FX Commentary – US Dollar Weakened As US Treasury Yields Retreated

Market Talk

– The US dollar fell against major currencies as bets on a robust global economic recovery continued to support currencies seen as riskier. A retreat in U.S. Treasury yields as benchmark U.S. 10-year Treasuries yield fell to 1.604% on Monday from 1.632% late on Friday also weighed on the greenback.

– Treasury yields fell after a few Federal Reserve officials affirmed their support to keep monetary policy accommodative for some time, dampening recent expectations the Fed would reduce bond purchases or flag rate hikes sooner than what it has indicated to the market.

– Strategists are trying to anticipate how quickly yields in other countries will rise compared  to the likely pace in the United States. Traders are also watching for progress on a new U.S. stimulus package, after the White House pared down its infrastructure bill to $1.7 trillion on Friday but failed to gain Senate Republican backing.

– The Euro has picked up around 4% on the greenback since March as Europe has moved to catch up with the United States in vaccinating its people and reviving its economy. The yen remains weak with Japan planing to extend its state of emergency as the number of COVID-19 cases rise.

– Gold steadied near the highest level in more than four months as a weaker dollar and lower Treasury yields bolstered its yellow metal’s appeal. Investors also weighed comments by Federal Reserve officials who sought to soothe concerns about inflation

Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7205. Stop at 0.7175 and target at 0.7275
3. A retreat in US Treasury yields and accommodative US monetary policy are both likely to weigh on the US dollar
4. Price bouncing off a support and MACD hinting of a bullish price trend are both supportive of the uptrend.

Fundamental Comments
1. A retreat in U.S. Treasury yields overnight is likely to weigh on the US dollar.
2. Fed officials affirming their support to keep accommodative monetary policy is likely to weigh on the US dollar.

Technical Comments
1. Price finding support at the base and moving off the recent high could be a sign the price correction is over.
2. MACD is moving pass the zero line and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – We have a pending position from Friday at 108.90 and yesterday, we had lower stop to cost while keeping profit order unchanged at 108.35. Unfortunately our stop was triggered and we are out of this position without a loss. MACD remains bearish and Stochastic is weak and there was a bearish crossover which is a hint that price could be moving lower. We remain bearish on this pair for 108.35.


EUR/USD – Yesterday, we had expected Friday’s low of 1.2160 to be a pivot low and we were expecting a rally to 1.2285. So far, price has moved higher to 1.2230 and is trying to break above the 1.2240 resistance for 1.2285. We think price is likely to test the 1.2285 barrier in the next 48 hours. MACD remains bullish and Stochastic is rising. Both are hinting of a bullish price trend ahead. 20EMA remains bullish.


GBP/USD – Our view remains unchanged. We think price could be forming a diagonal triangle and we are likely to see a price movement above 1.4233 in the next couple of day before the reversal. Stochastic and MACD have both given a divergence warning each, which is a hint of a possible price high. 20EMA remains bullish and supporting our view for another price push higher. A move below 1.4095 would negate our short term bullish view.


XAU/USD – Price failed to test last Wednesday’s Outside Range Day’s high at $1889.85 over the past 24 hours and has been moving lower, reaching a low of $1872.60 this morning. Stochastic and MACD are both weak and 20EMA has turned neutral. Price needs to hold above $1872 in order to test the high of $1889.85; else we could see a decline back to $1851 over the next few days.


USD/CNH – We had a sell call on this pair yesterday at 6.4340. Price went to a high of 6.4343 and our sell order was filled. Price dropped to a low of 6.4005 and our profit order was filled at 6.4070. We are out of this trade with a 270 pips profit. MACD is starting to warn with divergence and Stochastic is rising after a bullish crossover in the oversold zone. Price may have reached a low and we are likely to see a correction up to 6.4130.


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