FX Commentary – US Dollar Stayed Strong Despite Improvement In Risk Sentiment.

Market Talk
– The dollar traded near its strongest in more than two months against the euro and the yen on Thursday despite pessimism about the U.S. economic outlook receding before the release of important data on the jobs market.

– Expectations of a large U.S. stimulus package underpin risk assets as the Democratic-controlled U.S. Congress pushed ahead with a manoeuvre to pass President Joe Biden’s $1.9 trillion COVID-19 relief package without Republican support.

– Sentiment for the dollar has improved recently as progress in coronavirus vaccinations, moves by U.S. President Joe Biden to pass more fiscal stimulus, and improving economic data forced some  investors to give up their short US$ positions.

– The British pound held steady against the dollar and traded near an eight-month high versus the euro ahead of a Bank of England policy meeting that will publish findings on the feasibility of negative interest rates.

– Silverdeclined after a social media buying frenzy subsided despite by hopes global stimulus measures would prompt a pick-up in industrial demand, after a sharp decline from a near eight-year peak scaled with the help of a social media-inspired buying frenzy.

Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7605. Stop at 0.7575 and target at 0.7695.
3. Improvement in risk sentiment and RBA view of the Australian economy are both likely to weigh on the safe haven US dollar.
4. Price may have made a low with MACD warning of a possible low with divergence.

Fundamental Comments
1. Risk sentiment improvement has seen demand for the safe haven US dollar declined.
2. Reserve Bank of Australia had kept interest rate unchanged earlier in the week in view of a more stable economic condition.

Technical Comments
1. Price has moved off a low and has moved past the 20EMA, hinting of an possible reversal in the downtrend.
2. MACD has a divergence warning of a possible price low and reversal.

Key Levels


Technical Overview
USD/JPY – Price continues to make marginal higher high with last night high at 105.19. MACD remains bullish. Stochastic has a bullish crossover in the middle of its range and is moving higher. Both momentum indicators are hinting of a possible continuation of the price rally. We see price moving to 105.50 in the next couple of days. A decline below 104.60 would negate the bullish view.

Support 104.90104.55104.15
Resistance 105.20105.65106.00

EUR/USD – We had a sell call on this pair but our entry order was not filled at 1.2060 as price only managed to move to a high of 1.2042 yesterday. MACD remains bearish and Stochastic is weak and is near to oversold zone. Both indicators are hinting of a bearish price trend ahead. 20EMA is also bearish and pointing lower with a steep slope, hinting of a strong bearish price trend. We see price going lower to 1.1985 within the next 1-2 days.

Support 1.20051.19801.1940
Resistance 1.20351.20601.2095

GBP/USD -Price broke the lower boundary of a 2-week range this morning and we think the decline is likely to continue towards 1.3520 over the next few days. MACD is bearish and hinting of a bearish price trend. Stochastic is moving lower but is near to the oversold zone. 20EMA is pointing lower with a steep slope, hinting of a bearish price trend. A move above 1.3670 would negate our bearish view.

Support 1.35701.35201.3495
Resistance 1.36101.36601.3705

XAU/USD – Price broke the range support at $1830 overnight and has declined to a low of $1815 as at the time of writing. We see price moving lower to test the previous low at $1810.20. MACD is bearish and is hinting of a bearish price trend. However Stochastic is near to the oversold extreme. 20EMA is bearish and is hinting of a bearish price trend ahead. Only a move above $1831 would negate our bearish view.

Support 1815.801810.201799.80
Resistance 1829.401838.201844.70

XAG/USD – Our view of a price rally has not materialized and price has slipped lower. The important support zone at $26.00-$25.95 needs to hold or the bullish view will be void. If price is supported above $25.95, we may see a test to $27.10 but not $30.  MACD has turned bearish now and Stochastic is close to the oversold zone. 20EMA is bearish and hinting of a bearish price trend ahead.

Support 26.2525.9525.45
Resistance 26.7027.1527.45

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