FX Commentary – US Dollar Weaker On Yellen’s Hefty Fiscal Package.

Market Talk
– The dollar was down on Wednesday morning in Asia, with investors digesting U.S. Secretary of the Treasury nominee Janet Yellen’s big spending comments. The euro held onto its gains as a better-than-expected sentiment survey in Germany brightened the mood.

– The yield on the benchmark 10-year Treasury note declined 5 basis points on Yellen’s comments. The drop in yields weighed on the US dollar, which had recovered recently from a slump on the back of a rally in Treasury yields.

– The euro gained around 0.4% against the dollar overnight, and hovered around $1.2145 earlier in the session. The currency was boosted by both the Italian government surviving a confidence vote as well as a better-than-expected ZEW economic sentiment survey in Germany.

– The British pound was supported after Bank of England chief economist Andrew Haldane’s prediction during a webinar on Tuesday that the U.K.’s economy could begin to recover “at the rate of knots” from the second quarter of 2021 helped the pound higher.

– Gold prices gained a leg higher on Tuesday, reacting to U.S. Treasury Secretary nominee Janet Yellen’s plans to fight the coronavirus-induced economic crisis with big spending which could benefit Gold as an inflation hedge.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.2120. Stop at 1.2090 and target at 1.2210
3. Yellen’s hefty fiscal package and better than expected ZEW sentiment survey are both likely to weigh on the US dollar.
4. Price has broken out of a downtrend line and momentum indicators are hinting of a bullish price trend ahead.

Fundamental Comments
1. Yellen’s hefty fiscal stimulus package is likely to weigh on the US dollar.
2. Better than expected ZEW sentiment survey in Germany is likely to aid the Euro dollar,

Technical Comments
1. Price has broken out of a downtrend line hinting that a decline could have ended.
2. MACD is bullish and Stochastic is rising and both are hinting of a bullish price trend ahead.

Key Levels


Technical Overview

EUR/AUD – We had a sell call on this pair yesterday but our call was wrong. We were stopped out and we lost 40 pips on this trade. Price reached a high of 1.5767 and momentum indicators seem to suggest a reversal in trend. Stochastic has reached the overbought zone while MACD is about to have a bearish crossover. However, 20EMA is still bullish and supporting price.

Support 1.57101.56701.5620
Resistance 1.57451.57901.5830

XAG/USD – On Monday, we had a buy call at $24.85, which was filled when price dropped to a low of $24.72.  Yesterday we had suggested bringing stop higher to cost at 24.85 while keeping profit target unchanged at 25.80. Price has reached a high of $25.48 this morning and our view remains unchanged. MACD remains bullish but Stochastic has reached the overbought zone.20EMA remains bullish

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 price only reached a low of 1.3517 and has bounced up. Stochastic has a bullish crossover in the oversold zone and is moving higher. MACD also has a bullish crossover near the zero line. We think price can test the high of 1.3710 again and the next direction will depend on the reaction at 1.3710

Support 1.36251.35751.3545
Resistance 1.36751.37101.3750

XAU/USD – The low on Monday 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. Price has moved higher to $1850 this morning. MACD is neutral and near to the zero line. Stochastic is rising and is near to the overbought zone. However, 20EMA is bullish and hinting of a bullish price trend ahead.

Support 1838.801825.951810.20
Resistance 1853.651863.801875.60

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. We had shifted stop to 6.4760 while keeping profit order at 6.5090 on Monday. Price declined below 6.4760 and we are out of this position with a 150 pips profit. MACD is still bullish and Stochastic has reached the oversold zone but 20EMA is still bearish at the moment.

Support 6.46106.45106.4395
Resistance 6.47706.48706.5000

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