FX Commentary – Gold Higher On Hopes Of Further Stimulus Measures

Market Talk
– The dollar was down on Tuesday morning in Asia but hovered near its highest level in nearly a month as investors expect U.S. Secretary of the Treasury nominee, Janet Yellen, to affirm a more traditional commitment to market-set currency rates when she testifies at Capitol Hill later in the day.

– Janet Yellen, will reportedly affirm the U.S.’ commitment to market-determined exchange rates and indicate that the country doesn’t seek a weaker dollar for competitive advantage and is also expected to tell the committee that the government must “act big” with its next COVID-19 relief package.

– The greenback has started the year with a near 2% rally against major peers, supported by a rise U.S. Treasury yields in response to Biden’s plan for a US$1.9 trillion pandemic relief package. The safe-haven currency fell nearly 7% last year on expectations U.S. monetary policy would stay ultra-loose and on hopes for a post-pandemic global recovery in 2020.

– Many analysts still expect the US dollar to eventually resume its march lower in 2021 as an improving economic outlook under increased fiscal spending and accelerated vaccinations, along with ultra-easy monetary policy will weaken the greenback.

– Gold was up on Tuesday morning in Asia, climbing back up from the one-and-a-half-month low seen during the previous session, as hopes for further stimulus measures to boost economic recovery from COVID-19 countered a firmer dollar.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation.
2. Sell EUR/AUD at 1.5680. Stop at 1.5720 and target at 1.5585.
3. Interest rate differential as well as surging virus cases and political crisis in Italy is likely to weigh on the Euro dollar.
4. Price has been capped by a strong resistance zone and Stochastic is hinting of a bearish price trend ahead.

Fundamental Comments
1. Surging virus cases and political crisis in Italy is likely to weigh on the Euro.
2. Interest rate is in the Aussie dollar favour and is likely to weigh on the Euro.

Technical Comments
1. Price has been capped by the 20EMA and Fibonacci 38% correction of the previous decline, which is a hint of a bearish price trend ahead.
2. Stochastic has a bearish crossover and is heading lower while MACD is hinting of a bearish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Last Friday, we had a sell call at 103.85 which was filled when price rallied to a high of 103.92. Yesterday, we had recommended bringing stop lower to 104.00 while keeping profit target unchanged at 103.25. Unfortunately, our stop was triggered and we lost 15 pips. Stochastic is rising after a bullish crossover but MACD is neutral at the moment. 20EMA is also neutral and flat.

Support 103.80103.50103.20
Resistance 104.20104.55104.80

XAG/USD – Yesterday, we had a buy call at $24.85, which was filled when price dropped to a low of $24.72. Price has moved higher this morning to $25.27. We would suggest bringing stop higher to cost at 24.85 while keeping profit target unchanged at 25.80. Stochastic is near to the 80 level but MACD is still bullish and rising. 20EMA is also bullish and rising, hinting of a bullish price trend ahead.

Support 25.1524.7524.45
Resistance 25.6026.1026.45

GBP/USD -Price may have made a Double Tops around 1.3700 and we were expecting price to test the support at 1.3450 but yesterday, price only reached a low of 1.3517 and has bounced up. 20EMA is currently capping the advance at 1.3605. Stochastic has a bullish crossover in the oversold zone and is moving higher. MACD also has a bullish crossover near the zero line. If price can move above the 20EMA resistance, we think price can test the high of 1.3710 again.

Support 1.35751.35451.3495
Resistance 1.36201.36601.3710

XAU/USD – Yesterday’s low at $1810.18 could be the low we were looking for. If price can stay above this support, we are likely to see a rally $1865 or $1885 in the next few days. MACD is neutral and near to the zero line. Stochastic is in the middle of its band and is not giving any clues. 20EMA remains bearish at the moment. The critical levels to watch for direction lie at $1810 and $1865.

Support 1832.501822.901810.20
Resistance 1843.451853.651863.80

USD/CNH – We had a buy call on this pair on Thursday, which was filled at 6.4610 when price declined to a day low of 6.4510. Yesterday, we had shifted stop to 6.4760 while keeping profit order at 6.5090. However, price only reached a high of 6.5075 before dropping down to 6.4870. MACD is still bullish but Stochastic has a bearish crossover and is moving lower. 20EMA remains bullish.

Support 6.48706.47706.4575
Resistance 6.50006.51106.5230

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