FX Commentary – US Dollar Weakened On Economic Stimulus

Market Talk
– The dollar was headed for its worst week of the year on Friday, as investors cheered in the Joe Biden administration by buying riskier currencies and refreshed bets that a pandemic recovery could push the greenback lower still.

– Against the euro, the dollar is down almost 0.8% this week and it touched a week-low of $1.2173 per euro on Friday. The euro had found some support from the European Central Bank keeping policy steady and accommodative.

– Sterling rose to a 2-1/2 year high of $1.3743 overnight on hopes Britain’s vaccine roll-out can usher in a rebound in growth. It held at that level on Friday, up 1% for the week.

– Later on Friday, preliminary purchasing managers’ index figures are due across Europe and the United States, and weakness is expected as fresh waves of coronavirus infection have driven new lockdowns and curtailed growth.

– Gold prices lost little strength on Thursday in their rebound from $1,800 lows as the Biden administration’s plans to aggressively stimulate the U.S. economy with huge spending further weakened the dollar.

Chart Focus Buy NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7160. Stop at 0.7135 and target at 0.7250
3. Optimism of an economy recovery with hefty stimulus package and COVID-19 vaccine is likely to lead to less demand for the safe haven US dollar.
4. Price is likely to be supported and MACD is hinting of a bullish price trend ahead.

Fundamental Comments
1. Biden administration’s plans to stimulate the U.S. economy with huge spending is likely to weaken the dollar.
2. Optimism of an economic recovery with vaccine and stimulus is likely to lead to less demand for the safe haven US dollar.

Technical Comments
1. Price correction is likely to be supported by the 20EMA as well as a strong price support.
2. MACD remains bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – We had a sell call on this pair yesterday, which was filled at 103.45 when price rose to a high of 103.66. The 20EMA is currently capping price advance at 103.60. Stochastic is turning up from the oversold extreme but MACD is still bearish at the moment. If yesterday’s low of 103.32 holds, its means the recent decline to 103.32 is just a correction and the trend is actually bullish for this pair.

Support 103.30102.95102.60
Resistance 103.60103.85104.10

EUR/USD – Price has moved past the previous rally high of 1.2160 and we think the rally should continue higher to 1.2210 over the next couple of days. MACD remains bullish and Stochastic is rising but is close to the overbought zone. 20EMA is bullish and point up with a steep slope, hinting of a strong bullish trend. A move below 1.2100 could negate our bullish view for now.

Support 1.21551.21101.2080
Resistance 1.21851.22201.2260

GBP/USD -Price was supported by the 20EMA on Wednesday and we saw a movement to 1.3743 last night. Price will need to stay above 1.3670 in order to maintain its bullish trend. If price were to move below the 20EMA at 1.3670, we could see a move to 1.3530. Stochastic is near to the overbought zone but MACD remains bullish and 20EMA is bullish as well. Watch for the reaction at 1.3670.

Support 1.36751.36201.3575
Resistance 1.37151.37501.3790

XAU/USD – Price has moved above $1865 on Wednesday and reached a high of $1875 on Thursday before declining to $1859 on Friday. We are likely to see a test of $1885 in the next couple of days. 20EMA is currently supporting price at $1859 and if price stays above this level, we are likely to see a test of $1885. MACD remains bullish but Stochastic is turning down from the overbought zone.

Support 1857.751844.301831.95
Resistance 1874.501885.201900.50

XAG/USD – Price had reached a high of $26.02 yesterday and this was followed by a decline to $25.35. This could be the correction after price had rallied for the past 4 days but the correction needs to hold above $24.80. A move below $24.75 would mean a high is in place and price is likely to decline to the low of $24.10 again. Stochastic is turning down from the overbought zone on the 4-hourly chart but MACD remains bullish

Support 25.3024.9524.60
Resistance 25.6026.0526.45

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