FX Commentary – US Dollar Nursed Losses As Bond Yield Retreated

Market Talk

– The dollar nursed losses on Thursday, holding near a three-week low against a basket of currencies as U.S. bond yields pulled back from last month’s surge with investors buying the Federal Reserve’s arguments that interest rates can stay low despite accelerated economic growth.

– Powell re-affirmed the central bank’s continued support for the economic recovery and said that a pullback in asset purchases would happen “well before” the central bank commits to an interest rate increase, a scenario many investors have regarded as a given.

– European Central Bank President Christine Lagarde said the eurozone economy is now relying on the “two crutches” of monetary and fiscal stimulus, which cannot be removed until the economy recovers completely helping the Euro to $1.1984, near its highest level in four weeks.

– The Australian dollar stood at $0.7724 near Wednesday’s three-week high, having broken out of its tight trading band over the last few weeks. The New Zealand dollar likewise hit a three-week high of $0.7150.

Gold was up on Thursday morning in Asia, as a retreat in U.S. bond yields pushed the greenback to three-week lows, boosting the appeal of the safe-haven yellow metal. Other precious metals also continued the upward trend with Silver rising 0.5% to $25.50

Chart Focus XAG/USD – Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $25.45. Stop at $25.15 and profit target at $26.10.
3. A retreat in bond yields and Powell’s assurance that interest rate will be kept low have both aided Silver.
4. Price has moved above a resistance point and MACD is hinting of a bullish price trend. Both are hinting of a price rally ahead.

Fundamental Comments
1. A retreat in U.S. bond yields has aided Silver and its price rally.
2. Powell’s assurance that interest rate will be kept low has aided Silver

Technical Comments
1. Price has moved above a price resistance and also the Fibonacci 62% correction point, hinting of more upside ahead.
2. MACD remains bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price has declined to a low of 108.75 but both MACD and Stochastic have warned with divergence of a possible low in the process of forming. There is also a strong support at 108.40 and 108.45, which is the Fibonacci 127% price projection of the earlier decline from 110.96 to 108.99. MACD and 20EMA remains bearish but Stochastic has declined into the oversold extreme.


EUR/USD – Price was capped by resistance at 1.1990 and if price is unable to move above this resistance, there could be a decline back to 1.1860. MACD is starting to warn with divergence and Stochastic is near to the overbought zone. 20EMA remains bullish with a steep slope hinting of a strong bullish trend. Watch the reaction 1.1990 for clues to the next direction.


GBP/USD – We had a buy recommendation which was filled at 1.3775 when price dropped to a low of 1.3750. Price has been capped by the Fibonacci 127% projection target at 1.3806 and will need to move above this point to continue its bullish trend. Failure could mean a decline back to 1.3660 in the next few days. Stochastic is near to overbought zone and MACD remains bullish. 20EMA is also bullish.


XAU/USD – Price had reached a high of $1758.50 last Thursday and had declined to $1723.58, which is the Fibonacci 38% correction point of the rally from $1677.50 to $1758.50. Price will need to move above $1758.50 to regain its bullish impetuous, else there is still a chance of a test of the Fibonacci 50% at $1717.90 or 62% correction point. MACD and 20EMA are both neutral.


NZD/USD – Price has hit a 3-week high of 0.7150 after coming off a Double Bottoms chart pattern at 0.6942. Price is likely to continue its rally towards 0.7195 which is also the 200% price projection target from the low of 0.6942 to the high at 0.7069. While Stochastic has reached the overbought zone, MACD and 20EMA are both hinting of a bullish price trend.


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