FX Commentary – US Dollar Clung To Gains Ahead Of FOMC

Market Talk

– The dollar clung to small gains on Tuesday morning in Asia, holding onto gains from a 3-day rally against many peers ahead of a week of central bank meetings, headlined by the U.S. Federal Reserve FOMC meeting that starts later tonight.

– The dollar’s gains come amid a retreat in U.S. benchmark yields from their highest levels in more than a year ahead of the Fed meeting. The benchmark ten-year Treasury yield was last at 1.6073%, after climbing to 1.6420% at the end of the previous week.

– The euro remained largely unchanged and remained below the $1.20 mark since Mar. 5 as Europe’s COVID-19 vaccine rollout runs into some snags. Germany and France are among the European countries that have suspended the AstraZeneca’s vaccine over rising concerns of possible side effects.

– The greenback hovered just off its highest since June versus the yen at 109.36 ahead of Bank of Japan (BOJ) meeting. The BOJ will begin its own two-day policy meeting along with an extensive policy review, on Thursday.

– Gold was up on Tuesday morning in Asia, as Treasury yields backed off recent high and investors awaiting a U.S. Federal Reserve meeting, due to start later in the day, to tackle growing inflation and bond yields concerns.

Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2510. Stop at 1.2540 and target at 1.2440.
3. US fiscal stimulus and a decline in US Treasury yields are both likely to favour the Canadian dollar.
4. Price faced a strong resistance and MACD is hinting of a strong bearish price trend ahead.

Fundamental Comments
1. US fiscal stimulus is likely to lead to an economic recovery and boosting demand for crude oil.
2. Decline in US Treasury yields is likely to weaken the U.S. dollar.

Technical Comments
1. Price faced a strong resistance provided by a previous support turned resistance line and the 20EMA line.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels


Technical Overview

USD/JPY – The price rally continues for another day and price has now reached another marginal new high of 109.36. Both MACD and Stochastic have given a divergence warning of a possible high in the making. 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 – A strong resistance at 1.1995 managed to cap the rally and sent price lower to 1.1909 last Friday’s night. A rally to 1.1968 on Monday’s morning trading fizzed off and price has been in a tight range, trading from 1.1968 to 1.1910. MACD remains neutral but Stochastic is hinting of a price rally. 20EMA is flat and not giving any hints.


GBP/USD – Our view remains the same as yesterday. We think price may have reached a temporary top of 1.4004 last Friday. Price had declined lower to 1.3863 this morning but we do not think this is the low. We think there will be another decline to 1.3775. Stochastic is moving lower towards the oversold zone. MACD remains bearish. 20EMA has turned bearish and hinting of a bearish price trend ahead.


XAU/USD – Price had risen to a high of $1737.10 this morning and may continue to rise higher. A break of the recent high at $1739.50 is likely to send price higher to $1747.50 which is the Fibonacci 161.8 projection level. Stochastic is near to the overbought zone. MACD remains bullish looks weak. 20EMA is rising and is hinting of a bullish price trend ahead.


AUD/USD – We had a sell recommendation on this pair yesterday that was filled when price reached a high of 0.7755. There was little movement yesterday and price is currently at 0.7750. We would recommend keeping stop at 0.7780 and profit order at 0.7625. Stochastic is in the overbought zone but MACD remains bullish. 20EMA is neutral at the moment.


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