FX Commentary – US Dollar Strengthened On Rise In US Treasury Yields.

Market Talk
– The dollar continues to strengthen on Monday morning in Asia, continuing a rebound from last Friday as big gains in U.S. yields and hopes for more U.S. stimulus measures that had some investors tempering bearish bets saw the greenback moves further away from the multi-year lows seen recently.

– Biden’s promise of “trillions” in extra COVID-19 relief spending had pushed the yield on the benchmark 10-year U.S. debt up more than 20 basis points to 1.1187% in 2021 to date, in turn helping the dollar to a one-month high of 104.095 yen earlier in the day

– The Labour Department said nonfarm payrolls decreased by 140,000 in December, the first decline in eight months, and well below expectations of an increase of 71,000 jobs. Data showed a weak economy still reeling from the coronavirus pandemic. The unemployment rate was 6.7%.

– The Australian and New Zealand dollars each fell more than 0.5% against the dollar to one-week lows, while the euro and sterling lost 0.3% to touch two-week lows. Growing expectations that the Bank of England may soon cut rates into negative territory to support the recovery send the British pound lower.

– Gold was near to the previous Friday’s low on Monday morning in Asia, following a slump of more than 4% during the previous session, over a strengthening dollar and U.S. Treasury yields that continue to remain elevated.


Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation
2. Buy USD/CAD at 1.2745. Stop at 1.2695 and target at 1.2825
3. Rise in US Treasury yields and worries over a weak US economy is driving investors into the safe haven US dollar.
4. Price is likely to head higher to the Fibonacci 200% projection target with both momentum indicators hinting of a bullish price trend ahead.

Fundamental Comments
1. Rise in US Treasury yields is giving support to the US dollar.
2. Non-farm payroll weak data is giving rise to worries of a US economy still reeling from the coronavirus pandemic and driving investors into the safe haven US dollar.

Technical Comments
1. Price has broken above a recent high and is likely to head higher to the next Fibonacci 200% projection target.
2. Both momentum indicators are rising and are hinting of another price rally ahead.

Key Levels

Support1.27301.26951.2660
Resistance1.27651.27951.2830

Technical Overview
USD/JPY -Price reached a high of 104.21 this morning but there was a divergence warning given by MACD warning of a potential high. However, Stochastic is still rising and could carry price higher. 20EMA is also rising with a steep slope, hinting of a strong bullish price trend. We see price declining to 103.85 or 103.65 if price is unable to move above this morning’s high at 104.21.

Support 103.85103.60103.35
Resistance 104.20104.55104.95

EUR/USD – Price finally broke below a 3-week uptrend line last Friday and we could be seeing a bigger correction ahead to 1.2125. Stochastic is already in the oversold extreme but MACD remains bearish and is still moving lower. 20EMA is also pointing lower with a steep slope, hinting of a strong bearish price trend. Price will need to move above 1.2290 to regain the bullish tone, else we see price moving to 1.2125 or 1.2060 in the next few days.

Support 1.21651.21251.2095
Resistance 1.22101.22451.2280

GBP/USD – Price has been caught inside last Monday’s big range for the past few days but this morning we saw a break out of this trading range to a low of 1.3490. Stochastic is still pointing lower despite being near to the oversold zone. MACD remains bearish and 20EMA is hinting of a strong bearish price trend ahead. Price correction is likely to head lower to 1.3430 in the next couple of days ahead.

Support 1.34851.34301.3385
Resistance 1.35301.35801.3620

XAU/USD – Price reached a low of $1817.15 early this morning and Stochastic is now into the oversold zone. However MACD is still bearish and is pointing lower. 20EMA is still also pointing lower with a steep slope, hinting of a bearish price trend ahead. The decline also does not look complete. There is likely to be one more decline to $1799 or $1789 to complete this decline.

Support 1835.301826.701816.70
Resistance 1849.951859.351872.40

NZD/USD – We had a buy call on NZD/USD last Friday but our trade was stopped out on Friday. The US dollar had strengthened last Friday with US Treasury yields rising to a 10-month high. Price has broken below a 3-week uptrend line and this could be a hint of a reversal in price trend. MACD has also turned bearish. Price could be heading to the Fibonacci 62% correction point of the rally from 0.7070 to 0.7315 at 0.7120.

Support 0.71500.71200.7090
Resistance 0.71950.72300.7275

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