FX Commentary – Gold Retreated On Rising Yields and Upbeat US Data

Market Talk

– The dollar was up on Friday morning in Asia following overnight strong US economic data but was set for a fourth consecutive week of losses, as the U.S. Federal Reserve sticks to its dovish monetary policy.

– US GDP growth accelerated 6.4% in the first quarter, compared to 4.3% in the previous quarter, buoyed by government stimulus cheques, setting the course for what is expected to be the strongest performance this year in nearly four decades.

– The Canadian dollar climbed to a more-than-three-year high of C$1.2273 per greenback on Friday, on track for a 1.7% weekly gain that would be its biggest since the start of November.

– The euro stood at $1.2122, near to a two-month high of $1.2150 set the previous session. The Australian dollar stood at $0.7779, climbing back toward the six-week high of $0.7818 touched on Thursday.

– Gold was down on Friday morning in Asia as U.S. Treasury yields gained on upbeat U.S. economic data released overnight. Treasury yield rose after President Joe Biden proposed US$1.8 trillions of dollars in new spending to be financed by an increase in tax rate.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2280. Stop at 1.2250 and profit target at 1.2365.
3. Rising US Treasury yields and a declining crude oil price trend are both weighing on the Canadian dollar.
4. Candlestick price pattern is hinting of a price reversal while momentum indicators are hinting of a bullish price trend ahead.

Fundamental Comments
1. Rising Treasury yields as a result of upbeat US economic data is aiding the US dollar.
2. A decline in crude oil price is weighing on the Canadian dollar.

Technical Comments
1. Candlestick price pattern is hinting of a possible price bottom and an impending price reversal.
2. Stochastic is grossly oversold and MACD has a bullish crossover. Both are hinting of a bullish price trend ahead.

Key Levels


Technical Overview
USD/JPY – Price broke above to the Fibonacci 38% correction point at 108.80 on Wednesday headed towards the Fibonacci 50% correction point at 109.20. Stochastic and MACD had both given a divergence warning of a potential price high when price made the high at 109.22. If price is unable to move above this high, we are likely to see a test of 108.35 in the next couple of days.


EUR/USD – Price rallied from the channel support at 1.2075 to a high of 1.2149 last night but both Stochastic and MACD are warning with divergence of a potential price high in the making. Price is still above the 20EMA and trend channel and the uptrend is intact and we may see a price movement to 1.2180. However a price move below the trend channel at 1.2090 would hint of a reversal in price trend.


GBP/USD – Our buy entry was filled Monday at 1.3885 and yesterday we had recommended lifting stop higher to 1.3920 and keeping profit order at 1.3995. Our view remains unchanged but MACD and 20EMA has turned bearish. Stochastic has a bearish crossover and is moving lower. We would stick to the stop and profit order for another day to observe the price trend.


XAU/USD – We saw a price decline to $1755.95 overnight which was accompanied by bullish divergence warnings from both Stochastic and MACD. This is a hint of a potential price low in the making. 20EMA is also bearish and hinting of a bearish price trend ahead.  Price has moved higher to $1772 and we are likely to see a continuation of this rally to test the resistance at $1790.


AUD/USD – We had a buy recommendation yesterday, which was filled at 0.7770. Price is currently little changed at 0.7773 but MACD has a divergence warning of a potential high in the making. Stochastic is in the middle of its range and 20EMA is flat and neutral at the moment. We would recommend closing out the position at current level as we think price may move sideways for today or even decline.


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