FX Commentary – US Dollar Weak Amid Progress In Stimulus Talk.

Market Talk

  • The US dollar traded near two and a half years lows against major peers on Tuesday as demand for the safe haven US dollar sagged amid progress toward agreeing U.S. fiscal stimulus and optimism for a Brexit deal.
  • A $908 billion bipartisan COVID-19 relief plan will be split into two packages, a person briefed on the matter said, raising hopes that at least a large part of the plan that already has bipartisan support will be approved to help the economy.
  • Sterling held its 1.2% gains as EU Brexit negotiator Michel Barnier said that a trade pact with Britain was still possible, sowing hope that a deal can be reached with just days to avert a turbulent exit for the UK from the trade bloc at the end of the month.
  • The Euro slipped to $1.2150, trading near a 2 1/2-year high of $1.2177 touched on Monday as COVID-19 vaccine roll-outs in the U.S. and UK was tempered by spikes in infection cases and death rates as well as imminent lockdowns.
  • Gold fell back under a bearish cloud on Monday as concerns about increasing COVID-19 deaths, infections and lockdowns overshadowed optimism over Covid-19 vaccine rollout. Expectations of an imminent US stimulus relief package help to counter its decline.

Chart Focus Gold
Key Points

  1. Buy Gold recommendation
  2. Buy Gold at $1826.80. Stop at 1819.00 and target at 1848.00
  3. An imminent stimulus package and more COVID-19 restrictions in the US are both likely to favour Gold.
  4. Price has found support and both Stochastic and MACD are warning of a possible price low.

Fundamental Comments

  1. The US dollar is likely to weaken on an imminent US $904 billion stimulus relief package.
  2. More US states are imposing restrictions which is likely to weigh on the US dollar and favour Gold.

Technical Comments

  1. Price has reached a support level and is supported by the Fibonacci 50% correction point of the rally from $1765 to $1875.
  2. Stochastic and MACD are both warning with divergence of a possible price low.

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 a breakout occurs outside this range. Price tested the lower boundary for a second time last night but failed to break below 103.70. MACD and Stochastic have both turned up and we are now expecting price to test the upper end of the range over the next few days.

Support 103.75103.40103.15
Resistance 104.15104.50104.75

EUR/USD – Price declined to a low of 1.2058 on Wednesday and had rallied from this low to a high of 1.2162 this morning. We are looking at a continuation of this rally to 1.2190 or to 1.2225 in the next couple of days. Both MACD and Stochastic are starting to turn higher, hinting of a price rally ahead. 20EMA has also turned up, hinting of a bullish price trend ahead. A move below 1.2050 would abort our bullish view.

Support 1.21301.21001.2060
Resistance 1.21651.21901.2215

GBP/USD – News that both UK and EU will continue to work this week for a Brexit trade deal sent Sterling higher to 1.3336 this morning. Indicators remain mixed with MACD bearish but Stochastic is still rising. More important factor for Sterling movement is likely to be news on Brexit negotiation and agreement. Watch the news for clues to the next directional move.

Support 1.33051.32551.3220
Resistance 1.33501.33951.3455

AUU/USD – We had a buy call on this pair yesterday. However price did not reached our entry level but instead moved to a new high at 0.7573. MACD has given a bearish divergence warning of a possible price high and Stochastic had a bearish crossover and is moving lower from the overbought zone. We think price may have reached a temporary high and a corrective decline is likely in the next few days.

Support 0.75200.74850.7440
Resistance 0.75500.75950.7625

USD/CNH – Price reached a low of 6.5165 overnight and has bounced up strongly to 6.5435 this morning. The low is also just above the Fibonacci 62% which is a hint that price could have finished a corrective decline. Stochastic and MACD are both rising. 20EMA is pointing higher with a steep slope, which is a hint of a bullish price trend. We think price can go higher to 6.5590 and later 6.5760 over the next few days.

Support 6.53406.52206.5070
Resistance 6.54906.55906.5760

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