FX Commentary – US Dollar Weakened By Soft Inflation Data

Market Talk
– The dollar was pinned near two-week lows on Thursday, as softer-than-expected U.S. inflation and another Federal Reserve promise to keep interest rates low reinforced expectations of meagre returns from the greenback.

– In a speech, Fed Chair Jerome Powell focused on still-high unemployment and re-iterated that the central bank’s new policy framework could accommodate annual inflation above 2% for some time before hiking rates.

– The outlook for more US stimulus got a major boost overnight from a surprisingly soft reading on core U.S. inflation, which eased to 1.4% in January. U.S. core inflation last month was zero, against market expectations of 0.2%.

– The Australian dollar sat just below a two-week top touched overnight, while the euro held at $1.2116, near its highest since Feb. 1. Sterling, also boosted by receding expectations for negative interest rates in Britain, sat just shy of Wednesday’s nearly three-year peak of $1.3865.

– Gold was side-lined at $1,839 an ounce as investors turn to platinum, driving prices to a six-year peak on bets of more demand from the automobile sector.

Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 104.75. Stop at 105.05 and target at 104.05.
3. Expectation of low interest rate and more US stimulus are both likely to weigh on the US dollar.
4. Price is capped by a strong resistance and MACD is hinting of a bearish price trend ahead.

Fundamental Comments
1. Expectation of low interest rate is likely to weigh on the US dollar.
2. Expectation of more US stimulus is likely to weigh on the US dollar

Technical Comments
1. Price is likely to be capped by the Fibonacci 38% correction point and the 20EMA line.
2. MACD is bearish and is hinting of a bearish price trend.

Key Levels


Technical Overview
USD/CNH – Price has reached a low of 6.4126 yesterday. This morning we have seen a rally which has brought price close to the 20EMA resistance at 6.4345. MACD remains bearish but Stochastic is still rising. 20EMA is pointing lower with a steep slope hinting of a bearish price trend ahead. We think price is likely to be resisted by the 20EMA at 6.4345 and we are likely to see another decline to 6.4000.

Support 6.42506.41256.4000
Resistance 6.43456.44906.4605

EUR/USD – Price broke above 1.2055 on Tuesday and has reached a high of 1.2143 last night. Price is near to our target and MACD is bullish but has a bearish crossover and is turning down. Stochastic has a bearish crossover and is moving lower, hinting of a bearish price trend. We may see a price correction lower to 1.2080 to 1.2060 and from there we see another rally to 1.2175.

Support 1.20951.20551.2010
Resistance 1.21551.21901.2225

GBP/USD – Price broke above 1.3760 three days ago and has risen to a high of 1.3865 last night. Stochastic has been in the overbought zone for a few days and has a bearish crossover, hinting of a price correction ahead. MACD is bullish but a bearish crossover is also hinting of a likely price correction. 20EMA is rising and is likely to provide support at 1.3790. If price correction can hold around 1.3790, we may see another rally to test 1.3905.

Support 1.38151.37801.3755
Resistance 1.38351.38651.3905

XAU/USD – After a corrective decline to $1832 on Tuesday, the rally resumed for the first target at $1875. Last night, we saw a high of $1855.25 but there was divergence warning from the MACD indicator, hinting of a possible price high and a potential reversal. Stochastic has a bearish crossover and is declining from the oversold zone. 20EMA is still rising. A correction could bring price lower to $1828.

Support 1834.551819.201802.45
Resistance 1846.051855.251865.25

EUR/AUD – We had a sell recommendation yesterday, which was filled at 1.5670. Price has reached a high of 1.5705 this morning and Stochastic is still rising and has not shown any sign of a reversal as yet. We would recommend keeping stop at 1.5715 and profit target at 1.5600. MACD is bearish and could be turning down soon. 20EMA is neutral at the moment.

Support 1.56801.56451.5615
Resistance 1.57151.57601.5795

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