FX Commentary – USD/JPY Reached A 12-Month High

Market Talk

– The dollar was down on Tuesday morning in Asia but reached a one-year high against the yen with climbing Treasury yields, the quickening U.S. COVID-19 vaccination rollout and massive U.S. stimulus measures all flaming inflation concerns.

– 10-year benchmark yields trended upwards to 1.73% this morning, amid expectations that U.S. President Joe Biden’s infrastructure initiative, to be announced on Wednesday, could further bolster U.S. economic growth and drive up inflation as well.

– The greenback traded as high as 109.98 against the yen on Tuesday, its highest level since March 2020. Also helping the greenback on the path to its best month since 2016 is the dollar demand from Japan, as companies begin to square their books at the end of Japan’s fiscal year this week.

– The euro remained near the four-and-a-half month low reached on Monday, the short-term economic outlook became gloomier as France and Germany introduced tougher restrictive measures to curb a third wave of COVID-19 cases on the continent.

– Gold was down on Tuesday morning in Asia, dropping to its lowest level in more than two weeks. Investors turned away from the safe-haven asset as the quickening vaccine rollout and the prospect of more stimulus measures in the U.S. saw the dollar strengthen and Treasury yields climbed.

Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.7035. Stop at 0.7070 and target at 0.6950.
3. Rising Treasury yields and another stimulus package to bolster economic growth are both likely to support the US dollar.
4. A price resistance and an overbought Stochastic are both hinting of a possible price decline.

Fundamental Comments
1. Rising Treasury yields, rising to 1.73%, are likely to support the US dollar.
2. Another massive stimulus package aims to bolster US economic growth is likely to aid the US dollar

Technical Comments
1. Price is likely to be capped by the Fibonacci 38% correction point.
2. Stochastic has reached the overbought zone and is hinting of a possible price reversal.

Key Levels

Support0.69950.69450.6915
Resistance0.70350.70700.7110

Technical Overview
USD/JPY – We had a buy call on this pair yesterday but our order at 109.40 was not filled as price only declined to a low of 109.53. Price has continued its climb to almost 110 this morning but MACD is starting to warn with divergence, hinting of a possible price high in the making. Stochastic is also into the overbought extreme but 20EMA remains bullish. The next resistance lies at 110.15-110.25.

Support109.80109.50109.15
Resistance110.15110.50110.90

EUR/USD – A corrective rally on Friday was capped by the 20EMA at 1.1804 and the decline has continued to 1.1760. A break of this support is likely to lead price lower to 1.1700 in the next couple of days. Stochastic is close to the oversold zone but MACD remains bearish. 20EMA is also bearish and is hinting of a bearish price trend ahead. A move above 1.1805 is needed to negate our bearish view.

Support       1.17601.17101.1670
Resistance1.17901.18351.1870

GBP/USD – We had a sell recommendation which was filled on Friday at 1.3795. Yesterday, we had lowered stop to 1.3815 while keeping profit target at 1.3670. Our stop was triggered and we lost 20 pips. Price reached a high of 1.3846 and has declined to 1.3755. Stochastic has a bearish crossover and is moving lower. Both MACD and 20EMA are neutral. We remain bearish for 1.3670

Support1.37451.37051.3670
Resistance1.37801.38151.3850

XAU/USD – Price broke the range’s support at $1718 overnight and has declined to a low of $1704.35 at the point of writing. We see the decline continuing lower to $1698.45 within the next 2 days. MACD is bearish and is moving lower. Stochastic has moved into the oversold zone but 20EMA is hinting of a bearish price trend ahead.

Support1698.301687.101676.55
Resistance1715.651724.151732.55

USD/CHF – Price was supported by the 20EMA at 0.9375 and has bounced up above 0.9400. We see this rally continuing higher to 0.9465 in the next 2 days. MACD remains bullish and is turning up and hinting of a bullish price trend. Stochastic is likely to see a bullish crossover hinting of a bullish price trend. A move below 0.9370 would negate our bullish view.

Support0.93900.93650.9325
Resistance0.94400.94700.9515


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.