FX Commentary – US Dollar Gained As Risk Appetite Decreased.

Market Talk
– The US dollar was up on Tuesday morning in Asia. Disappointing economic data from China, the continuous spread of COVID-19’s Delta variant and political tension in Afghanistan all served to curb the market’s risk appetite, giving the safe-haven U.S. currency a boost.

– Investors are still digesting Monday’s data from China which fell more than expected in July as the world’s second-largest economy continues to deal with its latest COVID-19 outbreak.

– The Australian dollar slipped to a one-month low after minutes showed the Reserve Bank of Australia, which surprised markets by sticking to its plan to start tapering bond buying, would be prepared to take policy action, should coronavirus lockdowns across the country threaten a deeper economic setback.

– The greenback dipped as far as 109.28 yen, continuing its decline since last Friday. The safe haven Swiss francs gained against the US dollar to 0.9108. Against the euro, the US dollar was lower at 1.1766, while Sterling inched up to 1.3850.

– Gold stayed near an over one-week peak, buoyed by a pullback in U.S. Treasury yields, unrest in Afghanistan and some safe-haven buying spurred by COVID-19-related concerns, with investors looking for more direction from the Federal Reserve on monetary policy.

Chart Focus USD/JPY

Key Points

1. Sell USD/JPY recommendation.

2. Sell USD/JPY at 109.65. Stop at 110.00 and profit target at 108.75

3. The continuous spread of Delta variant and disappointing data from China are both reducing investor’s risk appetite which is aiding the Japanese yen.

4. Price is likely to be capped by a strong resistance and both MACD and 20EMA are hinting of a bearish price trend.

Fundamental Comments

1. The continuous spread of COVID-19’s Delta variant is serving to reduce risk appetite which is aiding the Japanese yen.

2. Disappointing economic data from China is reducing investors’ risk appetite which is aiding the Japanese yen.

Technical Comments

1. Price is likely to be capped by the 20EMA and the Fibonacci 38% correction point.

2. MACD remains bearish and 20EMA is also hinting of a bearish price trend.

Key Levels


Technical Overview

USD/CAD – Yesterday, we were looking for a rally to 1.2590 as MACD has a bullish divergence on the 4-hourly chart while Stochastic continues to rise. Both are hinting of a bullish price trend ahead. Price has moved past 1.2600 at the point of this writing. The next resistance lies at 1.2610 and we think price is likely to break this resistance and continues its rally to 1.2665.


EUR/USD – We had a buy recommendation on this pair yesterday at 1.1765 and our order was filled this morning when price declined to a low of 1.1761. Our view remains unchanged and we would recommend keeping stop at 1.1735 and profit target at 1.1830. Stochastic is still declining but 20EMA is currently supporting price. MACD has remained bullish and could be turning up again, which is a hint of a bullish price trend.


GBP/USD – Price made another marginal low at 1.3787 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. There is a possibility of price moving lower to the Fibonacci 62% correction point at 1.3730 but beyond this point would negate our bullish view for this pair.


XAU/USD – Yesterday, price again moved into the big gap zone but failed to close the gap at $1793.70. Price only reached a high of $1792.40 and the bearish trend remains intact. We are looking for a decline to $1758.25 but a move above $1793.70 would negate this bearish view. A move above 1793.70 would target the previous high of $1832. Stochastic is in the overbought extreme and MACD is bullish. 20EMA is pointing higher with a steep slope, which is a hint of a strong bullish price trend ahead.


NZD/USD – Yesterday, we had highlighted the formation of a Triangle pattern and we had recommended monitoring the breakout for directional clues. Price has broken down from the Triangle chart pattern this morning and we are likely to see a price move to the Fibonacci 161.8% projection price target at 0.6895 in the next 24 hours. Stochastic is still declining and MACD is bearish. 20EMA is also strong bearish.


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