FX Commentary – US Dollar Continues With Its Weak Trend Into 2021

Market Talk

The dollar started the New Year under pressure from investors who reckon low U.S. interest rates and an eventual worldwide recovery from the coronavirus pandemic will make US dollar a laggard against other major currencies as well as gold and silver.

The euro rose 0.2% from its New Year’s Eve closing level to $1.2244, while a media report that Japan is considering a state of emergency for Tokyo due to a record number of coronavirus cases, pushed the yen below 103 against the US dollar.

Surging coronavirus cases also held back gains in the British pound, which was steady at $1.3670 after British Prime Minister Boris Johnson said on Sunday tougher lockdown restrictions were probably on the way.

The Chinese yuan, which has become a favoured vehicle for shorting the dollar as China’s economy rebounds impressively, climbed strongly to 6.4495 per dollar in offshore trade, breaching a 2-1/2 year low in the process.

Gold was up on Monday morning in Asia, with a surge in global COVID-19 cases and the prospect of more countries imposing tighter restrictions giving the yellow metal strength after US stimulus near the end of 2020 had given gold a boost.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7180. Stop at 0.7150 and profit target at 0.7240.
3. Low interest rates and US stimulus are both likely to keep the US dollar weak.
4. A strong price support coupled with a bullish MACD trend is hinting of a price rally ahead.

Fundamental Comments
1. Low US interest rates as pledged by the US Federal Reserve is likely to keep the US dollar weak.
2. More US stimulus is likely going ahead which is likely to keep the US dollar weak.

Technical Comments
1. Price is likely to be supported by the 20EMA as well as a previous high resistance turned support.
2. MACD is bullish and the fast line is turning around just above the zero line, hinting of a bullish price trend ahead.

Key Levels

Support	0.7170	0.7135	0.7100
Resistance	0.7205	0.7240	0.7265

Technical Overview
USD/JPY -Price was capped by the 20EMA this morning at 103.30 and has declined to a low of 102.93. There is a strong support at 102.86 which will need to break if price is to move lower to 102.25. However Stochastic is starting to move higher, hinting of a price movement higher instead. MACD is also showing divergence warning of a low. We think the low of 102.85 will hold and price will move higher to 103.90 in the next few days.

Support	102.85	102.50	102.25
Resistance	103.10	103.45	103.90

EUR/USD – Price dipped just below the rising trendline starting from 23 November and connecting to the low of 12 December. However price has managed to move back above the trend line, keeping the bullish price trend intact. Stochastic is about to have a bullish crossover just above the oversold zone and MACD is still bullish. We think price can hold above the trend line and move back to the high of 1.2310 in the next few days.

Support	1.2230	1.2200	1.2165
Resistance	1.2260	1.2280	1.2310

GBP/USD – Price reached a high of 1.3697 this morning but MACD is warning with a divergence, hinting of a possible price high. Stochastic is also in the overbought zone. While the US dollar remains weak, Sterling is also capped by a rising number of coronavirus cases leading to a possible lockdown. We would prefer to wait for a dip to the 20EMA support at 1.3615 to get into a long position.

Support	1.3655	1.3615	1.3575
Resistance	1.3700	1.3765	1.3795

XAU/USD – Price has broken above a down trending channel at $1906 this morning and could be on its way to $1934 in the next couple of days. In the longer term, we see price moving to $1956, which is likely to decide the longer term trend direction. MACD is rising and bullish, supporting a price rally to $1956 and Stochastic is not into the overbought zone as yet, hinting there could be more price upsides.

Support	1913.70	1899.90	1884.75
Resistance	1925.45	1935.50	1946.65

AUD/USD -Price has been rising and had reached a high of 0.7702 on New Year’s eve. There was a price correction but we are expecting price to be supported at the 20EMA line at 0.7675 and from there, we think price is likely to move higher to 0.7745 again in the next couple of days. MACD is bullish and hinting of a rising trend. Stochastic is near to the overbought zone. 20EMA is rising with a steep slope hinting of a strong uptrend.