FX Commentary -US Dollar Under Pressure As Risk Appetite Improved

Market Talk

– The dollar stayed under modest pressure on Friday as global market risk appetite improved and traders looked forward to a key U.S. jobs report that could cement expectations of a strong economic recovery and fan investor appetite for stocks, higher-yielding currencies and commodities.

– Ahead of NFP report, data on Thursday showed the number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the COVID-19 pandemic started more than a year ago.

– The Canadian dollar rose almost 1% overnight to a 3-1/2-year high of C$1.2145 and last stood at C$1.2157. The currency has been bolstered by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

– The British pound traded at $1.3896, unable to hold on to gains made on Thursday after the Bank of England slowed the pace of its trillion dollar bond-purchasing programme. The decision was largely expected and the Bank of England stressed it was not reversing its stimulus.

– Gold continues it rally on Friday morning in Asia after jumping overnight as a weaker dollar and easing US Treasury yields propelled it over the key $1,800 psychological level. Silver also moved above $27 on the back of a weaker US dollar.

Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7745. Stop at 0.7715 and target at 0.7815.
3. A retreat in US Treasury yield and an improvement in global market risk are both weighing on the US dollar.
4. A price support at the 20EMA coupled with bullish momentum is hinting of a bullish price trend ahead.

Fundamental Comments
1. An improvement in global market risk appetite is weighing on the safe haven US dollar.
2. A retreat in US Treasury yields is also weighing on the US dollar.

Technical Comments
1. Price support at the 20EMA is likely to hold to keep the uptrend intact.
2. MACD is bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – We had a buy call which was filled at 109.20 on Wednesday. We had kept stop order at 108.85 and profit order at 109.95. Price is currently close to our stop order and we will just keep the orders and wait for clearer direction. Stochastic is declining after a bearish crossover and MACD is near to the zero line but remains bearish. 20EMA is flat and neutral at the moment.


EUR/USD – Price managed to bounce from the critical support zone from 1.1990 to 1.2000 but the rally has not been able to move above 1.2075 which could have confirmed the bottom and a reversal. Stochastic is into the overbought zone. MACD has turned bullish and 20EMA is also bullish at the moment. Price will need to move above 1.2075 for further upsides to 1.2115 or else we could see a decline back to the critical support zone at 1.2000


GBP/USD – Price tested the top side of the range at 1.3930 but was unable to sustain. Price is now back into the range of 1.3800 to 1.3930 again. Stochastic is in the middle of its range and there could be a bullish crossover soon. MACD is flat and neutral. 20EMA is flat and neutral as well. We would suggest to wait for a breakout of the range and to follow in the direction of the breakout.


XAU/USD – We saw a test of $1798.70 and a break above $1800 last night and the rally has brought price to a high of $1822.15. MACD is bullish and is hinting of a bullish price trend. 20EMA is rising and is hinting of a bullish price trend. However, Stochastic is into the overbought zone. We think price can still continue its rally higher to $1847 in the next couple of days ahead.


XAG/USD – Yesterday we had a buy call at $26.40 but price only reached a low of $26.58. Price has moved to a high $27.54 this morning. Stochastic and MACD have each given a divergence warning on the hourly chart, which is a hint of a possible price high and a possible reversal. Stochastic is also turning down from the overbought zone but 20EMA is bullish and rising and hinting of a bullish price trend. A move below $27.15 would be a warning of a potential high and a move to $26.60.


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