation and follows in the trend later.

Support 1.33651.33151.3285
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 has now exceeded our target price of $1872 and MACD forming a divergence warning. Stochastic is in the overbought zone but 20EMA is bullish and pointing up with a steep slope, which is a hint of a strong bullish trend. We think price is likely to correct back to $1832 if price is capped below last night’s high at $1875.16.

Support 1852.401839.101827.60
Resistance 1865.901875.151884.55

USD/SGD – Our sell call was filled at 1.3380 when price rose to a high of 1.3386. Price has declined to 1.3340 at the point of this writing and could be on its way to our target of 1.3305. We would recommend bringing stop down to 1.3390 while keeping profit target at 1.3305. Stochastic is turning down and MACD has turned bearish, both are in line with our bearish view.

Support 1.33051.32601.3230
Resistance 1.33501.33851.3415

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