FX Commentary – US Dollar Stronger on Upbeat U.S. Consumption Data

Market Talk

– The dollar was up on Monday morning in Asia, making a cautious start to the week and the month of May, as investors await a slew of central bank decisions and U.S. economic data, to be released throughout the week, for clues on the global inflation outlook and policymakers’ responses.

– Trade was thinned by holidays in Japan and China, which kept a lid on volatility, leaving the greenback to trade where it settled after Friday’s leap based on strong US consumption data.

– Data on Friday showed U.S. consumer spending rebounded in March amid a surge in income as households received additional COVID-19 pandemic relief money from the government.

– The Chinese Yuan drifted lower to 6.4781 per dollar in offshore trade following hawkish remarks from U.S. Secretary of State Antony Blinken. The Aussie dollar inched up to 0.7720 after a better than expected Australian data.

– Gold was up on Monday morning in Asia, with a weaker US dollar giving the yellow metal a shine on the first trading day of May. Investors also await further U.S. economic data later in the week for clues to the next direction.

Chart Focus NZD/JPY
Key Points
1. Buy NZD/JPY recommendation.
2. Buy NZD/JPY at 78.40. Stop at 78.05 and target at 79.60.
3. An earlier recovery from coronavirus pandemic and interest rate differential are both aiding the NZ dollar.
4. A bounce from the Fibonacci 50% correction point and bullish momentum reading are both hinting of a bullish price trend ahead.

Fundamental Comments
1. The NZ economy has recovered earlier from the coronavirus pandemic compared to Japan and an earlier re-opening bode well for its economy.
2. Interest rate differential is against the Japanese yen.

Technical Comments
1. Price has bounced from the Fibonacci 50% correction point, hinting of a bullish price trend.
2. Stochastic and MACD are both about to turn up, hinting of a bullish price trend.

Key Levels


Technical Overview

USD/JPY – Price broke above to the Fibonacci 50% correction point at 109.20 on Friday and has reached the Fibonacci 62% correction point at 109.63. Stochastic has reached the overbought extreme but MACD remains bullish. However, MACD could be forming a divergence warning. 20EMA is also bullish and hinting of a bullish price trend. Inability to move above 109.70 is likely to send price lower to 107.50.


EUR/USD – Price has declined to 1.2010 this morning which is near to a critical support zone from 1.1990 to 1.2000. Stochastic is into the oversold zone and a bullish crossover could be forming. However MACD remains bearish and 20EMA is also hinting of a bearish price trend. We are likely to see a rally to 1.2060-1.2070 area but if price is capped at 1.2070, we could be heading lower to 1.1990 again


GBP/USD – We had a long position from last Monday at 1.3885 and on Friday, we had recommended to bring stop higher to 1.3920 while keeping profit target at 1.3995. Stop was triggered on Friday at 1.3920 but we still managed to make 35 pips on this trade. Price has declined to a low of 1.3799 this morning and we are expecting price to move lower to 1.3715 in the next few days.


XAU/USD – Last Friday, price moved within the previous Thursday’s range in an Inside Day chart pattern. For today, we are expecting price to stay within last Thursday’s range in a consolidation. Stochastic is close to the overbought extreme but MACD remains bullish and is hinting of a bullish trend. 20EMA is also hinting of a bullish price trend. Watch the breakout of Thursday’s range for clues to the next directional movement.


USD/CAD – We had a buy recommendation at 1.2280 which was filled when price declined to a low of 1.2265. Price has moved higher this morning above 1.2300 and our view remains unchanged. Stochastic is moving higher and MACD is bullish and moving higher as well. 20EMA has also turned bullish. We would recommend bringing stop higher to 1.2260 while keeping profit target at 1.2365.


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