FX Commentary – US Dollar Pinned At Low As US Bond Yield Retreat

Market Talk
– The dollar was pinned near multi-week lows against most major currencies on Thursday as fading gains in U.S. Treasury yields reduced the greenback’s interest rate advantage.

– Sentiment toward the dollar has weakened as last month’s spike in Treasury yields reverses course, but some analysts say the outlook over the longer term remains positive due to a strong U.S. economy and an improved coronavirus vaccination programme.

– Bank of Canada signalled that it could start hiking interest rates in late 2022 after it cut the pace of bond purchases, making it the first Group of Seven central bank to move towards withdrawing extraordinary stimulus.

– The Australian and New Zealand dollars also held onto overnight gains against the greenback, supported by speculation that their central banks are more likely to follow Canada’s example due to an improving economic outlook.

– Gold was up on Thursday morning in Asia, sticking around eight-week high thanks to a weaker dollar and falling U.S. Treasury yields. Silver was lower in Thursday’s morning trade after reaching a 4-week high at 26.64 in the previous day.

Chart Focus XAG/USD – Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $26.15. Stop at $25.80 and target at 26.90.
3. Improving global economic outlook and retreat in U.S. Treasury yield is likely to aid Silver.
4. Price is likely to be supported by a strong support zone and MACD is hinting of a bullish price trend.

Fundamental Comments
1. Fading gains in U.S. Treasury yield is weighing on the greenback.
2. Improving global economic outlook is likely to lead to more demand for Silver

Technical Comments
1. Price is coming into a strong support zone supported by a previous resistance turned support line and the 20EMA line.
2.  MACD is bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price was capped by the 20EMA on Tuesday and had moved lower to 107.86 on Wednesday but MACD is warning with a divergence of a possible price low. Stochastic is also near to the oversold zone. 20EMA is bearish. Daily price range is also getting smaller which is a possible hint of a trend reversal. A move above 108.55 would be the first sign of a reversal.


EUR/USD – Price reached a high of 1.2079 on Tuesday and we have seen a decline to 1.1997, which was above the previous breakout point. This previous resistance is now supporting price and as long as price stays above this support, we are likely to see another test of 1.2079 again in the next few days. MACD remains bullish and Stochastic is about to have a bullish crossover.


GBP/USD – Our buy recommendation was filled at 1.3910 yesterday when price declined to a low of 1.3885, just above our stop at 1.3875. Our view remains unchanged and we are looking for a price movement above 1.4000 again. MACD remains bullish and Stochastic is moving towards the oversold zone. 20EMA remains bullish. Keep stop and profit orders unchanged.


XAU/USD – Our buy recommendation from Tuesday is still looking good with price close to the profit target. We would suggest bringing stop loss higher to $1787.00 while keeping profit target at $1799. MACD remains bullish but a bearish divergence warning may be developing. Stochastic is also into the overbought zone but 20EMA remains bullish and hinting of a bullish price trend.


NZD/USD – Price was supported by the 20EMA line yesterday and price was able to hold around this support.  We saw a rally to a high at 0.7218, which was below the previous high of 0.7228. This could be a sign of weakness. If price were to decline below 0.7160, it would confirm a Double Top chart pattern and call for a price move to 0.7092 in the next few days.


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