FX Commentary – Gold Hit A 9-Month Low On Rising Yield Trend

Market Talk
– The dollar was down on Tuesday morning in Asia but was near a three-and-a-half year high as bond yields rose and the U.S.’ economic normalization from COVID-19 is expected to come faster than expected, which puts the U.S. currency at a distinct advantage.

– Investors grappled with inflation fears as the Senate passed the US$1.9 billion stimulus package bill proposed by President Joe Biden earlier in the year, on Saturday following an overnight vote.

– Investors also continue to price in increasing optimism for the U.S. economic recovery from COVID-19, as well as higher inflation, as ten-year U.S. bond yields climbed to a one-year high on Friday.

– The euro dropped to a low last seen in late November 2020, ahead of the European Central Bank handing down its policy decision on Thursday. The USD/JPY pair inched higher to 109.09, its highest in nine months after Japan’s GDP grew 2.8% quarter-on-quarter in the fourth quarter of 2020 and lower than market’s forecast.

– Gold was up on Tuesday morning in Asia after slipping to a nine-month low on Monday, as the greenback strengthened after U.S. Treasury yields continued their upward trend, increasing the opportunity cost of holding bullion.

Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7645. Stop at 0.7610 and target at 0.7810.
3. Expectation of rising commodities prices and a rebound in global trades are both likely to keep the Aussie strong.
4. A Double Bottoms chart pattern with MACD divergence warning are signs of a possible bottom and reversal.

Fundamental Comments
1. Expectations for a rebound in global trade are likely to keep the Aussie dollar strong.
2. Expectation of rising inflation is likely to lead to a rise in global commodities which is likely to benefit the Aussie dollar

Technical Comments
1. A possible Double Bottoms chart formation is hinting of a possible price low and an impending reversal.
2. MACD is warning with divergence of a possible price low and an impending reversal.

Key Levels


Technical Overview

USD/JPY – The price rally continues for another day and price has now reached another new high of 109.20.  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 109.55.


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 1.1835 last night. Stochastic is the oversold zone. MACD remains bearish. Both MACD and Stochastic had reached their extreme and could be turning up. 20EMA is pointing lower with a steep slope, hinting of a strong bearish price trend ahead. We may see a price correction higher to 1.1915 over the next couple of days.


GBP/USD – Price rose to a high of 1.3857 overnight, missing our sell recommendation at 1.3860. However, price did not go lower to our target area. Instead, price has moved in a sideways consolidation. MACD is neutral around the zero line. Stochastic is rising and moving towards the overbought zone. 20EMA is flat and neutral at the moment. We think price may have reached a short term bottom and could be consolidating before a reversal.


XAU/USD – Price declined to a 9-month low last night at $1676.54 and has moved higher to $1691.33 this morning. We are expecting price to move higher to $1714 in the next couple of days ahead as MACD has been warning with divergences of a possible low. Stochastic is also in the oversold zone but 20EMA is bearish and pointing lower with a steep slope, hinting of a strong bearish trend.


USD/CNH – After a 4-week rally, with USD/CNH price rising from a low of 6.4010 to a high of 6.5623 this morning, we think price may have reached a high and a price correction is likely. This price correction could bring price lower to 6.50 in the next few days. MACD, while bullish, has reached an extreme point and is turning lower. Stochastic is in the overbought zone for some time now and is likely to move lower after a bearish crossover.


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