FX Commentary – US Dollar Outlook Remains Bullish

Market Talk

– The dollar was largely steady on Monday as investors soaked up last week’s strong U.S. employment report and looked ahead to data on the U.S. services sector for affirmation of a solid economic rebound from the coronavirus shock.

– The U.S. economy created more jobs than expected in March, data showed on Friday. However, there was scant reaction in currencies as most major stock and bond markets were closed for Easter holidays.

– The outlook for the dollar remains solid as the underlying economic pulse pointed to a strengthening recovery. The U.S. currency is likely to build on those gains as investors look for ways to bet on a global economic recovery from the worst of the coronavirus pandemic, analysts said.

– The dollar was last quoted at 110.65 yen, not far from its strongest level in a year. Against the euro, the dollar traded at $1.1751, which is close to a five-month high. The British pound held steady at $1.3822. Trading was subdued in Asia as Australia, China, and Hong Kong are also closed for holiday.

– Gold moved back above $1700 to $1730.25 despite as a firmer dollar and hopes for a faster U.S. economic recovery. Price recovery could gain traction if price is able to break above $1755 on a Double Bottom chart pattern.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2570. Stop at 1.2535 and target at 1.2720.
3. A strong US employment report and an easing of OPEC eases production cut are both likely to weigh on the Canadian dollar.
4. A Fibonacci support and a bullish Stochastic are both hinting of a bullish price trend ahead.

Fundamental Comments
1. An affirmation of a solid economic rebound from a strong US employment report is likely to aid the greenback.
2. A decline in crude oil price after OPEC eases production cut for May to July is likely to weigh on the Canadian dollar

Technical Comments
1. A price decline was supported by the Fibonacci 38% correction point.
2. Stochastic is rising after a bullish crossover and hinting of a bullish price trend

Key Levels

Support1.25601.25251.2485
Resistance1.26001.26451.2685

Technical Overview

USD/JPY – We had a buy recommendation from last Thursday which was filled when price dropped to a low of 110.37. Price has moved higher to 110.67 and we are expecting this price momentum to continue towards 111.40. MACD remains bullish and is hinting of a bullish price trend ahead. Stochastic and 20EMA remain bullish. We would suggest shifting stop higher to 110.30 while keeping profit target at 111.40.

Support110.35109.95109.65
Resistance110.95111.40111.70

EUR/USD – Price broke above 1.1760 but only managed to move to higher to 1.1785. Stochastic is declining after a bearish crossover in the overbought zone. MACD and 20EMA remain neutral at the moment. With Europe on holiday, we are expecting a tight range for today. Beyond today, we see a test of 1.1700 again.

Support1.17001.16501.1610
Resistance1.17601.17901.1835

GBP/USD – Price broke above 1.3812 to reach a high of 1.3852 and the decline from this high has managed to stay above the 20EMA at 1.3805. MACD remains bullish. Stochastic is near to the overbought zone and has a bearish crossover. 20EMA is bullish. If price is capped below 1.3860, we see a test of the downside at 1.3745.

Support1.38051.37601.3705
Resistance1.38551.38901.3945

XAU/USD – Price has reached a high of $1730.26 after hitting a bottom at $1677.50. Stochastic is into the overbought zone but MACD remains bullish. 20EMA is also bullish and is hinting of a bullish price trend ahead. There may be a price correction to $1715 but this could be a good buying opportunity for another test of $1755.

Support1714.801705.701693.65
Resistance1730.301740.951755.35

USD/CNH – We had a buy recommendation at 6.5640 which was filled last Wednesday when price declined to a low of 6.5553. Price has since moved higher to 5.5875. Stochastic is in the overbought zone. MACD and 20EMA remain bullish. We would recommend shifting stop to cost at 6.5640 while keeping profit target at 6.6090

Support6.56306.55156.5370
Resistance6.58806.60956.6345

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