FX Commentary – US Dollar Is Softer As US Treasury Yield Declined

Market Talk

– The dollar inched up on Wednesday morning in Asia but remained near multi-week lows as subdued U.S. bond yields had diminished the U.S. currency’s yield appeal in the previous day. Flare ups in coronavirus infections also lent support to the U.S. dollar.

– U.S. benchmark 10-year Treasury yield hovered around the 1.56% mark and near its lowest level since mid-March 2021, continuing its consolidation following its retreat from a 14-month high at the end of March and dragged the U.S. dollar lower

– However, surging COVID-19 numbers globally put paid to expectations of a quick economic recovery and investors’ flight to safety boosted the greenback and yen, another safe-haven currency, with the Japanese currency climbing to a seven-week high against the U.S. dollar.

– The euro traded at $1.2039, after climbing to a seven-week high of $1.2079 during the previous session. The European Union’s procurement of an additional 100 million doses of the COVID-19 vaccine also lent support to the single currency.

– Gold was up on Wednesday morning in Asia as softer U.S. Treasury yields increased demand for the safe-haven yellow metal. Increasing global COVID-19 cases also helped the yellow metal.

Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation.
2. Buy GBP/USD at 1.3910. Stop at 1.3875 and target at 1.4010.
3. Subdued US bond yield and more vaccine in Europe are both supportive of the British pound.
4. Price is supported by the 20EMA. Bullish MACD and 20EMA are also hinting of a bullish price trend.

Fundamental Comments
1. Subdued U.S. bond yields is likely to diminished the U.S. dollar appeal.
2. An increased supply of COVID-19 vaccine in Europe is likely to aid the British pound.

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

Key Levels


Technical Overview

USD/JPY – Price was capped by the 20EMA yesterday and has moved lower to 107.86 on the back of an increase in risk aversion. MACD is warning with a divergence of a possible price low and Stochastic is into the oversold zone but 20EMA is bearish and hinting of a strong bearish price trend. If price is unable to move above 108.60, its trend is likely to remain bearish.


EUR/USD – Price reached a high of 1.2079 overnight and has been moving lower. Price is coming to the 20EMA which should be able to provide support at 1.2020. A break of this support is likely to send price lower to 1.1990. MACD remains bullish. 20EMA is also bullish. Stochastic is near to the overbought zone but is still able to support another price rally.


USD/CHF – Price has declined lower for the past 2 weeks and reached a low of 0.9128 on Monday. Since that low, price has been moving higher and is approaching the 20EMA resistance at 0.9170. We think the price is likely to be capped by this 20EMA resistance line and there is likely to be another test to the low at 0.9120. MACD remains bearish and Stochastic is weak.


XAU/USD – We had a buy recommendation yesterday, which was filled at $1767 when price dropped to a low of $1763.45. Price has moved higher and this morning, price has reached a high of $1785.58 and we are expecting price to continue its movement higher to $1799. We would suggest shifting stop to cost at $1767 and keeping profit target at $1799. MACD and 20EMA are both bullish but Stochastic is already in the overbought zone.


NZD/USD – Price was supported by the 20EMA line this morning and if price is able to hold around this support, we are likely to see another rally to the previous high at 0.7228. However, we are bearish and we think price is likely to decline lower to 0.7120. Stochastic and MACD had both given a bearish divergence warning and with Stochastic moving lower, we are inclined to be bearish.


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