FX Commentary – USD Dollar Higher On Higher Treasury Yields

Market Talk

– The dollar was up on Tuesday morning in Asia as investors bet that rising inflation and surging commodity prices would erode the dollar’s value as the Federal Reserve maintains its loose monetary policy increasing concerns about runaway inflation.

– Traders are keenly awaiting the release of U.S. consumer price data on Wednesday to measure whether inflationary pressure is building, which could push Treasury yields higher and slow the dollar’s fall, some traders say.

– The British pound bought $1.4130, close to its strongest since Feb. 25 as investors cheered Britain’s progress in reopening its economy and as fear of a Scottish independence receded.

– The Australian dollar edged up to $0.7836, near an 11-week high while the Canadian dollar traded at C$1.2097, close to its strongest in more than three years on the back of surging crude oil and metal prices.

– Gold was down on Tuesday morning in Asia on the back of a slight rebound in the U.S.’ benchmark 10-year Treasury yield and a stronger dollar as investors weighed growing inflation risks and comments from Federal Reserve officials on the labour market for clues on monetary policy going forward

Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7815. Stop at 0.7780 and target at 0.7890
3. Rising inflation and surging crude oil and metal prices are likely to erode the dollar’s value as the Federal Reserve maintains its loose monetary policy.
4. A strong support coupled with bullish MACD is hinting of a bullish price trend.

Fundamental Comments
1. Investors are betting that rising inflation would erode the dollar’s value as the Federal Reserve maintains its loose monetary policy.
2. Surging crude oil and metal prices are aiding the Aussie currency.

Technical Comments
1. Price is likely to be supported by a previous resistance turned support line as well as the 20EMA.
2. MACD remains bullish and is hinting of a bullish price trend.

Key Levels

Support0.78150.77850.7740
Resistance0.78450.78900.7935

USD/JPY – From last Friday’s low of 108.33, we have seen a rally to 109.05 but 20EMA is acting as a resistance at this price point. From this price point, we could see another decline back down to 108.30 again in the next couple of days ahead. A price movement above 109.20 would negate our bearish view for the next couple of days.  MACD remains bearish and is hinting of a bearish trend. Stochastic is rising.

Support108.70108.45108.15
Resistance109.00109.45109.95

EUR/USD – Price managed to stay above the critical support zone from 1.1990 to 1.2000 and we had seen a rally which broke above the high from 2 week ago to another high at 1.2177. 20EMA remains strongly bullish. Stochastic has reached the overbought extreme and could be turning down. MACD is also bullish but is turning down from its extreme. We may see a price correction to 1.2115 which could offer a good buying opportunity for the next couple of days ahead.

Support1.21151.20751.2035
Resistance1.21501.21801.2220

GBP/USD – Price reached a high of 1.4158 last night which was also the 261.8% of the rally from 1.3800 to 1.3930. Stochastic and MACD are both turning down from overbought zone but MACD and 20EMA remain bullish. We see a price correction back to the 20EMA support at 1.4030 in the next few days and from this support, we see another rally above 1.4158.

Support1.40901.40451.3980           
Resistance1.41301.41601.4185

XAU/USD – Price continues its rally to a high of $1845.25 last night but Stochastic is already into the overbought zone. Stochastic and MACD remain bullish. However, Stochastic has a divergence warning of a potential price high. We may see a pullback in price to $1824 and from there we could see another rally to test the previous high of $1855.25 in the next few days.

Support1828.551818.351809.65
Resistance1838.601845.251855.25

USD/SGD – We had a sell call on this pair yesterday at 1.3290 but price only reached a high of 1.3272. Our view remains the same as yesterday. We see price capped by the 20EMA at 1.3290 and we are looking for another test of the low at 1.3230. MACD remains bearish and is hinting of a bearish trend but Stochastic is near to the bottom and hinting of a possible price bottom. 20EMA is also hinting of a bearish price trend.

Support1.32301.32051.3155
Resistance1.32701.33001.3335

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