FX Commentary – EURO At Risk Of Breaking 2021’s Low

Market Talk
– The dollar was down on Monday morning in Asia but remained near its strongest level since early April 2021 against the euro. Market focus is currently on FOMC meeting in the middle of the week for clues and timeline to tapering.

– The FOMC is widely expected to make few changes to the Fed monetary policy when it meets Tuesday, with the decision to be handed down on Wednesday. Investors, however, will be on the lookout for clues as to when the Fed would take a more hawkish stance via asset tapering and interest rate hikes.

– The Euro has been trending lower since June and touched a four-month trough of $1.1750 last week against the US dollar. The single currency is currently trading at $1.1775 and looked at risk of testing its 2021’s low of $1.1702.

– The Aussie pair edged down to 0.7349, with the Australian dollar dropping to an almost eight-month low of 0.7289 during the previous week as Sydney and Melbourne remain under COVID-19 lockdown.

– Gold was up on Monday morning in Asia, alongside a U.S. dollar that is holding firm and investors looking ahead to the US FOMC decision in the week, to be delivered by the Federal Open Market Committee on Wednesday for clues and direction.

Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation.

2. Sell AUD/USD at 0.7360. Stop at 0.7405 and profit target at 0.7290.

3. COVID-19 lockdown in Australia and US tapering expectation are both likely to weigh on the Aussie dollar

4. Price was capped by a strong resistance point and momentum indicators are hinting of a bearish price trend.

Fundamental Comments

1. COVID-19 lockdown in Australia two major cities are likely to weigh on the Aussie dollar.

2. Expectation of a taper from the Fed is likely to keep the US dollar strong.

Technical Comments

1. Price was capped by a previous support turned resistance together with the 20EMA, which is likely a sign of a bearish price trend ahead

2. Stochastic continues to decline and MACD is about to turn bearish, hinting of a bearish price trend ahead.



Key Levels

Support0.73450.73100.7285
Resistance0.73800.74100.7440

Technical Overview

USD/JPY – Price had reached a high of 110.59 last Friday and this high was accompanied with divergence warnings from both Stochastic and MACD. This is a strong warning of a possible price high. Stochastic is still in the overbought zone but has a bearish crossover and could be moving down. MACD remains bullish but we prefer to be on the short side for this pair.

Support110.05109.70109.30
Resistance110.40110.70111.15

EUR/USD – We had a sell recommendation at 1.1775 last Friday which was filled when price rallied to a high of 1.1780. Our view remains unchanged. We would recommend keeping stop at 1.1815 and profit target at 1.1705. Stochastic remains weak and near to the oversold zone. MACD remains bearish and 20EMA is still sloping down. We remain bearish unless price moves above 1.1815.

Support1.17501.17051.1665
Resistance1.17851.18151.1850

GBP/USD – Price had reached a high of 1.3787 last Thursday and spent last Friday in a range. This could be a sign of a consolidation before a final push higher to 1.3860. Stochastic has been moving lower since Friday and is likely to continue lower, capping the topside. However, MACD remains bullish. 20EMA is supporting price at 1.3735. Our bullish view for 1.3860 would be negated if price falls below 1.3735.

Support1.37351.36951.3660
Resistance1.37801.38301.3870

XAU/USD – Price had dropped below $1797 on Friday to a low of $1789.80. In the process, our bullish view for $1824 was negated. However, price did not go lower but bounced back higher above $1800 again. If price can hold above $1789 again for today, we may see another test to $1814. Stochastic is in the overbought zone but MACD and 20EMA remain bullish. We tend to favour the direction of MACD and 20EMA.

Support1804.301792.601784.55
Resistance1813.651824.801833.95

XAG/USD – We had a sell recommendation at $25.30 last Thursday which was filled when price rallied to a high of $25.47. On Friday, we had recommended keeping stop at $25.60 and profit target at $24.75. Price had reached a low of $24.99 last Friday and has bounced up to $25.38. We could keep this position with the same orders for today and may close the position tomorrow if both orders are not done.

Support25.2025.0024.70
Resistance25.4525.8026.05

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