FX Commentary – USD Little Changed Ahead Of FOMC

Market Talk
– The U.S. dollar hovered below recent peaks on Tuesday morning, as investors turned to this week’s Federal Reserve meeting for clues on the policy outlook. The surging number of global COVID-19 cases involving the Delta variant helps to halt the greenback weakness after an overnight slide in US 10-year Treasury yields.

– Fed officials will begin a two-day meeting later in the day, with the policy decision to be handed down on Wednesday. The central bank is likely to affirm that a strong U.S. recovery and plans for an eventual policy shift are both ongoing.

– The greenback has been rising broadly for more than a month as markets have become wary of the Fed starting to taper its monetary support. Investors turned long dollars for the first time since March 2020 last week, positioning data shows.

– The dollar held at 1.1809 per euro in Asia, finding support after a small dip on Monday. Sterling was near a one-week high at 1.3827 as early data seemed to show an ebb in surging COVID-19 cases in Britain in spite of the removal of many social curbs last week.

– Gold was down on Tuesday morning in Asia. Investors were cautious in the run-up to a Federal Reserve policy meeting waiting for clues over when the central bank will adopt a more hawkish tone, overshadowing some support from a weaker dollar.


Chart Focus USD/JPY

Key Points

1. Sell USD/JPY recommendation.

2. Sell USD/JPY at 110.25. Stop at 110.60 and target at 109.65

3. A softer US Treasury yield and worries that the Fed will continue with accommodative monetary policy are both likely to weigh on the US dollar.

4. A decline below the 20EMA and momentum indicators hinting of a bearish price trend are signs of a price decline.

Fundamental Comments

1. A decline in benchmark 10-year Treasury yield is weighing on the US dollar.

2. Worries that the FOMC will continues with its previous rhetoric of keeping monetary policy accommodative is likely to weigh on the US dollar.

Technical Comments

1. Price has declined below the 20EMA which is a sign of a change from bullish to a bearish trend.

2. MACD had earlier warning with a divergence and Stochastic has started to move lower, both are hinting of a bearish price trend ahead.



Key Levels

Support110.05109.70109.30
Resistance110.30110.70111.15

Technical Overview

AUD/USD – We had a sell recommendation yesterday at 0.7360 which was filled when price reached a high of 0.7390. We would recommend keeping stop at 0.7405 and profit target at 0.7290. MACD, while bullish is turning down towards the zero line, hinting of a price decline. Stochastic is close to the overbought zone, hinting of a limited upside. 20EMA is neutral at the moment.

Support0.73500.73100.7285
Resistance0.73800.74100.7440

EUR/USD – We had a sell recommendation at 1.1775 last Friday but this position was stop out last night when price moved above 1.1815 to a high of 1.1817. We are out with a 40 pips loss. MACD has turned bullish and Stochastic continues to rise towards the overbought zone. Both indicators are hinting there could be more upsides ahead. 20EMA is also bullish and supporting price at 1.1785.

Support1.17851.17501.1705
Resistance1.18151.18501.1885

GBP/USD – Price rose to a high of 1.3833 overnight and may have reached a high with MACD showing a bearish divergence signal on the 4-hourly chart. This is a warning of a potential price high. Stochastic is also in the overbought zone but 20EMA remains bullish at the moment. We favour a price high and a decline to 1.3725 over the next couple of days. A move above 1.3840 would negate our bearish view.

Support1.37801.37301.3695
Resistance1.38351.38701.3910

XAU/USD – Price reached a high of $1811.45 on Monday and has been declining. The decline has brought price lower to $1793.55 at the point of writing. We think the decline is likely to continue lower to last week’s low of $1789.40. A break of this low is likely to send price down to $1750 over the next few days. MACD is starting to turn bearish and Stochastic continues to move lower. Both are hinting of a price decline ahead.

Support1792.601784.551774.10
Resistance1802.401813.651824.80

XAG/USD – We had a sell recommendation at $25.30 last Thursday and yesterday we had placed stop at $25.60 and profit target at $24.75. For today, we would recommend bringing stop lower to $25.45 and profit target at $24.85. For the past few days, price has been moving in a sideways manner despite Stochastic declining. MACD has also turned neutral and flat.

Support25.1024.9524.70
Resistance25.4025.8026.05

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.