FX Commentary – US Dollar Remains Strong On Positive U.S. Economic Data, COVID-19 Vaccine Rollouts & Rising Treasury Yields

Market Talk
– The dollar was down on Friday morning in Asia but was still hovering near four-month highs as positive U.S. economic data, COVID-19 vaccine roll outs and rising Treasury yields all continued to cap the U.S. currency’s losses.
– U.S. jobless claims fell to a one-year low last week and President Joe Biden said he will double his vaccination rollout plan after reaching his previous goal of 100 million shots 42 days ahead of schedule, both of which supported the US dollar.
– The euro fell against the dollar to $1.1761, the strongest for the greenback since November 2020. Investor sentiment for the single currency has weakened thanks to fresh lockdowns and delays in the COVID-19 vaccine rollout across the continent.
– Aussie and Kiwi recovered against the US dollar from their losses earlier in the week and are likely to remain supported because of the two countries’ success in limiting the economic fallout from COVID-19, according to some investors.
– Gold was down on Friday morning in Asia and was set to record its first weekly decline in three weeks as U.S. Treasury yields nudged up and the US dollar strengthened, denting the non-yielding yellow metal’s appeal

Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3795. Stop at 1.3835 and target at 1.3670.
3. Rising Treasury yields and good US job data are both likely to support the US dollar.
4. A strong price resistance and a bearish MACD are both hinting of a price decline ahead.

Fundamental Comments
1. Rising Treasury yields are likely to support the US dollar.
2. A better than expected US jobless claims is likely to support the US dollar

Technical Comments
1. Price resistance provided by a previous support turned resistance line could provoke another downtrend.
2. MACD remains bearish and could be turning down, which is a hint of a bearish price trend.

Key Levels


Technical Overview

USD/JPY – Price reached a high of 109.30 this morning but was unable to move above the previous high of 109.36. Stochastic is into the overbought extreme and may not be able to support a price rally. MACD is bullish but is not strong. We think price is likely to be capped at 109.36 and sideways range movement from 108.30 to 109.36 is more likely than a bullish or bearish trend.


EUR/USD – Price broke below 1.1835 on Wednesday and the decline has continued to 1.1761 last night. MACD remains bearish and 20EMA is hinting of a bearish price trend but Stochastic is in the oversold extreme at the moment. While we remain bearish, we are wary of a price rally to correct the oversold condition.


XAG/USD – Price reached a low of $24.40 overnight but has bounced up higher to $25.26. 20EMA is currently capping a price rally at $25.20. There is also a uptrend line that is now providing resistance to price at $25.30. Price will need to move above $25.35 to negate the bearish trend. Below this resistance, there is still a chance of a decline back to $24.40.


XAU/USD – Price remains within last Thursday’s high-low range of $1718 to $1755 and we are expecting this range to hold again. Price tested to a high of $1741.30 and declined to a low of 1721.80. MACD is flat and near to the zero line and 20EMA is also flat and hinting of a sideways movement. Stochastic is near to the oversold extreme. Watch the range for breakout and clues to the next direction for gold


AUD/JPY – We had a sell recommendation on this pair yesterday. Price has reached a high of 83.31 at the point of writing and given the strong rising momentum, we think our position may be stopped out at 83.40. Price has also moved above the 20EMA, which could be a sign that price had bottomed at 82.27. A move above 83.75 would confirm this reversal and calls for a rally to 84.40.


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