FX Commentary – US Dollar Managed To Recover, But Can It LAST?

Market Talk
– The dollar found support overnight as investors turned to safe-haven assets as the number of COVID-19 cases and uncertainty about a U.S. Senate runoff election in Georgia, which could impact US President-elect Joe Biden economic policy mount.

– Some investors predicted that the greenback would continue to weaken amid expectations that risk sentiment will continue to improve while low US interest rates will also weakened the greenback.

– The safe-haven Japanese yen was little changed at 103.00 per dollar. It advanced to 102.715 on Monday, the strongest level since March, as Japan’s prime minister said the government is considering a state of emergency for Tokyo amid a surge in coronavirus cases.

– The pound came under pressure and declined to a low of 1.3541 as U.K. Prime Minister Boris Johnson on Monday ordered a new, tougher national lockdown to contain a surge of COVID-10 cases in the country.

– Gold got off to a good start for 2021 as President-elect Joe Biden’s Democrat party appeared in close contention for control of the U.S. Senate that would allow his administration to issue unrestrained economic stimulus that could send a flood of investment dollars toward the yellow metal.

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2770. Stop at 1.2815 and profit target at 1.2670.
3. An increase in crude oil price, low US interest rates and expectations of more US stimulus are keeping the US dollar weak.
4. Price is capped by a strong resistance point while MACD is hinting of a bearish price trend ahead.

Fundamental Comments
1. Increase in crude oil price is keeping the Canadian dollar strong.
2. Low US interest rates and expectations of more US stimulus package are keeping the US dollar weak.

Technical Comments
1. Price is capped by the Fibonacci 50% correction point as well as the 20EMA.
2. MACD remains bearish and the fast line is about to turn down, hinting of a bearish price trend ahead

Key Levels


Technical Overview
USD/JPY -Price had broken below 102.85 only to bounce back again. However the bounce was again capped by the 20EMA at 103.15. Our view remains the same as yesterday. We see a price movement to 102.25. MACD remains bearish but the bearish tone is not strong. Stochastic is in the middle of its range. Momentum indicators are not supporting our bearish call at the moment. Be cautious of a move to 103.90 if price is supported above 102.70.

Support 102.70102.30102.00
Resistance 103.10103.45103.90

EUR/USD – Yesterday price had dipped below a trend line that dated back to 23 November but had bounced back above that trend line, keeping the uptrend intact. We think price is likely to test the high of 1.2310 again over the next few days. However MACD and Stochastic are both weak and warning of a bearish price trend. If price were to fall below the 1.2230, we are likely to see a price correction to 1.2160

Support 1.22401.22001.2165
Resistance 1.22801.23101.2355

GBP/USD – Price reached a high of 1.3703 on Monday morning but with divergence warning from MACD. Price has since declined to a low of 1.3541. The decline may not be over as yet as MACD on the hourly chart is bearish and is warning of a decline. Price is also capped by the 20EMA on the hourly chart. We see another decline to 1.3500 in the next 24 hours. Above 1.3630 would negate our short term bearish view.

Support 1.35751.35401.3500
Resistance 1.36051.36501.3705

XAU/USD – Price has broken above a down trending channel at $1906 on Monday’s morning and could be on its way to $1956 in the next couple of days. This resistance which is also the Fibonacci 62% correction point of the decline is likely to decide the longer term trend direction. A move above this resistance is likely to open the way for $2075 while failure is likely to send price back to $1758.

Support 1933.301921.201906.70
Resistance 1944.701956.201970.45

NZD/USD – We had a buy call on this pair which was filled when price fell to a low of 0.7152 overnight. Price has climbed back higher above 0.7200. Our view remains unchanged. Keep stop at 0.7150 and profit order at 0.7240. MACD remains bullish with the fast line turning up from below the zero line. Stochastic has a bullish crossover and is moving higher. Both momentum indicators are hinting of a bullish price trend ahead.

Support 0.71700.71350.7100
Resistance 0.72100.72400.7265

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