FX Commentary – US Dollar Declined On Dampened Expectation Of Tightening

Market Talk
– The dollar held near a one-week low versus major peers on Monday, after slumping the most in almost seven weeks on Friday as a slump  in  U.S. consumer confidence lessened the likelihood of an early tightening by the U.S. Federal Reserve.

– A University of Michigan survey released on Friday showed consumer sentiment sliding to the lowest level since 2011 amid acceleration in COVID-19 infections caused by the fast-spreading Delta variant.

– The greenback dipped as far as 109.33 yen for the first time since Aug. 5 on Monday morning. Against the euro, the US dollar was mostly flat at 1.1796, close to the one-week low of 1.1804 reached Friday, while Sterling inched up to 1.3850.

– The Australian dollar sank to 0.7357 on Monday, as COVID-19 lockdowns were extended and tightened ahead of minutes from the Reserve Bank of Australia’s latest meeting, which will be released on Tuesday.

– Gold was down on Monday morning in Asia, but remained near a one-week high. A sharp drop in U.S. consumer sentiment reduced concerns about early asset tapering by the U.S. Federal Reserve and gave the yellow metal a small boost.


Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation.

2. Buy EUR/USD at 1.1765. Stop at 1.1735 and target at 1.1830

3. A slump in US consumer confidence and dampened expectation of an early tightening are both likely to weigh on the US dollar.

4. Price is likely to be supported by the 20EMA and Fibonacci point with MACD and 20EMA hinting of a bullish price trend.

Fundamental Comments

1. A slump in US consumer confidence is weighing on the US dollar.

2. Dampened expectation of an early Fed’s tightening is likely to weigh on the US dollar.

Technical Comments

1. Price is likely to be supported by the 20EMA and Fibonacci 50% correction point at 1.1763

2. MACD has turned bullish and 20EMA is hinting of a bullish price trend.



Key Levels

Support1.17801.17501.1725
Resistance1.18051.18301.1855

Technical Overview

USD/JPY – Price broke below the 20EMA in early European hours on Friday and by Monday morning, price has reached a low of 109.32. This could be a temporary low as Stochastic is into the oversold zone and MACD is turning up from the bearish zone. We could see a correction back to the 20EMA or the Fibonacci 38% of the decline. From the 20EMA, we see another decline that is likely to bring price below 109.30.

Support109.25109.00108.70
Resistance109.50109.80110.10

USD/CAD – We had a buy recommendation on Friday at 1.2520 but unfortunately our stop was triggered at 1.2485 when price declined to a low of 1.2484. We lost 35 pips on this trade. However, we remain bullish on this pair. We are looking for a rally to 1.2590 in the next couple of days. MACD has a bullish divergence on the 4-hourly chart while Stochastic continues to rise. Both are hinting of a bullish price trend ahead. A price move below 1.2480 would negate our bullish view.

Support1.25251.24851.2450
Resistance1.25551.25901.2610

GBP/USD – Price made another marginal low at 1.3790 and we think this could be the base from which a rally is likely to start. The low is also close to the Fibonacci 50% correction point. The low was also made with divergence warning from both MACD and Stochastic on the 4-hourly chart. 20EMA is currently supporting price at 1.3842. A price move below 1.3728 would negate our bullish view for the next few days ahead.

Support1.38401.37901.3740
Resistance1.38751.39101.3955

XAU/USD – Price moved into the big gap but failed to close the gap at $1793.70. Price only reached a high of $1782.35 and the bearish trend remains intact. We are looking for a decline to $1758.25 in the next few days ahead. Stochastic is in the overbought extreme and MACD is about to have a bearish crossover. Both are hinting of a bearish price trend ahead. A move above $1794 would negate our bearish view.

Support1764.551754.201741.40
Resistance1782.351793.701805.20

NZD/USD – Price could be consolidating in a Triangle chart pattern at the moment on the 4-hourly chart. Stochastic is rising and moving towards the overbought zone but MACD is flat around the zero line. MACD remains in the bullish zone. 20EMA is also flat at the moment. We would recommend watching the boundaries at 0.7040 and 0.6990 for clues to the next direction. We prefer the downside break.

Support0.70150.69900.6965
Resistance0.70400.70650.7090

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