FX Commentary – US Dollar Holds Steady As Investors Awaits Labour Data

Market Talk
– The U.S. dollar was wavering above major support levels on Thursday, as traders bet on the dollar falling as the world recovers from the COVID-19 pandemic, but investors have lately grown nervous over whether a surprisingly strong U.S. economic rebound poses a threat to a key assumption that US interest rates stay low.

– The Fed’s overnight announcement of a move to unwind corporate bond holdings bought through an emergency facility last year offers another sign of pandemic measures coming to an end and hinting of a tapering soon than officials had previously said.

– Fed released its Beige Book survey, which showed that the pace of the U.S. recovery picked up somewhat in the past two months, sparking price pressures as businesses contended with worker scarcity and rising costs.

– The Chinese yuan had hit a near six-month high earlier this week sparked by robust Chinese economic data and speculation about shifts in Chinese policymakers’ stance on the currency, although it eased slightly to 6.3807 in early offshore trade on Thursday.

– Gold was down on Thursday morning in Asia but remained near the highest level in almost five months as investors weighed the latest comments from Federal Reserve officials for clues on the potential time frame for tapering stimulus.

Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.4160. Stop at 1.4200 and target at 1.4075
3. Strong Beige Book data and rising inflation are both supporting the US dollar.
4. Price has fallen below the 20EMA and both 20EMA and MACD are hinting of a bearish price trend ahead.

Fundamental Comments
1. Strong Beige Book data is supporting the US dollar.
2. Rising US inflation is posing a threat to the low US interest rate environment

Technical Comments
1. Price has fallen below the 20EMA which is a hint of a bearish price trend ahead.
2. MACD has turned bearish and is hinting of a bearish price trend ahead.

Key Levels


Technical Overview
USD/JPY – We had a buy call from Monday, which is still pending at the moment. Our view remains unchanged and we would recommend keeping stop at 109.25 and profit target at 110.20. Stochastic is turning up after a bullish crossover from the oversold zone. MACD is also moving higher and hinting of a bullish price trend. 20EMA is also hinting of a bullish price trend ahead.


EUR/USD – Price moved to a high of 1.2254 on Tuesday and we think this could be a temporary high. We see a decline back to 1.2160 or 1.2130 over the next couple of days ahead. Currently price has declined to a low of 1.2160 and has managed to hold above this support. MACD has turned bearish and is moving lower, hinting of a bearish trend. Stochastic is still near to the oversold zone. 20EMA is hinting of a bearish price trend ahead.


AUD/USD – The rally off the low of 0.7677 halted at 0.7773 which was off the previous high. Price has since declined lower to 0.7725. We are looking at this decline continuing lower to 0.7677 again in the next few days ahead. Stochastic continues to move lower and MACD is also moving lower. Both indicators are hinting of a bearish price trend ahead. 20EMA has also turned bearish.


XAU/USD – Price was caught within Tuesday’s wide range of $1916.45 to $1882.25. Yesterday, we had an Inside Range Day chart pattern and today, we are likely to see a consolidation within Tuesday’s range. Stochastic is in the middle of its range and MACD is near to the zero line. Both indicators are hinting of a sideways movement. Watch the breakout of Tuesday’s range for clue to the next direction.


NZD/USD – We had a sell call at 0.7245, which was filled when price rallied to a high of 0.7248. Our view remains the same as yesterday and we would recommend lowering stop to 0.7250 while keeping profit target at 0.7185. MACD remains bearish and is moving lower, hinting of a bearish price trend. 20EMA is also hinting of a bearish price trend. Stochastic is near to the oversold zone.


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