FX Commentary – Powell’s Dovish Tone Capped US Dollar Rally.

Market Talk
– The dollar drifted lower in choppy trading on Thursday, after Federal Reserve Chair Jerome Powell struck a dovish tone, saying the U.S. central bank is not raising interest rates anytime soon and rejecting suggestions the Fed might start reducing its bond purchases in the near term.

– Powell said the economy remains far from the Fed’s goals and he sees no reason to alter its highly accommodative stance “until the job is well and truly done.”

– The Fed’s asset-buying program to support financial markets in a pandemic has weighed on the US dollar, as it increased the supply of the currency and diminished its value. The US dollar had weakened to multi-year lows as a result of the Fed’s action.

– Treasury yields edged higher in anticipation of the new stimulus package but a jump in U.S. jobless claims put a damper on immediate expectations of economic growth amid more government debt as well as further climb in Treasury yields.

– Gold prices rose after comments by U.S. Federal Reserve Chair Jerome Powell cemented hopes around a lower interest rate environment, while prospects of more U.S. stimulus further lifted bullion’s appeal as an inflation hedge.

Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation
2. Sell USD/JPY at 103.85. Stop at 104.20 and profit target at 103.25
3. Power dovish tone and higher US jobless claims are both keeping the US dollar weak.
4. Price is in a correction and momentum indicators are both hinting of a bearish price trend ahead.

Fundamental Comments
1. Powell’s dovish tone on interest rate and bond purchase is keeping the US dollar weak.
2. A higher US jobless claims is also keeping the US dollar weak.

Technical Comments
1. Price could be in a correction and 20EMA is keeping the rally in check.
2. MACD is bearish and Stochastic is turning down after a bearish crossover.

Key Levels


Technical Overview

USD/CNH – We had a buy call on this pair yesterday, which was filled at 6.4610 when price declined to a day low of 6.4575. Our view remains unchanged. We would recommend keeping stop at 6.4510 and profit target at 6.5090. MACD is flat near the zero line at the moment and 20EMA is also flat. Both indicators are hinting of a sideways movement. Stochastic is hinting of a small price decline.

Support 6.45756.44206.4325
Resistance 6.47706.49006.5090

EUR/USD – Price broke below 1.2130 overnight but only reached a low of 1.2110. Both Stochastic and MACD had warned with divergence, hinting of a possible price low in the making. Price is close to the 20EMA at 1.2165. A break above this resistance is likely to send price higher to 1.2220 again in the next couple of days. A move below 1.2110 would negate our bullish view.

Support 1.21351.20951.2055
Resistance 1.21851.22201.2250

GBP/USD -Yesterday, price managed to hold above 1.3620 and we saw a price rally above 1.3700. However the rally only managed to send price higher to 1.3710 and both Stochastic and MACD starting to warn with divergence, hinting of a possible price high in the process of forming. If price is unable to move above 1.3710, we see price declining to 1.3620 again to test the support.

Support 1.36601.36201.3580
Resistance 1.37101.37601.3795

XAU/USD – Price had declined to a low of $1820 yesterday and it could be sign of a possible Double Bottoms if price is able to move above $1864. MACD is starting to move higher and could turn bullish soon. Stochastic has a bullish crossover and is moving higher as well. Both momentum indicators are hinting of a bullish price trend ahead. 20EMA is currently capping price at $1864.

Support 1846.051832.951820.15
Resistance 1863.701877.401885.80

XAG/USD – We had a short position on this pair from Wednesday and yesterday, we had recommended bringing stop lower to 25.75. Unfortunately price hit our stop and we are out of this position with a loss of $0.15.  MACD is starting to turn bullish and Stochastic is turning up after a bullish crossover. Both indicators are hinting of a bullish price trend ahead. 20EMA is flat and neutral at the moment.

Support 25.4025.0524.80
Resistance 25.8026.1026.55

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