FX Commentary – US Dollar Weak On Poor Jobless Claims Data

Market Talk

– The US dollar stayed near at a two and half year low after weekly initial jobless claims data spiked by 137,000 to a seasonally adjusted 853,000, well above expectations for 725,000 and the highest level since mid-September, underscoring the need for fresh stimulus measures to support a flagging economy.

– The pound slipped 0.8% overnight as leaders on both sides of Brexit trade talks sounded doubtful about finding a resolution.  British Prime Minister Boris Johnson said on Thursday there was “a strong possibility” UK and the EU would fail to strike a deal.

– The euro rose to $1.2158 even after the European Central Bank expanded its bond buying scheme, given the move was widely expected. The central bank also lifted growth forecasts but lowered inflation projections for 2022.

-The Australian dollar soared along with iron ore prices to hit a 2-1/2 year high around 0.7560 as the rally in Australia’s biggest export commodity iron ore, helped to bolster sentiment in the Aussie.

– Gold eased as a failure to significantly breach the $1,850 per ounce resistance level prompted technical selling, with persistent overall vaccine-driven optimism also prompting investors to look past weak U.S. jobs data.


Chart Focus USD/CNH
Key Points
1. Sell USD/CNH recommendation.
2. Sell USD/CNH at 6.5280. Stop at 6.5390 and target at 6.4980.
3. Poor jobless claims data is weighing on the US dollar while demand for iron ore is a sign of the Chinese economy’s strength.
4. Price is facing a resistance and both MACD and Stochastic are hinting of a bearish price trend ahead.

Fundamental Comments
1. High jobless claims underscoring the need for fresh stimulus measures to support a flagging US economy is weighing on the US dollar.
2. Demand for iron ore is a sign of the Chinese economy’s strength as 70% of global demand is accounted for by China

Technical Comments
1. Price is capped by the 20EMA line which is showing a bearish price trend.
2. MACD has turned bearish and Stochastic has a bearish crossover and is turning down, hinting of a bearish price trend.

Key Levels

Support6.51856.50706.4975
Resistance6.52806.53406.5470

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 a breakout outside this range. Price tested the upper boundary earlier but was capped at 104.57 and has moved lower to 103.90 this morning. MACD remains bullish but Stochastic has a bearish crossover and is moving lower. 20EMA is also bearish.

Support 103.90103.45103.15
Resistance 104.20104.50104.75

EUR/USD – Price declined to a low of 1.2058 on Wednesday and had rallied from last night to a high of 1.2159 this morning. MACD has turned bullish and Stochastic is rising after a bullish crossover. 20EMA has also turned up but price will need to move above 1.2178 to continue its rally. Failure of break above would result in a possible Double Tops chart pattern and hint of a price high.

Support 1.21401.21101.2075
Resistance 1.21801.22151.2250

GBP/USD – Price dropped to a low of 1.3245 after news that the UK and EC was still far apart from a Brexit trade deal. MACD remains bearish but Stochastic has a bullish crossover and is likely to move higher. 20EMA has also turned bearish and we are expecting price to be capped at 20EMA resistance point at 1.3345. With more news on a Brexit trade deal this weekend, we would prefer to stay aside for today.

Support 1.32851.32451.3195
Resistance 1.33451.33801.3420

XAU/USD – Our sell call was filled at $1842.70 when price reached a overnight high of $1849.75. Price declined to a low of $1830.05 before recovering to $1840. We would recommend bring stop lower to cost at $1842.70 while keeping profit target at $1820.00. MACD and 20EMA are both neutral but Stochastic is hinting of a price rally. We remain bearish for a final decline before the long term rally resumes.

Support 1832.801822.101812.60
Resistance 1842.201855.401866.15

AUD/JPY – We had a buy recommendation on this pair on Wednesday and yesterday we had recommended bringing stop higher to 77.80 while keeping profit target at 78.15. Last night, our profit order was filled and we are out with a 65 pips profit from this trade. Price had continued to advance to a high of 78.76 this morning. MACD and 20EMA remain bullish but Stochastic is in the overbought zone.

Support 78.4578.1077.70
Resistance 78.8079.0079.35

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