FX Commentary – US Dollar Is Steady Ahead Of Senate Runoffs

Market Talk

– The U.S. dollar steadied in Asia on Wednesday as traders looked to the outcome of a Senate election in Georgia. The outcome of the runoff vote to elect two senators in Georgia will determine control of the U.S. Senate, although a final result is not expected before Wednesday morning in the United States – perhaps longer if the contest is close.

– The euro rose past major resistance at $1.2310 to as high as $1.2328 in early Asia trade, its strongest since April 2018, before slipping back to $1.2281 as traders watched early results from Georgia flow in. The British pound was range bound with lockdown measures offsetting optimism of a Brexit deal.

– The Australian and New Zealand dollars hung on to hefty gains to trade near multi-year highs, with the Aussie a  touch softer at $0.7745 and the kiwi touching a new 32-month top before easing back to $0.7240.

– The yuan surged to its highest since June 2018 on Tuesday after the People’s Bank of China lifted the midpoint of its trading band by 1%, the biggest one-day lift since China abandoned a peg to the dollar in 2005. China’s Caixin PMI came in below expectation but numbers were still in expansion mode.

– Gold rose, buoyed by a weaker dollar and growing concerns about COVID-19 as investors awaited the outcome of U.S. Senate runoff elections in Georgia that could impact prospects for more fiscal stimulus.

Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 102.80. Stop at 102.50 and profit target at 103.50.
3. Uncertainty from Georgia election and rising global coronavirus cases are keeping the US dollar strong.
4. Price may have ended its decline with momentum indicators hinting with divergence of a price bottom.

Fundamental Comments
1. Uncertainty from Georgia election is keeping the safe haven US dollar strong.
2. Rising global coronavirus cases despite vaccine is keep the safe haven US dollar strong

Technical Comments
1. Price may have ended its decline close to the Fibonacci 127% price target.
2. Stochastic and MACD both are warning with divergence, hinting of a possible price bottom

Key Levels


Technical Overview
USD/CAD – Our sell call was filled at 1.2770 yesterday when price reached a high of 1.2775. Our profit order was also filled when price dropped to a low of 1.2656. We are out of this trade with a 100 pips profit. MACD is warning with a divergence, hinting of a possible short term low. However, 20EMA is pointing lower with a steep slope, hinting of a strong bearish trend. For today, we are likely to see a short term corrective rally to test the 20EMA resistance point and to unwind the divergence warning at 1.2730.

Support 1.26551.26251.2595
Resistance 1.26951.27301.2770

EUR/USD – Price rose to a 32-month high this morning but MACD failed to match price’s strength. MACD has a bearish divergence warning of a potential price high. Similarly Stochastic has a divergence warning and is close to the overbought zone. However 20EMA is pointing up with a steep slope, which is a sign of a strong bullish price trend. We remain cautious. We think it the topside is limited and a correction is likely.  Wait for the correction to get into a long position.

Support 1.22801.22401.2000
Resistance 1.23251.23551.2385

GBP/USD – Price reached a high of 1.3703 on Monday morning but with divergence warning from MACD and had declined to a low of 1.3541 on Monday night. A rally was capped at the Fibonacci 62% correction point of the decline from Monday’s high to Monday’s low. We believe the next move is lower to the Fibonacci 127% price projection target of 1.3495. MACD has been warning with divergence but Stochastic is near to the oversold zone. 20EMA is neutral at the moment.

Support 1.35751.35401.3500
Resistance 1.36101.36501.3705

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 morning, Gold made a high at $1955.28. MACD and Stochastic both had bearish divergence warning when price made the high this morning. This could be a warning of a potential high and a possible correction ahead. Price has come close to our target and we may see a pullback to the 20EMA at $1929 in the next 24-48 hours. As long as price stays above $1900, our longer term bullish view is intact.

Support 1941.351929.101918.40
Resistance 1955.251965.351970.45

NZD/USD -Our first call of the year reached its profit target at 0.7240. We gained 60 pips on this trade. MACD had warned with a divergence when price reached a high of 0.7261. However, Stochastic has not reached the overbought zone as yet. There may be some upsides but we think the upside is limited. Price is likely to do a correction lower today to test the support at 0.7170. Ability to hold above this support is likely to determine the next short term direction of this pair.

Support 0.72100.71700.7135
Resistance 0.72400.72650.7295

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