FX Commentary – Crude Oil Price Rally Lifted Canadian Dollar

Market Talk
– The dollar was slightly down on Tuesday morning in Asia as rising oil prices and the general optimism for a global economic recovery from COVID-19 pandemic boosted riskier currencies and dampened safe havens.

– Sterling hit an almost three-year high over increasing vaccine optimism.  The dollar and struck multi-year lows against the euro. The yen also hit its lowest since late 2018 against the euro and commodity currencies rose as vaccination progress added to investors’ recovery hopes.

– Investors are divided over the US dollar direction this year, debating on whether the recovery would be U.S.-led, which could support the dollar, or much broader, and thus negative for the greenback as global trade picks up.

– The Canadian dollar gained as oil prices climbed more than 2%, hitting the highest levels in more than a year on hopes a U.S. stimulus will boost the economy and fuel demand, as supplies tighten due largely to output cuts by top producing countries.

– Gold was up on Tuesday morning in Asia as hopes for a quick global economic recovery weakened the safe haven US dollar. However the rally was capped by US Treasury yields climbing to their highest level since March 2020

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2665. Stop at 1.2705 and target at 1.2605.
3. Expectation of a global economic recovery and gains in crude oil price had led to a weaker US dollar.
4. Price is likely to face a stiff resistance overhead and MACD is hinting of a bearish price trend ahead.

Fundamental Comments
1. Gains in crude oil prices had led to a stronger Canadian dollar.
2. Expectation of a global economic recovery from COVID-19 pandemic has boosted riskier currencies and dampened safe haven US dollar.

Technical Comments
1. Price is likely to be capped by a support turned resistance line as well as the 20EMA.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels


Technical Overview
USD/JPY – Price broke above the Fibonacci 62% correction point at 105.25 and has climbed to a high of 105.63. MACD has turned bullish and is rising. Stochastic is strong but is in the overbought zone. 20EMA is bullish and pointing up with a steep slope hinting of a bullish price trend. We think price is likely to test the previous high at 106.10 over the next few days.

Support 105.40105.05104.80
Resistance 105.75106.10106.50

EUR/USD – Price saw a correction lower into the 1.2080 support level on Friday and is currently probing the 1.2155 resistance. Our view remains unchanged and we see price continuing its rally to 1.2175 with 1.2225 a possibility.  MACD is bullish and Stochastic is rising towards the overbought extreme. 20EMA is bullish and is pointing higher with a steep slope, which is a hint of a strong bullish price trend

Support 1.21201.20951.2055
Resistance 1.21551.21901.2225

GBP/USD – Price reached a high of 1.3951 this morning and looks like it will continue to move higher. Stochastic is in the overbought zone and MACD is bullish. MACD is also hinting of more upsides before the reversal. 20EMA is pointing higher with a steep slope, hinting of a bullish price trend. Our indicators are hinting a move to 1.4010 with 1.4050 a possibility in the next few days ahead.

Support 1.39201.38801.3830
Resistance 1.39551.40101.4050

XAU/USD – Our buy recommendation was filled at $1817 when price dropped to a low of $1815.87. Stochastic is near to the oversold zone and a rally off the oversold zone appears weak. MACD has yet to turn bullish and price is still below the 20EMA, hinting of a bearish price trend. However, it would be due to the US holiday overnight. If price and its indicators do not pick up today, we may need to get out of this position. Keep stop and profit order unchanged at $1806.00 and $1854.00 respectively.

Support 1813.851802.301791.70
Resistance 1824.801834.551846.05

XAG/USD – Price tested the resistance high at $27.80 this morning but has declined back below the resistance point to $27.55. If price can move above this resistance, we are expecting a price movement to $28.35. However, inability to move above the $27.80 resistance is likely to result in a decline back to $26.70.  MACD is bullish but is near to the zero line. Stochastic is into the overbought zone

Support 27.5027.1526.80
Resistance 27.8028.0528.35

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