FX Commentary – Progress In Vaccination Boosted Riskier Currencies

Market Talk
– The U.S. dollar teetered near three-year low against the British pound as progress in curbing coronavirus infections boosted sentiment for riskier assets. Sterling hit $1.4051; its highest since April 2018, as Prime Minister Boris Johnson charts a path out of lockdowns on the back of rapid vaccinations.

– The US$1.9 trillion COVID-19 stimulus relief package proposed by U.S. President Joe Biden continues to advance, after the House of Representatives on Friday released the legislation that lawmakers target to pass within this week, boosting sentiment for riskier assets and currencies.

– The Australian dollar hit $0.7892, its highest since March 2018 while the New Zealand currency rose to $0.7315, its strongest since April 2018 helped by helped by S&P’s upgrade of New Zealand’s sovereign credit ratings by a notch.

– The U.S. currency, which is often considered a safe asset during times of uncertainty, is likely to fall further as more investors focus on economic recovery once the worst of the coronavirus pandemic passes.

– Gold was up on Monday morning in Asia, edging up from the over seven-month low seen during the previous session. A weaker US dollar gave the yellow metal a boost, although gains were capped by higher U.S. Treasury yields.

Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation.
2. Buy EUR/USD at 1.2100. Stop at 1.2070 and target at 1.2185.
3. Expected passage of a US$1.9 trillion relief package and expectation of a recovery from COVID-19 pandemic are both likely to weaken the US dollar.
4. Price is supported by a strong support zone and MACD is hinting of a bullish price trend.

Fundamental Comments
1. Expectation of a recovery from the COVID-19 pandemic has boosted risk sentiment and dampened the safe haven US dollar demand.
2. Expected passage of a US$1.9 trillion pandemic relief package is likely to weaken the US dollar.

Technical Comments
1. Price is supported by the 20EMA and a previous support.
2. MACD is bullish and is rising, hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – We had a buy call on this pair on Thursday. Our open position was stopped out at 105.25 when price reached a low of 105.23. We remain bullish as MACD is bullish and Stochastic has a bullish crossover and is moving higher. We see price moving up to test the high of 106.25 again in the next few days.


USD/CHF – We had a buy call on this pair which was filled on Friday at 0.8960 when price declined to a low of 0.8932. Price has climbed back up again on Monday morning to 0.8975. Our view remains unchanged. We would recommend bringing stop higher to 0.8930 while keeping profit target at 0.9035. Stochastic is turning up and hinting of a bullish price trend. MACD remains bullish. 20EMA is also hinting of a bullish price trend.


GBP/USD – The price rally continues from last Friday and we have seen a high of 1.4051 this morning. We may see the rally continues towards 1.4075. The trend is bullish and strong as shown by a steep slope from the 20EMA. MACD remains bullish with its lines high above the zero line. Stochastic is in the overbought zone and has given a divergence warning of a possible price high. A break of 1.3950 will lead to a test of 1.3840.


XAU/USD – Price had reached a low of $1760.35 last Friday’s morning and has turned up to a high of $1794. Stochastic is rising towards the overbought zone and MACD remains bullish. 20EMA is rising with a steep slope hinting of a bullish price trend. We see price rising to test the $1810 resistance over the next few days.


USD/CNH – Our buy call from Wednesday remains open. On Friday, we had brought stop loss higher to cost at 6.4390 while keeping profit order at 6.4790. We would recommend keeping both orders unchanged. Price reached a low of 6.4425 this morning.  MACD and 20EMA remains bullish and Stochastic is still rising


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