Market Talk
– The dollar fell against the currencies of major commodity exporters on Monday as investors increased bets on countries that will benefit from rising prices for oil, metals, and other goods in the wake of stronger than expected Non-Farm Payroll report and passage of a US US$1.9 billion stimulus package.
– The benchmark 10-year U.S. Treasury yields hit a new one-year high of 1.626% after nonfarm payrolls increased by 379,000 jobs last month, blowing past a rise of 182,000 forecast by economists polled by Reuters.
– Analysts said that sentiment for the dollar has improved because of positive economic data and progress in passing a $1.9 trillion stimulus package, but that the greenback would continue to struggle against commodity currencies amid strong expectations for a rebound in global trade.
– The Australian dollar rose to $0.7702, while the NZ dollar reached $0.7177. The Antipodean currencies are both in demand because of their links to the global commodities trade. Against the euro, the dollar eased slightly to $1.1921, but held steady at $1.3844 against the British pound.
– Gold was up on Monday morning in Asia, bouncing back from the nine-month low hit during the previous session. Passage of a $1.9 trillion stimulus package also boosted the bullion’s appeal as a hedge against inflation.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3860. Stop at 1.3895 and target at 1.3750.
3. Rising yields and inflation are both keeping the US dollar strong.
4. Price is capped by a strong resistance while MACD is hinting of a bearish price trend.
Fundamental Comments
1. Yields have surged in anticipation of an accelerated economic recovery keeping the US dollar strong.
2. Optimism over improving US economic growth bolsters bets that inflation will rise keeping the US dollar strong.
Technical Comments
1. Price is capped by a strong support turned resistance line as well as the declining 20EMA line.
2. MACD is bearish and is hinting of a bearish price trend ahead, despite a possible divergence forming.
Key Levels
| Support | 1.3810 | 1.3775 | 1.3735 |
| Resistance | 1.3855 | 1.3895 | 1.3930 |
Technical Overview
USD/JPY – The price rally continues for another day and price has now reached a high of 108.64. MACD remains bullish and is hinting of a strong bullish price trend. Stochastic is in the overbought zone. However, 20EMA is bullish and rising with a steep slope, hinting of a bullish price trend ahead. The next strong resistance lies at 108.95.
| Support | 108.25 | 107.85 | 107.45 |
| Resistance | 108.65 | 108.95 | 109.20 |
EUR/USD – From a high of 1.2110, price has now broken below the previous low of 1.1952 and has reached a low of 1.1891 last Friday. Stochastic is the oversold zone. MACD remains bearish. 20EMA is pointing lower with a steep slope, hinting of a strong bearish price trend ahead. We fear price may continue to decline further to 1.1840 over the next few days.
| Support | 1.1890 | 1.1855 | 1.1815 |
| Resistance | 1.1930 | 1.1975 | 1.2010 |
XAG/USD – Price had gapped higher this morning on passage of the US$1.9 billion US stimulus package. However, the price rally is capped by the declining 20EMA at $25.75. Stochastic is rising from the oversold zone after a bullish crossover but MACD remains bearish. Price will need to move above $26.00 to negate the bearish trend.
| Support | 25.35 | 24.80 | 24.50 |
| Resistance | 25.75 | 26.00 | 26.35 |
XAU/USD – Price had moved higher this morning but is currently capped by the declining 20EMA at $1706. MACD is bearish but has been warning of a potential price low with divergence. Stochastic is rising from the oversold zone but remains weak. 20EMA is bearish and price will need to move above $1706 to negate the bearish price trend. Else we are likely to test $1680 again.
| Support | 1701.55 | 1693.60 | 1686.45 |
| Resistance | 1714.05 | 1726.25 | 1740.15 |
AUD/USD – Price rose to a high of 0.7725 on Friday, missing our sell order at 0.7735. Price has declined to a low of 0.7620 on Friday but has bounced back to 0.7721 again this morning. MACD has turned bullish but Stochastic has a bearish crossover near the overbought zone and is hinting of a bearish price trend ahead. 20EMA is neutral at the moment. Price may pull back higher to 0.7730 again but we see a decline from this high to 0.7620 again.
| Support | 0.7685 | 0.7645 | 0.7615 |
| Resistance | 0.7720 | 0.7750 | 0.7790 |