FX Commentary – US Dollar Weak As Euro And Sterling Reached 3-Month Highs

Market Talk

– The US dollar hold steady against major currencies on Wednesday as traders awaited U.S. Federal Reserve minutes to be released later tonight for clues as uncertainties over inflation had prompted investors to reduce exposure to riskier assets for now.

– Fed policymakers have reiterated that recent hike in inflation is a temporary and reiterated that they expect interest rates to remain low, which has taken some steam out of the dollar, but not all are convinced by the Fed’s persuasion.

– The British pound soared to a three-month high against the dollar to 1.4220, riding on the gradual lifting of coronavirus restrictions in Britain after a successful vaccine rollout which has lifted the British currency.

– The Canadian dollar traded at C$1.2076 against the greenback which is close to its strongest since May 2015 on expectations of policy tightening in by the Bank of Canada. The euro hit a near-three-month high of $1.2234 against the greenback.

– Gold hold steady at $1873, near to a more than three months on Wednesday morning in Asia as concerns over the pace of a global recovery following a pickup in coronavirus cases in Singapore, Taiwan and India.

– There will be no Daily FX Commentary tomorrow. The next update will be on Friday.

Chart Focus XAG/USD – Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $28.00. Stop at $27.55 and target at 28.75.
3. With US interest rate expected to remain low and the US economy growing, Silver is likely to benefit from these factors.
4. A strong support together with bullish MACD momentum is likely to propel price higher.

Fundamental Comments
1. With US interest rate expected to stay low for the foresee future, the US dollar is likely to stay weak.
2. A pick up in the US economy is likely to aid demand for Silver.

Technical Comments
1. A strong support provided by the previous resistance turned support line and the 20EMA is likely to halt the price decline.
2. MACD remains bullish and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – We had a buy call on Friday which was filled at 109.30 and we had kept stop at 108.95 and profit order at 109.90 yesterday. Price went to a low of 108.82, triggering our stop at 108.95. We are out of this trade with a loss of 35 pips. MACD is turning around and Stochastic is also likely to turn up from the oversold extreme. Both indicators are hinting of a possible price low and a reversal.


EUR/USD – A break above the resistance at 1.2180 has send price higher to 1.2242 this morning. Price is likely to continue rising with 1.2285 the next likely resistance target. Stochastic continues to rise and is close to the overbought zone. MACD and 20EMA are both hinting of a bullish price trend. We see price rising to 1.2285 in the next 24 hours.


GBP/USD – Price rose to a high of 1.4220 last night but this high was accompanied by a divergence warning from MACD indicator. This is a warning of a possible price high. Stochastic is also into the overbought zone and has a bearish crossover and is currently moving lower. However, 20EMA is hinting of a bullish price trend ahead. We think price may have reached a high and a decline to 1.4140 is likely in the next 48 hours.


XAU/USD – We had a sell recommendation yesterday at $1870 which was filled with price rising to a high of $1874.85. Price is staying close to the upper edge of a 7-week uptrend channel without showing any signs of a reversal as yet. MACD and 20EMA remain bullish. Stochastic has continued to stay in the overbought zone. We fear price may continue to stay high. We would recommend keeping stop nearby at $1876 and profit target at $1850 unchanged from yesterday.


USD/CAD – Last night price reached a 7-year low at 1.2012 but the trend still look bearish. The rally from the low was capped by the 20EMA at 1.2080 and if price fails to move above this resistance, we are likely to see another decline to test the 1.2000 handle. MACD, while hinting of with a divergence is still bearish. 20EMA is also bearish but Stochastic is hinting of a bullish price movement.


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