FX Commentary – An Improvement In Risk Appetite Send US Dollar Lower.

Market Talk
– The greenback fell as an improvement in risk appetite sapped demand for the safe haven US dollar and after data showed that U.S. jobless claims wasn’t as bad as feared  while gross domestic product figures met investors’ expectations despite the worst contraction since 1946.

– Wall Street also provided a lift to sentiment, as stocks rebounded after earnings season got off to a strong start amid concerns that President Joe Biden’s fiscal spending package will not be as large as the proposed $1.9 trillion.

– Many analysts still expect the dollar to return to the downward trend that saw it lose nearly 7% of its value last year, particularly with the Federal Reserve committed to ultra-easy monetary policy.

– Silver prices rose as rumours rippled through the market about calls to drive silver prices higher by buying shares in silver miners and exchange traded funds (ETF) started circulating on social media such as Reddit and Twitter.

– After a week trending downwards, gold was up as the dollar weakened on Friday morning in Asia. Gold was also lifted by a surge in Silver prices and news overnight that U.S. GDP contracted 3.5% for all of 2020, the worst contraction since 1946, after the Second World War.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2830. Stop at 1.2780 and profit target at 1.2965.
3. Vaccine delay and biggest US GDP decline since 1946 are likely to weigh on the Canadian dollar and keep the safe haven US dollar in demand.
4. An Inverse Head and Shoulder chart pattern and bullish MACD are both hinting of a bullish price trend ahead.

Fundamental Comments
1. Crude oil declined on concerns that delays to vaccine could curb economic growth, is likely to weigh on the Canadian dollar.
2. This biggest US GDP contraction since 1946 is likely to lead to demand for the safe haven US dollar.

Technical Comments
1. Price had broken above the neckline of an Inverse Head and Shoulder chart pattern which is a bullish pattern.
2. MACD is bullish and both its lines are moving higher, hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price broke above 104.39 this morning and we are expecting price to move higher to 104.90. MACD is bullish and is trending higher. Stochastic is into the overbought zone but is bullish. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish trend.  Our three indicators used all are showing a strong bullish price trend ahead. Only a move below 103.90 would negate our bullish view.

Support 104.35104.05103.80
Resistance 104.75105.10105.50

EUR/USD – Our sell call was filled at 1.2130 yesterday when price rose to a high of 1.2141. Price has started the decline and is already below 1.2100 at the time of writing. We are expecting the decline to continue lower to 1.2060. What happens at 1.2065 will determine the next direction of this pair. MACD is still bearish but is near to the zero line. Stochastic has a bullish crossover and is turning up.

Support 1.20901.20551.2010
Resistance 1.21401.21801.2210

GBP/USD – Price had failed to hold above 1.3650 overnight and had declined to a low of 1.3628. We saw a sharp bounce from this low to 1.3745 later in the night. MACD remains bullish and is hinting of more price upsides ahead but Stochastic is still declining. 20EMA is neutral at the moment. Indicators are hinting of a down move again to 1.3630 but we think price is more likely to test the high of 1.3750.

Support 1.36951.36501.3610
Resistance 1.37251.37501.3790

XAU/USD – Price has managed to hold above $1830.80 which is also the Fibonacci 62% of the rally from $1810.20 to the high of $1874.95.  Price had rallied to $1863.99 overnight but was unable to sustain and had declined to $1840. MACD and 20EMA is neutral and flat. Stochastic had a bullish crossover and is moving up from the oversold extreme. We think price is likely to move sideways for today.

Support 1839.051831.201820.20
Resistance 1850.201864.001874.90

USD/SGD – Price moved to the previous week’s high at 1.3334 but there was a bearish divergence warning from the Stochastic indicator. However there was no divergence warning from the MACD indicator. However, MACD appears weak although MACD is still bullish. 20EMA is bullish and hinting of a bullish price trend ahead. We think price may have made a high and a decline back to 1.3250 is likely over the next few days ahead.

Support 1.32951.32651.3215
Resistance 1.33201.33501.3400

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