FX Commentary – US Dollar Weaker On Progress Of US Stimulus Relief Package

Market Talk
– The dollar languished near 2 1/2-year lows on Wednesday as progress toward a U.S. government spending bill and COVID-19 relief measures whetted risk appetite, sapping demand for the safe haven US dollar.

– The British pound held on to more than 1% of gains made on Tuesday following a report that an elusive Brexit trade deal may now be close, even as British Prime Minister Boris Johnson repeated that the most likely outcome of talks was no deal.

– The dollar changed hands at $1.2154 against the euro, near the 2 1/2-year low of $1.2177 touched on Monday. The Australian dollar was little changed at 75.525 U.S. cents, near the 2 1/2-year high of 75.780 it recorded Monday.

– Investors are also keeping an eye on the outcome of a two-day Federal Reserve policy meeting on Wednesday. Policymakers are expected to keep the key overnight interest rate pinned near zero and signal it will stay there for years to come, a decision that analysts say will further boost investors’ risk sentiment.

– Gold prices jumped more than $20 an ounce for their biggest one-day gain in a week, ahead of a Federal Reserve meeting on Wednesday and as lawmakers moved again to try and get Covid-19 relief through Congress after multiple failed attempts.


Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 103.70. Stop at 104.15 and target at 102.85.
3. An imminent US stimulus bill and more QE from FOMC meeting tonight are both weighing on the US dollar.
4. Price has broken below a sideways consolidation with both momentum indicators hinting of a bearish price trend ahead.

Fundamental Comments
1. An imminent US stimulus relief measures bill is sapping demand for the safe haven US dollar.
2. An expectation of more QE from FOMC tonight is also weighing on the US dollar.

Technical Comments
1. Price has broken below a big sideways movement and is likely to head lower to the next lower support level.
2. Both MACD and Stochastic are heading lower, hinting of a bearish price trend ahead.

Key Levels

Support103.40103.10102.80
Resistance103.75104.15104.60

Technical Overview
XAG/USD – Support at 23.56 has hold for the past 4 occasions when price tested the downside. The rebound has now moved past a downtrend line and price is likely to head higher to the previous price high of $24.85. A break of this resistance is likely to send price higher to $26.20. MACD remains bullish and is heading higher but Stochastic is in the overbought zone.20EMA is bullish with a steep slope, which is a hint of a strong bullish trend ahead.

Support 24.3523.9523.55
Resistance 24.8525.1525.65

EUR/USD – Price declined to a low of 1.2058 last Wednesday and had rallied from this low to a high of 1.2168 last night. 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 1.21651.21951.2225

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 1.34351.33951.3350
Resistance 1.34751.35001.3535

XAU/USD – We had a buy call yesterday but price did not reached our entry price. Instead, price rallied higher to $1858.20. Stochastic is into the overbought zone but MACD has turned bullish. 20EMA has also turned bullish and is rising with a steep slope, which is a hint of a strong bullish price trend. We may see a small correction today but on a longer term basis, price is likely to head higher to $1904 over the next couple of weeks. Only a move below $1817 would negate our bullish view.

Support 1849.301833.951818.30
Resistance 1859.501865.801874.80

EUR/JPY – Price has stayed within a range of 125.75 to 126.75 for the past 3 weeks. After testing the high earlier in this week, price is now near to the lower edge of the range. Stochastic is close to the oversold zone and could be about to turn up. MACD and 20EMA are both neutral at the moment. We think price is likely to stay within the range and we see a bounce up to the upper range again in the next few days. However, if price were to move below 125.70, we are likely to see a move to 124.80.

Support 125.75125.20124.80
Resistance 126.00126.45126.75

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