Market Talk
– The U.S. dollar slid on Monday, after posting its biggest weekly rise in more than two months last week, as markets embraced a weak data suggesting the Federal Reserve is unlikely to quickly remove its accommodative monetary stance.
– IHS Markit data showed U.S. business activity growth slowed for a third straight month in August as capacity constraints, supply shortages and the rapidly spreading Delta variant of the coronavirus weakened the economic rebound.
– Robert Kaplan, president of the Dallas Fed, dented expectations when the well-known hawk said he might reconsider the need for an early start to tapering if the virus harms the economy. Together with poor US data, the US dollar tumbled from its nine and a half month high.
– The Canadian dollar was among the major beneficiaries of a weaker dollar after crude oil prices rebounded from a seven-day losing streak. The Canadian dollar gained more than 1% to 1.2640.
– Gold vaulted over the key $1,800 psychological level as a retreat in the US dollar pushed investors to bullion, with rising coronavirus cases driving expectations that the U.S. Federal Reserve might delay tapering of economic support.
Chart Focus USD/CHF
Key Points
1. Sell USD/CHF recommendation.
2. Sell USD/CHF at 0.9145. Stop at 0.9180 and profit target at 0.9065
3. Slowdown of US business activity and spread of the Delta variant is likely to aid the Swiss franc
4. Price is capped by a strong resistance point with MACD hinting of a bearish price trend.
Fundamental Comments
1. Data showing US business activity has slowed is likely to weigh on the US dollar.
2. Spread of the Delta variant is likely to aid the Swiss francs more than the US dollar.
Technical Comments
1. Price has been capped by the Fibonacci 62% correction point and 20EMA and both are hinting of a bearish price trend ahead.
2. MACD is bearish and is hinting of a bearish price trend ahead.
Key Levels
| Support | 0.9095 | 0.9060 | 0.9015 |
| Resistance | 0.9140 | 0.9175 | 0.9205 |
Technical Overview
USD/JPY – Price has remained in last Thursday’s range (110.30-109.50) and will need to break out of this range for a directional move. If not, we are likely to stay trading in this range for the next 1-2 days ahead. Stochastic is moving towards the oversold zone after a bearish crossover. Both MACD and 20EMA remain flat and neutral and is hinting of a sideways movement. Watch the breakout for direction clues.
| Support | 109.50 | 109.10 | 108.70 |
| Resistance | 109.95 | 110.30 | 110.80 |
EUR/USD – Price has moved above 1.1710 yesterday and our bearish view for 1.1600 was negated. Price is now likely to continue its rally to 1.1805 in the next couple of days. Stochastic is inside the overbought zone but remains strong MACD has turned bullish and is hinting of more upsides ahead for price. 20EMA has also turned bullish as well. A move below 1.1700 would negate our bullish view.
| Support | 1.1705 | 1.1665 | 1.1635 |
| Resistance | 1.1750 | 1.1780 | 1.1810 |
GBP/USD – Price may have bottom at 1.3602 last Friday. Price has currently moved above the 20EMA to a high of 1.3740 and we think the rally is likely to continue higher to 1.3795. Stochastic continues to rise and is near to the overbought zone. MACD has turned bullish and is rising. 20EMA is also hinting of a bullish price trend ahead. A break of 1.3602 will be needed to change this bullish trend into a bearish trend.
| Support | 1.3705 | 1.3665 | 1.3630 |
| Resistance | 1.3750 | 1.3790 | 1.3840 |
XAU/USD – Price broke above $1795.50 overnight and had rallied to a high of $1806.40. We are likely to see a continuation of this rally to $1831.70 over the next few days. 20EMA is currently offering support at $1792.70. Stochastic is into the overbought zone but Stochastic remains strong. MACD is neutral and flat at the moment. 20EMA is bullish and hinting of a bullish price trend.
| Support | 1795.50 | 1782.25 | 1770.70 |
| Resistance | 1806.30 | 1814.75 | 1827.55 |
USD/CAD – Yesterday, we had a buy recommendation at 1.2760 but our stop order was triggered as well when price declined to a low of 1.2640 overnight. We lost 35 pips on this trade. Stochastic is in the oversold zone. MACD is mixed at the moment. 20EMA is point lower with a steep slope and is hinting of a strong bearish price trend ahead. A strong support lies at 1.2590 which could halt this decline.
| Support | 1.2595 | 1.2550 | 1.2515 |
| Resistance | 1.2640 | 1.2695 | 1.2745 |