FX Commentary – US Dollar Near 10-month High Against Yen

Market Talk

– The dollar began the week firmly and within a whisker of milestone peaks against the euro and yen on Monday, as U.S. economic strength and a vaccine rollout proceeding much more quickly in US than in Europe drew investors into the greenback.

– The yen was not far from Friday’s 10-month low of 109.85 against the dollar as yield on benchmark 10-year U.S. Treasury notes rose to 1.66%. The yen is sensitive to difference in returns on U.S. and Japanese government debt.

– The euro traded at $1.1788, close to the previous week’s four-and-a-half-month low, and was headed for its worst month since mid-2019. Safety concerns hampering Europe’s COVID-19 vaccine rollout along rising coronavirus cases had led investors to avoid long euros

– Bank of England’s monetary policy committee members Michael Saunders and Silvana Tenreyro on Friday played down risks of runaway inflation when the U.K. economy recovers from COVID-19 pandemic. Tenreyro even emphasized that more stimulus measures could be needed yet ahead.

– Gold was down on Monday morning in Asia, with the yellow metal’s safe-haven status taking a hit as investors turned to the strengthening dollar and a rise in Treasury yields put the metal on course for its first weekly decline in three weeks.

Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 109.40. Stop at 109.00 and target at 110.20.
3. Positive US economic recovery and yields gap between US and Japanese bonds are both favouring the US dollar.
4. Price is supported by a previous resistance turned support line with MACD hinting of a bullish price trend.

Fundamental Comments
1. Positive US economic recovery is adding strength to the US dollar.
2. Yields gap between the US and Japanese bond is favouring the US dollar.

Technical Comments
1.  Price had broken above a range and the pullback is likely to find support at the previous resistance turned support line.
2. MACD and 20EMA are both bullish and is hinting of a bullish price trend

Key Levels


Technical Overview

USD/CNH – Price has moved close to a recent high resistance at 6.5624 this morning. A break of this resistance could lead price higher to 6.6485 according to the Ichimoku V-shaped price projection. MACD remains bullish and 20EMA is hinting of a strong bullish price trend ahead. Stochastic is moving higher and has not yet reached the overbought zone, hinting of more price upsides ahead. Below 6.4670 would negate our bullish view.


EUR/USD – Price broke below 1.1835 on Wednesday and the decline has continued to 1.1761 on Thursday. There was a corrective rally on Friday but price was capped by the 20EMA at 1.1804. MACD and 20EMA are both bearish and are hinting of a bearish price trend ahead. Stochastic has moved above the oversold zone but remains weak. We see price testing the low of 1.1700 in the next few days ahead.


GBP/USD – We had a sell recommendation which was filled on Friday at 1.3795 when price reached a high of 1.3812. Price has declined to the 20EMA support line at 1.3757 on Monday morning and a break of this support is likely to lead price lower to 1.3670. MACD remains bearish and Stochastic is into the overbought extreme. We would recommend lowering stop to 1.3815 while keeping profit target at 1.3670.


XAU/USD – Price remains within last Thursday’s high-low range of $1718 to $1755 and we are expecting this range to hold again for today. Price tested the downside but managed to hold above $1721 which was just below the previous day’s low. MACD is flat and near to the zero line and 20EMA is also flat. Stochastic is near to the oversold zone Watch the range for breakout and clues to the next direction for gold.


AUD/JPY – We had a sell recommendation on this pair on Thursday which was filled at 83.05. This position was stopped out at 83.40 on Friday and we lost 35 pips. Price has continued the rally to a high of 83.87 but this may be the high. Stochastic is in the overbought extreme and we could see a price correction to 83.25. MACD and 20EMA is hinting of a bullish price trend.


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