Market Talk
– The dollar took a breather from its grind higher on Wednesday, easing slightly from multi-month peaks as a bout of risk-aversion ebbed, though selling was light as expectations of a cautious European Central Bank had the euro pinned down.
– The dollar’s rise has been driven mostly by expectations that U.S. economic strength could prompt interest rates to rise and virus infections continue to drag on Asian currencies other than the yen as new lockdowns have been enforced from Seoul to Sydney.
– The euro touched a fresh three-month trough of 1.1755 overnight and its small rebound had carried it only as far as 1.1780 by early in the Asia session ahead of ECB meeting on Thursday. Sterling has similarly faced pressure as COVID-19 cases soar while England lifts most social restrictions, trusting that vaccines will prevent hospitals from being overwhelmed.
– The dollar also rose slightly against the safe-haven Japanese currency to buy 109.96 yen, after dropping to as low as 109.06 yen this week when fresh concerns about new coronavirus cases globally drove investors into safer assets.
– Gold was down on Wednesday morning in Asia as fears about the recent surge in COVID-19 cases involving the Delta variant also eased, thus increasing investors’ risk appetite.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2705. Stop at 1.2665 and target at 1.2800.
3. Expectation of a US taper coming earlier than the central bank had forecasted and a decline in crude oil price are both likely to depress the Canadian dollar.
4. Price is supported by the 20EMA which together with the MACD are both hinting of a bullish price trend ahead.
Fundamental Comments
1. A decline in crude oil price is pulling the Canadian dollar.
2. Expectation that the Fed will taper earlier than forecast is likely to keep the US dollar strong.
Technical Comments
1. Price was supported by the 20EMA which is also hinting of a bullish price trend ahead.
2. MACD remains bullish and is hinting of a bullish price trend ahead.
Key Levels
| Support | 1.2700 | 1.2665 | 1.2620 |
| Resistance | 1.2735 | 1.2770 | 1.2810 |
Technical Overview
USD/JPY – Price reached a low of 109.06 on Monday and has since recovered higher to 109.90. Both MACD and Stochastic had registered divergences with price, which is a hint of a potential price low in the making. Stochastic continues to rise and 20EMA has turned bullish. We think the rally can continue to 110.35 in the next 48 hours. Only a move below 109.05 would negate our bullish view.
| Support | 109.80 | 109.55 | 109.20 |
| Resistance | 110.10 | 110.50 | 110.85 |
EUR/USD – Price broke below the previous low at 1.1770 on Monday to reach a low of 1.1755 overnight. Stochastic is warning with divergence of a potential price low. However, MACD is flat and near to the zero line. MACD is hinting of a sideways movement ahead but 20EMA remains bearish. We think the decline can continue lower to 1.1705 in the next few days ahead.
| Support | 1.1750 | 1.1705 | 1.1655 |
| Resistance | 1.1785 | 1.1820 | 1.1850 |
GBP/USD – Price had reached a low of 1.3571 last night which was also the Fibonacci 161.8% projection target of the earlier decline from 1.4132 to the low of 1.3787. Stochastic has a bullish crossover and is moving higher from the oversold zone. However both MACD and 20EMA are bearish and hinting of a bearish price trend ahead. If price can hold above 1.3570, we see a test to 1.3690. A break of 1.3570 is likely to send price lower to 1.3520.
| Support | 1.3570 | 1.3535 | 1.3500 |
| Resistance | 1.3615 | 1.3655 | 1.3695 |
XAU/USD – We had a sell recommendation at $1826 in our last update on Thursday which was filled when price rallied to $1826.60. Price had decline to a low on Monday at $1784.35 on Monday. We took a profit of $21 on this trade. Stochastic is declining and MACD remains bearish. 20EMA is bearish and if price remains below the 20EMA resistance at $1814, we may see another test of $1785 in the next couple of days ahead.
| Support | 1805.05 | 1794.90 | 1784.55 |
| Resistance | 1814.20 | 1824.80 | 1833.95 |
AUD/USD – We had a sell recommendation for this pair and profit target was filled on last Friday. We are out with an 85 pips profit. Price has continued its decline to 0.7299 last night but MACD is warning with a divergence warning, hinting of a possible price low. Stochastic is also moving into the oversold zone but 20EMA remains bearish. Fibonacci 161.8 projection target is at 0.7285 which could halt the decline.
| Support | 0.7285 | 0.7255 | 0.7220 |
| Resistance | 0.7315 | 0.7340 | 0.7370 |