FX Commentary – US Dollar Edged Higher As Investors Seek Out Safe Havens

Market Talk
– The US dollar edged higher on Tuesday as the COVID-19 pandemic encouraged investors to seek safe havens, ahead of U.S. inflation data, with investors on edge over whether the figures may offer clues about the likely timing of tapering and interest rate hikes.

– Economists polled by Reuters expect the U.S. consumer price index to have risen 0.5% from May and 4.9% from a year earlier. Traders think a miss on either side could move the greenback and the bond market by shifting expectations on interest rates.

– Against the euro, the greenback held on to Monday’s  gain to trade at 1.1861, with the common currency weak after European Central Bank President Christine Lagarde hinted at a dovish shift to the rates outlook for Europe.

– The Japanese currency stood at 110.31 yen per dollar on Tuesday, having slipped overnight to edge further away from last week’s one-month high of 109.53. Sterling held at 1.3892 amid nerves about England abandoning COVID-19 restrictions next week even as cases keep on climbing.

– Gold fell on Monday in step with a stronger dollar but was higher again on Tuesday morning as investors cautiously looked forward to U.S. inflation data that could influence the Federal Reserve’s timeline for easing its bond purchases.

Chart Focus EUR/AUD
Key Points
1. Buy EUR/AUD recommendation.
2. Buy EUR/USD at 1.5820. Stop at 1.5795 and target at 1.5895.
3. Australia’s COVID-19 cases and lockdown are both likely to weigh on the Aussie dollar.
4. A strong support with bullish momentum is both hinting of a bullish price trend ahead.

Fundamental Comments
1. Australia COVID-19 cases and lockdown are both likely to weigh on the Aussie dollar.
2. COVID-19 cases in Asia has increased and this has led to a move away from risk currency which is likely to weigh on the Aussie dollar

Technical Comments
1. A strong support provided by the Fibonacci 62% correction point and a previous resistance turned support line is likely to halt the price decline.
2. MACD remains bullish while Stochastic is in the oversold extreme. Both indicators are hinting of a bullish price trend ahead.

Key Levels


Technical Overview

USD/JPY – Price is currently testing the 110.40 resistance. A break of this resistance is likely to send price higher to 110.80 as well as negate our bearish view. Stochastic continues to move higher and is currently not showing any signs of a turnaround. MACD and 20EMA are both pointing higher. We prefer to wait for confirmation on the result of the 110.40 resistance test.


EUR/USD – Price moved in a tight range overnight and our bearish view could be wrong. Stochastic continues to stay close to the overbought zone while MACD continues to stay above the zero line. However MACD is flat around the zero line hinting of a sideways movement instead. 20EMA is bullish and is hinting of a bullish price trend ahead. We prefer to stay aside and wait for clearer direction.


GBP/USD – Price failed to move above 1.3910 overnight stopping at 1.3905. However, signs are pointing to a break of this resistance for a push to 1.4005. Stochastic is near to the overbought zone but we are likely to see a bullish crossover and a bullish hint ahead. MACD remains bullish and both of its lines are rising and hinting of a bullish price trend. 20EMA is also rising and hinting of a bullish price trend ahead. A move below 1.3835 would negate our bullish view.


XAU/USD – Price move higher after the previous day’s slide was halted by the Fibonacci 38% correction point. However, price still remains within the previous week range. MACD is flat and neutral with both its lines close to the zero line. Stochastic is rising and hinting of a short term rally towards the previous high at $1818.25. 20EMA has turned bullish and is hinting of a rally.


AUD/USD – We had a sell recommendation yesterday at 0.7480, which was filled when price rose to a high of 0.7502 this morning. We would recommend keeping stop at 0.7515 and profit target at 0.7395. Stochastic continues to rise even though it is in the overbought zone. MACD remains bearish but continues to rise. 20EMA has turned bullish and is hinting of a bullish price trend ahead. If price were to move above 0.7530, it is likely to move higher to 0.7585 in the next 48 hours.


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