FX Commentary – US Dollar Rallied With Bond Yield

Market Talk

– The dollar was up on Wednesday morning in Asia, rising to a fresh one-year high against the yen over investor bets that fiscal stimulus and an aggressive vaccine rollout will help the U.S. lead a global economic recovery from COVID-19 pandemic.

– Rising U.S. bond yields also gave the greenback a boost, with the yield on the benchmark 10-year Treasury note touching a one-year high of 1.776% on Tuesday ahead of U.S. President Biden infrastructure plan set to be announced tonight.

– Data overnight showed U.S. consumer confidence soared to 109.7 in March, its highest since the start of the pandemic, supporting views that economic growth will accelerate in the coming months, driven by more fiscal stimulus and an improving public health situation.

– China’s manufacturing activity expanded at the quickest pace in three months in March as factories cranked up production after a brief lull during the Lunar New Year holidays, with improving global demand adding further momentum to a solid economic recovery.

– Gold slipped on Wednesday morning in Asia as a firmer dollar and hopes for a faster U.S. economic recovery dampened demand for gold. China’s faster than expected growth in factory activity also dent prospect for safe-haven bullion.

Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.5640. Stop at 6.5510 and target at 6.6090.
3. Strong consumer confidence and fiscal package are both likely to aid economic recovery and bond yield.
4. Price is supported by 20EMA and a previous resistance line with MACD hinting of a bullish price trend.

Fundamental Comments
1. Rising bond yield to a one-year high of 1.776% is aiding the U.S. dollar.
2. Strong consumer confidence and another fiscal package is likely to aid economic recovery and the US dollar

Technical Comments
1. Price is supported by 20EMA line as well as a previous resistance turned support line.
2. MACD remains bullish and is hinting of a bullish price trend ahead.

Key Levels

Support6.56306.55156.5370
Resistance6.58306.59706.6095

Technical Overview
USD/JPY – Price has continued its climb to 110.96 this morning and looks set to climb higher. Stochastic is into the overbought extreme but both MACD and 20EMA are both hinting of a strong bullish price trend ahead. The next strong resistance lies at 112.20, which is year 2020’s high as well as the Fibonacci 261.8% price projection point.

Support110.70110.35109.85
Resistance111.05111.50111.90

EUR/USD – The price decline broke 1.1760 last night and a break of this support has led price lower to 1.1700. Stochastic is into the oversold zone and MACD is also near to its extreme. There is also a possibility of a MACD divergence forming. However, 20EMA is pointing lower with a steep slope, which is a hint of a strong bearish trend ahead. If price fails to hold above 1.1700, it could decline to 1.1610.

Support1.16901.16501.1610
Resistance1.17201.17601.1790

GBP/USD – Price reached a high of 1.3846 on Monday and has declined to 1.3706. Stochastic has a bearish crossover and is moving lower. MACD remains bearish but there was a bullish crossover and both lines of MACD are moving higher towards the zero line. 20EMA is neutral at the moment. We remain bearish for 1.3670. A price move 1.3760 would negate our bearish view for 1.3670.

Support1.37101.36701.3620
Resistance1.37501.37801.3815

XAU/USD – Price broke the range’s support at $1718 on Monday and by Wednesday price had reached a low of $1677. Price could be forming a Double Bottom chart pattern and a price movement above $1690 would confirm $1677 as the low. MACD remains bearish but Stochastic is in the oversold extreme. 20EMA is also bearish.

Support1676.551668.601658.50
Resistance1688.201698.301715.65

NZD/USD – We had a sell recommendation on this pair at 0.7035 but this order was not filled as price only reached a high of 0.7017. Price has declined to 0.6970 and we are expecting price to continue its downward movement to 0.6950. Stochastic is still declining and has not reached the oversold zone. MACD and 20EMA is neutral at the moment.

Support0.69450.69150.6875
Resistance0.69950.70350.7070

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