FX Commentary – Gold Continues Its Decline From Friday’s High

Market Talk
– The US dollar rose along with other safe haven currencies as stocks fell. Worries about the raging Delta coronavirus helped to reverse some of the losses from earlier in the previous week when dovish remarks by the Federal Reserve tanked a month-long rally in the US dollar.

– Economic data on Friday was dollar-positive, showing a higher-than-expected rise in U.S. consumer spending in June as COVID-19 vaccinations boosted demand for travel-related services and recreation. However softer-than-expected inflation data fed the view that the Federal Reserve could delay its exit from quantitative easing

– The dollar was little changed at 109.64 against the yen on Monday, and mostly flat at 1.18685 against the Euro. Sterling was also little changed at 1.39005, with a policy announcement by the Bank of England due on Thursday.

– The Aussie dollar was little changed at 0.7346 with the RBA due to hand down its policy decision after its meeting on Tuesday. The RBA is widely expected to widely expected to backtrack on a previous decision to taper stimulus, with protracted COVID-19 lockdowns dragging on growth

– Gold continues its decline from a high of $1832 reached on Friday, with a firmer dollar curtailing the precious metal’s brief rally spurred by U.S. Federal Reserve Chair Jerome Powell’s reassurance that a rate hike was not on the cards for the time being.


Chart Focus GBP/USD

Key Points

1. Buy GBP/USD recommendation.

2. Buy GBP/USD at 1.3890. Stop at 1.3850 and target at 1.3980

3. Softer than expected U.S. inflation data and UK reopening are both likely to aid the British pound against the US dollar.

4. Price is supported by the 20EMA and both the 20EMA and MACD hinting of a bullish price trend ahead.

Fundamental Comments

1. Softer than expected U.S. inflation data fed the view that the Federal Reserve could delay its exit from quantitative easing, weighing on the US dollar.

2. Data showing ebb in coronavirus in UK and reopening of its economy is likely to aid the British pound.

Technical Comments

1. Price is supporting by the 20EMA which is also hinting of a bullish price trend ahead.

2. MACD is bullish and is hinting of a bullish price trend ahead.



Key Levels

Support1.38901.38451.3805
Resistance1.39351.39801.4005

Technical Overview

USD/JPY – Our target of 109.40 was achieved on Friday when price reached a low of 109.35. MACD is warning with a divergence of a price low. Stochastic is warning with a divergence as well. Stochastic is also in the oversold zone. Stochastic is also starting to move out of the oversold zone. However, 20EMA is still bearish and hinting of a bearish price trend. We think that price has likely hit a low and is now likely to move higher to test the Fibonacci 62% correction point at 110.30, which is likely to determine its next direction.

Support109.50109.05108.60
Resistance109.80110.00110.30

EUR/USD – Price had reached a high of 1.1908 on Friday but had ended Friday near the low of the day at 1.1851. Price was supported by the 20EMA at 1.1850 and if this support continues to hold, price is likely to move up to test the previous high of 1.1908 again over the next 2-3 days. Stochastic is near to the overbought zone. MACD remains bullish. 20EMA is also bullish and both MACD and 20EMA are hinting of a bullish price trend ahead. A move below 1.1820 would negate our bullish view.

Support1.18701.18351.1805
Resistance1.19101.19401.1975

USD/CHF – Price had reached a low of 0.9030 but there were no divergence warnings from either MACD or Stochastic. While 0.9030 could be a low, it is highly likely that price will move lower to 0.8930 unless 0.9030 low holds. MACD remains bearish but Stochastic has started to move higher from the oversold zone. 20EMA remains bearish and is pointing lower with a steep slope, hinting of a strong bearish price trend. We think price is likely to break this low and move lower.

Support0.90300.90000.8965
Resistance0.90750.91150.9145

XAU/USD – Price had reached a high on Thursday of $1832.58. Since that high, we have seen a price decline to current low of $1807.60 at the point of writing. Stochastic continues to decline and is now near to the oversold zone but 20EMA is pointing down with a steep slope, hinting of a strong bearish trend. MACD is also hinting of a bearish price trend. We are expecting the decline to continue to the previous week’s low of $1793.35 over the next few days ahead.

Support1802.101793.351784.55
Resistance1813.251825.751832.50

XAG/USD – We had a buy recommendation at $25.25 on Friday but price only reached a low of $25.31, missing out on our entry. However, our view remains unchanged. We are looking at a rally to $26 in the next few days. 20EMA is supporting price and MACD remains bullish. Both are also hinting of a bullish price trend ahead. Stochastic is near to the overbought zone but remains strong. Only a price move below $24.90 would negate our bearish view for the next few days.

Support25.4024.9024.65
Resistance25.7526.0526.45

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