FX Commentary – An Increase In Risk Sentiment Supported The US Dollar.

Market Talk
– The U.S. dollar steadied on Tuesday as rising coronavirus cases and doubts over the speed and size of U.S. stimulus tempered financial markets’ upbeat mood, while investors were also cautious ahead of the Federal Reserve’s review later in the week.

– Coronavirus cases are surging and U.S. economic data has pointed to a flagging pace in the recovery, leaving investors looking for the Fed to maintain easy policy at its Wednesday meeting, while bracing for lackluster growth figures on Thursday.

– Investors had thought that Democrats’ control of U.S. Congress, won at Senate runoff elections in early January, could smooth the passage of enormous pandemic relief spending but as lingering concerns about potential roadblocks to the Biden administration’s $1.9 trillion stimulus weighed on sentiment lifting the US dollar.

– The euro and yen are likewise hemmed in, with the euro unable to break resistance around $1.2190 while the continent grapples with new COVID-19 infections and fresh lockdowns. The British pound inched down to 1.3670, weighed down by coronavirus pandemic and lockdowns.

– Gold prices pared gains as the dollar edged higher, but expectations of fresh U.S. fiscal stimulus underpinned the bullion ahead of this week’s Federal Reserve’s meeting.

Chart Focus NZD/JPY
Key Points
1. Sell NZD/JPY recommendation.
2. Sell NZD/JPY at 74.60. Stop at 74.90 and target at 73.65.
3. Risk sentiment has increased as a result of rising coronavirus cases and declines in stocks indices and yields.
4. Price is on a bearish price trend which is confirmed by both MACD and Stochastic.

Fundamental Comments
1. Rising coronavirus cases has led to worries over lockdowns and the growth pace of the global economy leading to an increase in risk sentiment.
2. Declining yields and stock indices have led to an increase in risk sentiment which favours the yen.

Technical Comments
1. Price has been capped by the Fibonacci 62% of the decline, which is a sign of a bearish price trend.
2. Both MACD and Stochastic have shown divergence warning of a high and a likely bearish price trend ahead.

Key Levels


Technical Overview

USD/JPY -Price range is starting to narrow, which is a hint of a sideways consolidation ahead. On the 4-hourly chart, MACD is also moving in a flat line near to the zero line, confirming the sideways movement. Stochastic is still moving lower after a bearish crossover earlier. We think price is likely to consolidate within last week’s range of 103.32 to the high of 104.10 for the next few days ahead.

Support 103.65103.30102.95
Resistance 103.90104.15104.50

EUR/USD – Price seems to have made a 3-wave movement to 1.2190 and has declined to 1.2112 and we may see a movement to 1.2065 within the next few days to complete the decline. MACD is still bullish but Stochastic is still declining after a bearish crossover earlier near the overbought zone. 20EMA is neutral at the moment. We remain bullish unless 1.2065 price support is broken

Support 1.21101.20801.2050
Resistance 1.21551.21851.2220

GBP/USD -After touching a high of 1.3742 last week, price tested above 1.3700 again but was capped at 1.3722 on Monday and we have seen a decline to 1.3645. This is near to the support at 1.3635 and if this support is broken, we are likely to see a test of 1.3570 within the next couple of days. MACD is turning bearish and Stochastic is still declining. Watch out for 1.3635 for clues to the next direction

Support 1.36351.35951.3555
Resistance 1.36751.37201.3745

XAU/USD – Price has been moving sideways for the past 2 days and MACD has become flat and neutral. Stochastic is in the middle of its range. 20EMA is also flat and neutral, hinting of a sideways movement as well. Price is likely to stay within last week’s range of $1875 to $1836 until we see a breakout of this range. We would recommend staying aside for now until there is a clearer direction.

Support 1850.101837.801822.65
Resistance 1862.401874.801884.35

XAG/USD – Our buy recommendation was filled at 25.25 when price declined to a low of 25.16 yesterday. MACD has remained bearish while Stochastic is rising after a bullish crossover. 20EMA has also remained bearish. We are cautious and would recommend bringing stop higher to $24.99 while keeping profit target unchanged at 26.50. Price will need to move above 26.05 for the bullish view to be valid.

Support 25.1524.8524.60
Resistance 25.5025.7526.05

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