FX Commentary – Expectations Of A Global Economic Recovery Led To An Increase In Risk Appetite

Market Talk
– The dollar was down on Wednesday morning in Asia, sliding to a three-year low against the GBP and recording losses against commodities currencies, on increased bets that the global economic recovery from COVID-19 will whet investors’ risk appetite.

– U.S. Federal Reserve chair Jerome Powell pushed back on suggestions that loose monetary policy risked unleashing inflation and reiterated the central bank’s commitment to low interest rates and bond purchases to support the U.S. economic recovery. However, the Fed support could be a long-term negative factor for the greenback.

– The pound rose to its highest level since April 2018 after U.K. Prime Minister Boris Johnson introduced a plan to ease current lockdown restrictions in stages as the country continues its rapid COVID-19 vaccine rollout.

– The NZ dollar inched up to 0.7382 after the Reserve Bank of New Zealand kept its interest rate unchanged at 0.25%, in line with expectations. The AUD climbed to near a three-year high at 0.7944 on the back of rising metal and energy prices.

– Gold was up on Wednesday morning in Asia, close to a one-week high reached during the previous session, due to a weaker dollar and comments by U.S. Federal Reserve Chairman Jerome Powell that the U.S. economy is still on the road towards recovery from COVID-19.


Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 105.40. Stop at 105.10 and target at 105.90.
3. Rising Treasury yields and expectations of a global economic recovery from COVID-19 are aiding the US dollar.
4. Price has formed a reversal from the recent low and Stochastic is hinting of a bullish price trend ahead.

Fundamental Comments
1.  Expectations that the global economic recovery from COVID-19 has whet investors’ risk appetite and dampened safe haven yen.
2. Rising U.S. Treasury yields has boosted the US dollar.

Technical Comments
1. Price had moved above the high of a recent low, indicating a price reversal.
2. Stochastic has a bullish crossover and is hinting of a bullish price trend ahead.

Key Levels

Support105.40105.05104.85
Resistance105.90106.20106.50

Technical Overview

USD/CHF – We had a buy call on this pair on Friday and yesterday we had recommended bringing stop higher to 0.8930 while keeping profit target at 0.9035. Our profit order was filled last night and we are out with a 75 pips profit. Price may continue to move higher as Stochastic has yet to reach the overbought extreme and MACD and 20EMA are both hinting of a bullish price trend ahead.

Support0.90450.89950.8965
Resistance0.90900.91250.9150

EUR/USD – We had a buy call on Monday and yesterday we had recommend bringing stop loss higher to 1.2125 while keeping profit target at 1.2185. Price hit a high of 1.2180 last night before declining to 1.2134. Our view remains unchanged and we would recommend keeping both stop and profit orders unchanged. Currently 20EMA is supporting price at 1.2135 but if price were to break this low, it could mean a top has been formed yesterday and a price decline ahead.

Support1.21301.20951.2055
Resistance1.21651.21951.2245

GBP/USD -We got this direction wrong yesterday. Price reached a high of 1.4240 this morning and the bullish trend looks like it will continue for another day or two. MACD remains bullish although Stochastic is declining from the high after a bearish crossover. 20EMA is pointing higher with a steep slope, hinting of a strong bullish price trend ahead.

Support1.41451.40901.4045
Resistance1.41801.42401.4295

XAU/USD – We had a buy recommendation at $1800, which was filled when price declined to a low of $179.40. Stochastic has a bearish crossover near to the overbought zone and MACD is close to the zero line. Both momentum indicators are hinting of declining prices ahead. We would recommend bringing stop higher to $1795 and profit order to $1815.50.

Support1806.051795.001786.25
Resistance1815.001826.301837.60

USD/CNH – Our buy call from Wednesday remains open and yesterday, we had brought stop loss higher to 6.4420 and profit target lower to 6.4750. Price only reached a high of 6.4740 overnight. Stochastic is rising but MACD remains bearish. 20EMA has turned neutral. We would recommend closing the position at current 6.4620 for a 230 pips profit

Support6.45806.44206.4275
Resistance6.47406.48806.4990

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