FX Commentary – Euro Declined As ECB Killed Off Tapering Of QE

Market Talk

– The dollar was down on Friday morning in Asia, caged into a narrow trading range as investors await a U.S. Federal Reserve meeting in the following week, despite US unemployment claims coming in at a 13-month low.

– The euro fell after ECB President Christine Lagarde warned that expectations of tapering of bond purchases are premature. The ECB kept rates unchanged and said that the QE purchases would continue at 20B euro and continue until at least the end of March 2022.

– The Fed will hand down its policy decision on Apr. 28. Fed Chairman Jerome Powell is likely to repeat Lagarde’s message that talk of tapering is premature, which would put downward pressure on Treasury yields and cap the dollar’s gains against most currencies.

– The Australian and New Zealand dollars steadied on Friday, but traders said risks are pointed to the downside due to a recent weakening in commodity prices.

– Gold was up on Friday morning in Asia and was set to record a third consecutive weekly gain, after US President Joe Biden’s proposal to hike capital gains tax weighed on US Treasury yields, while a weaker dollar also bolstered the metal’s appeal.

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7160. Stop at 0.7120 and target at 0.7225.
3. A retreat in U.S. Treasury yield and Biden’s proposal to hike capital gains tax are both likely to weigh on US dollar.
4. A Hammer candlestick price pattern and bullish MACD and Stochastic are hinting of a bullish price trend ahead.

Fundamental Comments
1. Fading gains in U.S. Treasury yield is weighing on the greenback.
2. US President Joe Biden’s proposal to hike capital gains tax is likely to weigh on US dollar.

Technical Comments
1. A Hammer candlestick price pattern is indicating a possible price low and a reversal.
2. MACD is turning bullish and Stochastic is turning up from the oversold zone. Both are hinting of a bullish price trend ahead.

Key Levels

Support0.71650.71200.7090
Resistance0.71950.72300.7265

Technical Overview

USD/JPY – The marginal decline continues and yesterday we saw a lower low at 107.80 which was 6 pips lower than the previous day’s low. However MACD and Stochastic are both showing divergences and hinting of a possible price low in the making. Daily price range is also getting smaller which is a possible hint of a trend reversal.

Support107.80107.50107.15
Resistance108.20108.60108.95

EUR/USD – Price reached a high of 1.2079 on Tuesday and we have seen a decline to 1.1993 last night, which was above the previous breakout point. This previous resistance turned support is now supporting price and as long as price stays above this support at 1.1990, we are likely to see another test of 1.2079 again in the next few days MACD remains bullish and Stochastic is near to the oversold zone. 20EMA is flat and neutral at the moment.

Support1.19901.19451.1895
Resistance1.20301.20801.2115

GBP/USD – Our buy recommendation was filled at 1.3910 on Wednesday but last night our stop at 1.3875 was filled. We lost 45 pips on this trade. Price reached a low of 1.3823, which was also the Fibonacci 62% correction point of the advance from 1.3715 to 1.4008. Stochastic is in the oversold zone and we are likely to see a bullish crossover, hinting of a bullish price trend. MACD and 20EMA remain bearish.

Support1.38251.37901.3755
Resistance1.38651.38951.3950

XAU/USD – Our buy recommendation from Tuesday was stopped out yesterday as we had moved stopped higher to $1787 while keeping profit target at $1799. We still make $20 on this trade. MACD remains bullish but there was a bearish divergence warning. Stochastic is still moving lower. 20EMA is flat and neutral at the moment. Price is still within an uptrend channel and unless price moves below $1768, the uptrend is still intact.

Support1777.251765.451758.50
Resistance1789.701800.001815.65

XAG/USD – Our buy order was filled at $26.15 when price fell to a low of $25.97 overnight. Our view remains unchanged and we would suggest keeping stop at $25.85 and profit target at $26.90. MACD remains bullish and is hinting of a bullish price trend. Stochastic is still moving lower towards the oversold zone but 20EMA is neutral and flat at the moment.

Support25.9025.6025.15
Resistance26.1026.3526.65

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