FX Commentary – US Dollar Consolidates Ahead Of NFP

Market Talk
– The dollar hovered below a two-month high versus major counterparts on Tuesday, with traders largely sidelined ahead of a closely watched U.S. jobs report, which could sway the timing of an exit from Federal Reserve stimulus.

– The safe-haven dollar and yen benefited from increasing demand as the Delta variant of COVID-19 continues to spread in Asia and elsewhere, stroking fears of further lockdowns. The dollar bought 110.62 yen, hanging below a nearly 13-month high of 111.11 reached last week.

– The euro was at 1.1921, in a move back to the two-and-a-half-month low of $1.8470 hit on Jun. 18. The British pound slipped back toward a two-month low, weakening to $1.3864.

-The Australian dollar, seen as a liquid proxy for risk appetite, was mostly unchanged at 0.7561 after falling at the start of the week on concerns over renewed COVID-19 lockdowns across parts of the country as the cities of Sydney, Perth, Darwin and Brisbane re-entered lockdown.

– Gold was down on Tuesday morning in Asia, remaining close to the one-week low hit during the previous session and is set for its worst month since 2016 as a strengthening US dollar continues to weigh on the yellow metal.

Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 110.75. Stop at 111.05 and target at 110.10.
3. A slight drop in 10-year Treasury yield and the spread of Delta variant of COVID-19 in Asia are both likely to drive demand into the safe haven yen.
4. 20EMA and MACD are both hinting of a bearish price trend ahead.

Fundamental Comments
1. US benchmark 10-year Treasury yield’s decline to 1.480% is likely to weigh on the US dollar.|
2. Spread of the Delta variant of COVID-19 in Asia is likely to drive demand into the safe haven yen

Technical Comments
1. 20EMA has turned bearish and is hinting of a bearish price trend ahead.
2. MACD has bearish and is moving lower, which is a hint of a bearish price trend ahead.

Key Levels


Technical Overview
AUD/USD – We had a sell call yesterday at 0.7595 but price only reached a high of 0.7580. Price has since declined to a low of 0.7548 this morning. MACD has turned bearish and could be moving lower but Stochastic is near to the oversold zone. Both are hinting that the downside could be limited for today. 20EMA remains bearish and is hinting of a bearish price trend ahead.


EUR/USD – Price broke above the previous high of 1.1969 last Friday to reach a high of 1.1975. It was also unable to sustain above this high and we saw a decline back into the range. Our view remains the same as last Friday. We are expecting a break below 1.1910 to lead price lower to 1.1850. A move above 1.1975 would negate our bearish view. Stochastic continues to decline but MACD and 20EMA are both flat and neutral at the moment.


GBP/USD – Price tested last Friday’s low at 1.3859 again last night and has remained near to this low, putting our view of a rally to 1.4000 in danger. A break of the low at 1.3859 is likely to result in a test of 1.3786. Stochastic is declining but is close to the oversold zone. MACD remains bearish but is close to the zero line, which is a hint of a non-trending movement. Watch the support at 1.3859 for directional clues.


XAU/USD – Our view is the same as yesterday. We see price staying within a range of $1796.70 to $1760.60 in the next couple of days ahead until there is a breakout. MACD and 20EMA are both flat and neutral, hinting of a sideways movement. Stochastic moved out of the oversold zone but could not go up and is back near to the oversold zone. Watch the breakout of either range for directional clues.


USD/CHF – We had a sell call last Friday at 0.9180, which was filled when price rallied to 0.9188 on Monday morning. Our view remains unchanged and we would recommend keeping stop at 0.9220 and profit at 0.9110. Price had little movement yesterday but Stochastic continues to trend higher. MACD has turned bullish but is flat and near to the zero line. Both momentum indicators are hinting of a sideways movement in the near future. We will keep this position for another day.


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