FX Commentary – Is The Silver Retail Trader-Driven Rally Over?

Market Talk
– The dollar was slightly up on Wednesday morning in Asia, trading near a two-month high against the euro as the disparity between the strength of the U.S. and Europe’s pandemic recoveries widened.

– The disparity was highlighted as the U.S. moves towards passing President Joe Biden’s US$1.9 trillion stimulus package after Democrats begin debate in Congress while across the Atlantic, lockdowns are extended and expectations of a decline in euro zone growth this quarter grow.

– The dollar was little changed at $1.2038 per euro earlier in the session, after it strengthened to $1.2011 overnight for the first time since Dec. 1. The USD/CNH pair inched higher after disappointing Caixin Services and Manufacturing PMI, both came in below expectations.

– Although the dollar’s rebound starting from early January is widely seen as a correction to its decline in 2020, other investors said that the new-found firmness could indicate a retreat of the bearish sentiment on the U.S. currency. The dollar index has rebounded 1.2% in 2021 after declining almost 7% in 2020.

– Gold was up on Wednesday morning in Asia, amid growing hopes of further U.S. stimulus measures. Spot silver saw a rebound from an 8% tumble on Tuesday night to $25.94 with many analysts saying the retail trader-driven rally to a near eight-year peak in the previous session has faded.

Chart Focus EUR/USD
Key Points
1. Sell EUR/USD recommendation.
2. Sell EUR/USD at 1.2060. Stop at 1.2090 and target at 1.1985.
3. Lockdowns in Europe and expectation of slower growth are likely to weigh on the Euro dollar.
4. Price is facing a strong resistance and MACD is hinting of a bearish price trend ahead.

Fundamental Comments
1. Lockdowns in Europe and expectations of a decline in euro zone’s growth this quarter are likely to weigh on the Euro dollar.
2. Democrats taking step to push through Biden’s US$1.9 trillion stimulus package is likely to aid the US economy

Technical Comments
1. Price is facing a strong resistance from the 20EMA as well as a previous support turned resistance line at 1.2060.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels


Technical Overview
USD/JPY – Our sell recommendation on this pair was stopped out at 105.10 last night when price rallied to a high of 105.17. We lost 30 pips as a result. MACD had a bearish divergence, hinting of a possible price high. Stochastic is also in the overbought zone. We think that price is near to a high and we remain bearish. However price will need to decline below the 20EMA support at 104.80 to negate the current bullish rally.

Support 104.80104.55104.15
Resistance 105.15105.40105.70

AUD/USD – Price reached a low of 0.7563 overnight and a bounce to above 0.7600 was seen. The low was accompanied with divergence warnings from MACD and Stochastic. This is a hint we may have hit a low at 0.7563 and a rally is ahead. However, price will have to break above the 20EMA resistance at 0.7630 to turn the trend bullish.  Stochastic is also turning up after a bullish crossover from the oversold zone

Support 0.76000.75600.7535
Resistance 0.76300.76650.7700

GBP/USD -Price tested the lower boundary of its range at 1.3610 last night after testing the upper end of its range at 1.3755 on Monday. Price managed to bounce up from the low and we are likely to see a continuation of sideways range movement going forwards until we see a break of either range boundary. MACD has turned bearish and Stochastic has a bearish crossover. Both are hinting of a bearish price trend ahead and we are likely to see another test of the support at 1.3610.

Support 1.36101.35701.3520
Resistance 1.36601.37051.3755

XAU/USD – Price test the $1840 support and declined to a low of $1829.40. However, price was able to hold above the range support at $1830. Stochastic is near to the oversold extreme but MACD is bearish. If price is unable to move above the 20EMA resistance at $1847, we are likely to see a break of $1830 and a possible decline to $1810. If price move above the 20EMA resistance, we are likely to test the topside of this range at $1875.

Support 1834.051823.101810.20
Resistance 1844.601853.601863.90

XAG/USD – Our buy call on silver was stopped out last night. The price correction was larger than we expected and there is still no confirmation that the price correction is over and a resumption of the rally. Price continues to fall and $26.00 will need to hold for the bullish view to persist. A move below $26.00 could hint of a decline to $24.70. However, Stochastic and MACD are both hinting of a potential low and a possible bottom at $25.95 last night.

Support 26.6026.2525.95
Resistance 27.0527.4527.85

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