FX Commentary – Improvement In Risk Sentiment Send US Dollar To Near 2-week Lows

Market Talk
– The dollar was down on Wednesday morning in Asia to near two-week lows as demand for safe-haven assets faded. Hopes for a global economic recovery from COVID-19 continue to grow alongside hopes for further massive fiscal and monetary stimulus.

– Traditionally viewed as a safe haven, the dollar has sunk against major peers as optimism over monetary and fiscal support from policymakers, robust corporate earnings and the prospect that coronavirus vaccines could hasten a return to normality in the United States and elsewhere have bolstered risk sentiment.

– Data released by China earlier in the day showed that the China’s Consumer Price Index (CPI) grew 1% month-on-month but fell 0.3% year-on-year. China Producer Price Index grew 0.3% year-on-year in January. The USD/CNH pair declined to a low of 6.4175 near a multi-year low.

– The dollar traded at 104.55 yen after its biggest decline in three months, while the euro changed hands at $1.2119, extending its rebound from a two-month low of $1.1952 touched on Friday. The British pound held firm at $1.3822, hitting its highest level since April 2018. 

– Gold was up on Wednesday morning in Asia to a one-week high after a weak dollar and growing expectation of further U.S. stimulus measures bolstered its appeal among investors seeking an inflation hedge.

Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation.
2. Sell EUR/AUD at 1.5670. Stop at 1.5715 and target at 1.5600.
3. Coronavirus pandemic and interest rate differential are both in the Australian dollar’s favour.
4. Price is capped by the 20EMA and MACD is bearish. Both are hinting of a bearish price trend ahead.

Fundamental Comments
1. Compared to Australia, Europe has a more serious coronavirus pandemic which is weighing on the Euro.
2. Interest rate differential is in the Aussie dollar’s favour.

Technical Comments
1. Price is capped by the 20EMA which is hinting of a bearish price trend ahead.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels


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. This morning price reached a low of 104.49. Stochastic is in the oversold extreme. MACD is bearish but is already in its extreme. 20EMA is bearish and hinting of a bearish trend ahead. We think there is likely to be a price correction that could bring price higher to 104.90 before another decline to 104.05

Support 104.45104.05103.70
Resistance 104.75105.15105.45

EUR/USD – Price broke above 1.2055 yesterday and has reached a high of 1.2129 this morning. We expect this rally to continue higher to 1.2155 or 1.2175 over the next couple of days. Stochastic is into the overbought zone but has shown no signs of a reversal as yet. MACD is bullish and is hinting of a bullish price trend ahead. 20EMA is also hinting of a strong bullish price trend ahead.

Support 1.20901.20551.2010
Resistance 1.21301.21651.2190

GBP/USD – Price broke above 1.3760 two days ago and has continued moving higher to a high of 1.3827 this morning. We are looking at a price movement to 1.3860 but price may extend to 1.39. Stochastic is in the overbought zone but is still strong. MACD is bullish and rising. Both of MACD’s lines are high above the zero line, hinting of a strong bullish price trend. 20EMA is also bullish and hinting of a strong bullish price trend.

Support 1.37951.37551.3695
Resistance 1.38351.38651.3905

XAU/USD – 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 over the next couple of weeks. Price after a small corrective decline to $1832 has resumed its rally with the first target at $1875. Stochastic is in the overbought zone but MACD is still in the bullish zone and rising. 20EMA is also rising. Both MACD and 20EMA are hinting of a strong price trend ahead.

Support 1840.901828.351814.90
Resistance 1854.751865.251875.15

USD/CHF – We had a sell recommendation yesterday but there was no pullback to get into our sell position. Instead price declined beyond our target price to 0.8913. Stochastic is in its oversold extreme and MACD is also at an extreme point. Both momentum indicators are hinting of a possible price bottom. However 20EMA is hinting of a strong bearish price trend ahead. We would prefer to wait for a corrective rally to get into a short position.

Support 0.88900.88600.8835
Resistance 0.89250.89600.8990

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