FX Commentary – Biden’s initiative Is Likely To Keep Yields Elevated

Market Talk
– The dollar held near a multi-month high against other major currencies on Thursday as investors bet fiscal stimulus and aggressive vaccinations will help the United States economy to grow faster than other countries.

– U.S. President Joe Biden announced his long awaited $2 trillion-plus job plan, including $621 billion to rebuild infrastructure and alongside the $1.9 trillion stimulus package, are likely to keep bond yields elevated.

– The euro hit a near five-month low of $1.1704 as Europe continues to suffer with a third wave of COVID-19 cases and a vaccination program lagging behind that of the U.S. while France went into its third national lockdown.

– The U.S. currency held firm against the yen after ending March with its biggest monthly gains since November 2016. The dollar traded at 110.74 yen, having risen to as high as 110.97, its highest level in a year.

– Gold moved back above $1700 on Wednesday helped by the greenback’s pullback after a retreat from bond yields, but elevated U.S. bond yields still put the yellow metal on course for its biggest quarterly decline in more than four years.


Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 110.40. Stop at 110.05 and target at 111.40.
3. Biden’s fiscal stimulus and aggressive vaccine rollout are both likely to aid the US dollar.
4. Price is supported by a strong support and MACD is hinting of a bullish price trend.

Fundamental Comments
1. Biden’s infrastructure initiative is likely to keep bond yields at an elevated level.
2. The U.S. big fiscal stimulus and aggressive vaccine rollout is likely to aid the US dollar

Technical Comments
1. Price is likely to be supported by the 20EMA and a previous price support.
2. MACD remains bullish and is hinting of a bullish price trend

Key Levels

Support110.35109.95109.60
Resistance110.95111.40111.70

Technical Overview
NZD/USD – Price has declined to 0.6944 overnight and if price can hold this support, we are expecting a bounce higher to 0.7030. MACD is hinting with a divergence of a possible price low and Stochastic is approaching the oversold zone. 20EMA is flat and neutral at the moment. However, a break of 0.6940 could lead to a decline to 0.6880.

Support0.69400.68950.6840
Resistance0.69850.70100.7040

EUR/USD – Price broke the support at 1.1760 on Tuesday and reached a low of 1.1703. The ability to hold above 1.1700 managed to provoke a rally to 1.1759. However price was capped by this resistance and price has declined back near 1.1700. If price can hold above 1.1700, we are likely to see a break above 1.1760 for 1.1835 while a break is likely to lead price lower to 1.1610.

Support1.17001.16501.1610
Resistance1.17601.17901.1835

GBP/USD – A price move above 1.3760 yesterday negated our bearish view for 1.3670. However, price only reached a high of 1.3812 and has declined to 1.3762. Stochastic is still rising but MACD is neutral at the moment. 20EMA is also flat and neutral. Price action at the moment is inconclusive and we would prefer to watch and wait for a better trading idea.

Support1.37451.37051.3670
Resistance1.37901.38451.3875

XAU/USD – Price broke the range’s support at $1718 on Monday and by Wednesday price had reached a low of $1677. Price formed Double Bottom chart pattern with a break above $1690 and price could be heading back to the previous range’s support at $1718. MACD is bullish but Stochastic is in the overbought zone. A break above $1718 is likely to target $1755.

Support1706.101692.901677.50
Resistance1718.901732.551755.35

USD/CNH – We had a buy recommendation at 6.5640 which was filled yesterday when price declined to a low of 6.5553. Price has since moved higher to 5.5830. Stochastic has a bullish crossover and is moving higher. MACD and 20EMA remain bullish. We see price moving higher above 6.60. We would recommend shifting stop to cost at 6.5640 while keeping profit target at 6.6090.

Support6.58206.56306.5515
Resistance6.59706.60956.6345

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