Market Talk
– The dollar was on the back foot against the safe-haven yen and Swiss franc on Tuesday after soft U.S. manufacturing data and rising concerns about the coronavirus Delta variant prompted traders to wind back bets on a strong global economic recovery.
– The U.S. Treasury yield dropped on Monday after data released on Monday showed Institute for Supply Management (ISM) July U.S. manufacturing growth slowed for the second straight month dragging the US dollar lower.
– The US dollar traded at 109.34 yen, near its July 19 low of 109.07, which was its lowest level since late May. Against the Swiss franc, the dollar traded at 0.9054 franc, having hit a 1-1/2-month low of 0.9038 in the previous session.
– Reserve bank of Australia left its cash rate unchanged at 0.1%. The Aussie dollar jumped up to 0.7400 after RBA announced no change to its tapering plans for the time being. Investors had expected RBA to reverse a decision to trim its bond buying programme.
– Gold prices were little changed on Tuesday, supported by a weaker dollar and lower U.S. bond yields, though an increase in risk appetite took some shine off the safe-haven yellow metal as investors avoided taking big positions ahead of key U.S. non-farm payroll data due later this week
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2505. Stop at 1.2465 and target at 1.2600
3. Rising concerns about the spread of the coronavirus Delta variant in Asia and US is aiding the safe haven US dollar.
4. Price has turned bullish and both MACD and Stochastic are hinting of a bullish price trend ahead.
Fundamental Comments
1. Rising concerns about the coronavirus Delta variant in Asia is aiding the US dollar
2. Spread of the Delta variant in the US is aiding the safe haven US dollar.
Technical Comments
1. Price moving above the 20EMA could be a signal of a bottom in place and a bullish trend.
2. Stochastic is rising and MACD is rising after a bullish crossover. Both are hinting of a bullish price trend ahead.
Key Levels
| Support | 1.2495 | 1.2450 | 1.2420 |
| Resistance | 1.2530 | 1.2570 | 1.2615 |
Technical Overview
USD/JPY – Our view of a bottom at 109.35 and a rally to 110.30 was wrong. Price has moved to a low of 109.13 at the point of this writing and looks poised to break the 109.00 barrier for 108.50 in the next few days ahead. 20EMA and MACD both remain bearish and are hinting of a bearish price trend. Stochastic has turned back down and is moving into the oversold zone.
| Support | 109.00 | 108.65 | 108.35 |
| Resistance | 109.35 | 109.65 | 110.00 |
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. Yesterday, 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. MACD has stayed above the zero line, keeping the bullish trend intact.
| Support | 1.1870 | 1.1835 | 1.1805 |
| Resistance | 1.1905 | 1.1940 | 1.1975 |
GBP/USD – Yesterday, we had a buy recommendation on this pair at 1.3890 which was filled as price declined to a low of 1.3869. Stochastic is in the oversold zone and looking to move up after a bullish crossover. MACD and 20EMA both remain mildly bearish. Our bullish view remains intact. We would recommend keeping stop at 1.3850 and profit target at 1.3980.
| Support | 1.3865 | 1.3825 | 1.3795 |
| Resistance | 1.3905 | 1.3935 | 1.3980 |
XAU/USD – Price had reached a high on Thursday of $1832.58. On Monday, we saw price decline to $1807.60 before a rally to $1819.40. The high was also the Fibonacci 62% correction point of the decline from Thursday’s high of $1832.58 to the low of $1807.60. As long as price stays below $1819.40, we are looking at a decline to $1798 or $1788 in the next few days ahead. MACD and 20EMA are both turning bearish and hinting of a bearish price trend ahead.
| Support | 1807.60 | 1793.35 | 1784.55 |
| Resistance | 1819.40 | 1825.75 | 1832.50 |
XAG/USD – Our view was for silver to make a rally to $26 but in the past 2 days, price was on a decline. Price has also moved below the 20EMA which was supporting price before. MACD remains bullish but its fast line is dipping below the zero line. Stochastic is near to the overbought zone. A price move below $25 could be the first warning of a bearish trend ahead.
| Support | 25.20 | 24.90 | 24.65 |
| Resistance | 25.45 | 25.70 | 26.05 |