Market Talk
– The dollar was down on Tuesday morning in Asia, hovering near its lowest level in a week as doubts began to creep in about a recent rally fueled by hopes of a faster U.S. economic recovery from COVID-19 pandemic compared to elsewhere.
– A US$1.9 trillion stimulus package proposed by U.S. President Joe Biden in January continues its path towards Congressional approval but some investors, including former Secretary of the Treasury Larry Summers, have questioned the package’s price tag and raised risks such as faster inflation.
– Worries have been building that as US government and central bank continue their massive spending and ultra-easy money policies until they are certain that the US economy will recover from the coronavirus pandemic could see the dollar decline in the long term
– The euro was little changed in early Asian trading on Tuesday but was up from the two-month low touched on Friday. The dollar was mostly flat at 105.21 yen, after climbing to 105.76 at the end of last week for the first time since October.
– Gold was up on Tuesday morning in Asia, continuing the rally after the yellow metal recorded its biggest two-day gain in a month on expectations of a large U.S. economic stimulus package in the U.S. bolstered its appeal as an inflation hedge and a weaker US dollar will continued to drive gold’s rally.
Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation.
2. Sell USD/CHF at 0.8980. Stop at 0.9005 and target at 0.8915
3. Doubts about a strong US economic recovery compared to elsewhere and massive fiscal and loose monetary policies are weighing on the US dollar.
4. Price capped by the Fibonacci 62% correction point and bearish MACD are both a hint of a bearish price trend ahead.
Fundamental Comments
1. Doubts began to creep in about a faster U.S. economic recovery from COVID-19 pandemic compared to Europe is weighing on the US dollar.
2. Massive fiscal stimulus spending and ultra-easy money policies from Federal Reserve are likely to weaken the US dollar.
Technical Comments
1. A price rally stopped just ahead of the Fibonacci 62% correction point is a hint of a bearish price trend.
2. MACD is bearish and hinting of a bearish price trend ahead.
Key Levels
| Support | 0.8960 | 0.8925 | 0.8890 |
| Resistance | 0.8990 | 0.9020 | 0.9045 |
Technical Overview
USD/JPY – Price made a high of 105.76 last Friday and this may be the high. We are likely to see a price decline to 104.40 in the next few days. MACD has earlier warned with a divergence warning. Stochastic is moving lower towards the oversold extreme. 20EMA has turned bearish and is moving lower, hinting of a bearish trend ahead. A move above 105.30 would negate our bearish view for the next few days.
| Support | 104.80 | 104.45 | 104.15 |
| Resistance | 105.15 | 105.40 | 105.90 |
EUR/USD – Price broke above 1.2055 this morning and has reached a high of 1.2075. We are looking at this rally continuing higher to 1.2155 over the next couple of days. Stochastic is into the overbought zone but MACD is bullish and is hinting of a bullish price trend ahead. 20EMA is also hinting of a strong bullish price trend ahead. A move below 1.2000 would negate our bullish view for the next few days.
| Support | 1.2055 | 1.2010 | 1.1975 |
| Resistance | 1.2090 | 1.2130 | 1.2160 |
GBP/USD – Price broke above 1.3760 yesterday and the rally looks strong. On the 4-hourly chart, there were 2 strong candlesticks when breaking above the strong resistance at 1.3755. MACD is bullish but Stochastic is already in the overbought extreme. 20EMA is also bullish and hinting of a strong bullish price trend. In view of the strong trend, we will override the stochastic reading and will be looking for a rally to 1.3860.
| Support | 1.3755 | 1.3695 | 1.3650 |
| Resistance | 1.3795 | 1.3835 | 1.3865 |
XAU/USD – Our sell recommendation on gold was wrong yesterday. It looks like the yellow metal corrective decline could be over at $1784.70 and we could be on a rally to test the high of $1961. Stochastic is rising towards the overbought zone but MACD is still in the bullish zone. However 20EMA has turned bullish and is moving higher. As long as price stays above $1806 our bullish view over the next few weeks for $1961 will not be threatened. The first target for the rally is at $1875.
| Support | 1834.35 | 1823.50 | 1814.90 |
| Resistance | 1844.70 | 1854.75 | 1865.25 |
AUD/USD – We had a buy recommendation from last Thursday which was filled at 0.7605. Yesterday, we had recommended keeping profit order at 0.7695 while raising stop higher to 0.7650. Unfortunately price reached a low of 0.7650 before jumping up to 0.7727 this morning. We are stop out but we still managed a 45 pips profit. Price may be near a high as Stochastic is into the overbought extreme. We remain bullish and will be looking for a correction to buy at a lower level around 0.7680.
| Support | 0.7700 | 0.7650 | 0.7620 |
| Resistance | 0.7745 | 0.7780 | 0.7820 |
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