FX Commentary – Decline In US Treasury Yield Weighs On US Dollar

Market Talk

– The dollar was up on Tuesday morning in Asia but remained near multi-week lows as U.S. Treasury yields fell and investors consolidated positions ahead of the U.S. Federal Reserve’s latest policy decision.

– Durable Goods data overnight showed demand for U.S.-made capital goods rose in March and shipments surged, indicating accelerated economic growth in the first quarter due to government aid and increasing rates of COVID-19 vaccination giving demand a boost.

– The dollar has fallen nearly 3% since late March as U.S. Treasury yields traded in narrow ranges after retreating from a 14-month high of 1.7760%, slashing the currency’s yield appeal. The safe-haven greenback was also out of favour after world stocks started the week hitting a record high, amid increasing investor confidence in a rapid global recovery from the pandemic.

– The dollar edged to 108.18 yen, continuing its rise from the seven-week low of 107.48 reached Friday. The yen showed a muted response after the Bank of Japan kept its monetary policy on hold as widely expected.

– Gold was down on Tuesday morning in Asia as investors await U.S. Federal Reserve’ policy decision, which will be handed down on Apr.29. Despite expectations of an easy monetary policy and a retreat in Treasury yields, Gold has not been able to rally.


Chart Focus XAU/USD – Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1780. Stop at $1771.90 and profit target at $1797.00.
3. A retreat in US Treasury yield and expectations of an easy monetary policy are both weighing on the US dollar.
4. Price is near to a strong support and momentum indicators are hinting of a bullish price trend ahead.

Fundamental Comments
1. Expectation of a easy monetary policy when the Federal Reserve hands down its policy later in the week is weighing of the US dollar.
2. A retreat in Treasury yields is weighing on the US dollar.

Technical Comments
1. Price is finding a strong support provided by the 20EMA together with the base of the rising trend channel.
2. Both MACD and Stochastic are turning up and hinting of a bullish price trend ahead.


Key Levels

Support1779.201768.251758.50
Resistance1788.651797.851808.75

Technical Overview

USD/JPY – We saw a decline to 107.47 on Friday night but price was able to bounce right up again. Price has now moved above 108.20 and could be heading higher to the Fibonacci 38% correction point at 108.80. MACD and Stochastic had earlier given bullish divergence warning of a possible low in the process of forming. 20EMA has also turned bullish.

Support107.95107.45107.15
Resistance108.20108.60108.95

EUR/USD – Price broke above 1.2079 last Friday and has moved to a high of 1.2116 on Monday. A decline followed and currently, the 20EMA is halting the price decline at 1.2065. Stochastic is still declining but MACD remains bullish. MACD is also hinting of a bullish price trend ahead. If price can hold above 1.2060, we can see a break of 1.2115 for 1.2180 in the next few days ahead.

Support1.20601.20301.1990
Resistance1.20901.21201.2180

GBP/USD – Our buy entry was filled last night at 1.3885 when price declined to a low of 1.3865. Our view remains unchanged. We would recommend keeping stop at 1.3850 and profit order at 1.3995. Stochastic is in the middle of its range and MACD is near to the zero line. 20EMA is also flat. Both 20EMA and MACD are also hinting of a sideways movement.

Support1.38651.38251.3795
Resistance1.38951.39301.3985

USD/CAD – Price had reached a high of 1.2653 last week and has been declining. Last night price reached a low of 1.2383 and Stochastic is deep into the oversold extreme. MACD and 20EMA remain bearish. 20EMA is also hinting of a strong bearish price trend. We may see a price correction to 1.2450 if price is halted by a previous low point at 1.2364.

Support1.23801.23601.2310
Resistance1.24151.24551.2505

AUD/USD – Price reached a high of 0.7814 last night and in the process, created a Double Top chart pattern with last week high at 0.7815. MACD remains bullish but Stochastic is into the overbought zone. 20EMA is bullish and pointing higher, hinting of a bullish price trend ahead. Price needs to move above 0.7815 in order to progress higher to 0.7915. If price is unable to move above the resistance at 0.7815, price is likely to decline back to 0.7705. We think price can move above 0.7815.

Support0.77850.77550.7725
Resistance0.78150.78500.7885

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