FX Commentary – US Dollar Continues Its Rally

Market Talk
– The dollar was up on Thursday morning in Asia following its first back-to-back gains overnight in two weeks. Positive U.S. data raise hopes that the country will see a faster economic recovery from COVID-19 than its global peers giving strength to the US dollar.

– Positive U.S. retail sales data and producer price index data released on Tuesday gave the greenback a boost. Progress is also being made on the U.S President Joe Biden’s proposed US$1.9 trillion stimulus relief package.

– The Federal Reserve also released the minutes from its January policy meeting on Wednesday, reinforcing its willingness to let the economy overheat while maintaining an ultra-accommodative monetary policy to boost the US economic recovery.

– The euro was steady after dropping the most in two weeks. The yen was almost flat against the dollar on Thursday, after the dollar pulled back from an almost five-month high overnight. Onshore trading in the yuan resumed as Chinese markets returned from a holiday.

– Gold was up on Thursday morning in Asia, after extending its slide overnight to a fifth session, dipping to its lowest in more than two months as bets for an economic recovery boosted the dollar and benchmark U.S. Treasury yields.

Chart Focus USD/JPY
Key Points

1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 105.65. Stop at 105.25 and target at 106.60
3. Positive U.S. economic data and rising U.S. Treasury yields have given the US dollar a boost.
4. Price is likely to be supported by a strong support point and MACD is hinting of a bullish price trend.

Fundamental Comments
1. Positive U.S. retail sales data and producer price index data has given the US dollar a boost.
2. Rising U.S. Treasury yields has boosted the US dollar.

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

Key Levels


Technical Overview

USD/CHF – Price has reached a low of 0.8870 on Tuesday and the decline seems to have completed a 5-wave movement lower. There were further confirmations from both Stochastic and MACD. Both momentum indicators have given divergence warnings hinting of a price low. We saw price moved above the Fibonacci 62% correction point of the decline. Our first target for this rally is at 0.9015 with 0.9090 a possibility over the next few days ahead.


EUR/USD – Price had formed a Double Tops chart pattern and had declined below the neckline yesterday, confirming the bearish price trend. Price is likely to move to the Double Tops chart pattern price target at 1.1995. MACD remains bearish but Stochastic has reached the oversold extreme. 20EMA is pointing lower with a steep slope, hinting of a bearish price trend ahead. A move above 1.2105 would negate our bearish view for the next few days.


GBP/USD – Price had reached a high of 1.3951 on Tuesday morning and had declined to 1.3831 last night. MACD has remained bullish during the decline and Stochastic has declined to near the oversold extreme. 20EMA has turned bearish. In the short term, we may see a corrective rally to 1.3905 to form the second part of a correction with the third phase of the correction likely to bring price lower to 1.3760.


XAU/USD – Price had reached a low of $1769.65 last night but Stochastic has reached the oversold extreme and is hinting of a possible price rally. MACD is warning with a divergence of a possible price low. However, 20EMA remains strongly bearish. We think there will be a corrective rally to $1790, to be followed by a decline below $1767 over the next few days. A price move above $1815 would negate our bearish view.


USD/CNH – Our buy call was filled when price dropped to a low of 6.4294. Our view remains unchanged from yesterday and we would recommend keeping stop at 6.4270 and profit target at 6.4790. MACD remains bullish and rising. 20EMA is also rising and hinting of a bullish price trend. However, Stochastic is in the overbought zone. As long as price stays above 6.4290, we see price moving higher to 6.4800.


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