FX Commentary – US Dollar Paused Ahead Of Powell’s Speech.

Market Talk
– The dollar paused on Friday ahead of a speech by Federal Reserve Chair Jerome Powell later in the day, following small gains the previous day after fresh calls for early tapering from a few hawkish Fed policymakers. Renewed concerns due to rising COVID-19 infections and developments in Afghanistan also aided the US dollar overnight.

– A dovish tone from the Fed’s chief could counter worries about economic damage from the Delta coronavirus variant and fears about political fallout from a bomb attack in Kabul, possibly spurring bids in riskier currencies against the dollar. The rough consensus is that Powell will likely announce tapering in the fourth quarter, giving a clear signal at one meeting before the actual announcement

– The euro against the US dollar traded at 1.1755, having eased from the previous day’s high of 1.1779. Sterling ticked down to 1.3695. Against the safe-haven yen, the dollar eased slightly to 109.98 yen.

– The Australian dollar fetched 0.7243, little changed after data showing Australian retail sales plunged in July due to the spread of the Delta variant. The New Zealand dollar dipped slightly after Prime Minister Jacinda Ardern announced the lockdown in Auckland, the country’s biggest city, for further two weeks.

– Gold prices stabilized after a sharp retreat, taking a firmer dollar in its stride as investors looked forward to the U.S. Federal Reserve’s stance on tapering economic support at its Jackson Hole symposium.

Chart Focus GBP/USD

Key Points

1. Buy GBP/USD recommendation

2. Buy GBP/USD at 1.3700. Stop at 1.3670 and profit target at 1.3785

3. Expectation of a dovish tone from Fed while a lifting of COVID-19 restrictions in the UK are both likely to favour the British pound

4. Price was supported by the Fibonacci 50% correction point with MACD and Stochastic both hinting of a bullish price trend ahead.

Fundamental Comments

1. Expectation of a dovish tone from Fed’s Chairman Powell is likely to weigh on the US dollar.

2.  Lifting of COVID-19 restrictions in the UK is likely to favour the British pound

Technical Comments

1. The decline in price was halted by the Fibonacci 50% correction point which is a hint of a bullish price trend.

2. Stochastic is near to the oversold zone while MACD has remained bullish, which is a hint of a bullish price trend.



Key Levels

Support1.36751.36401.3600
Resistance1.37151.37651.3795

Technical Overview

USD/JPY – We had a sell recommendation at 110.10 yesterday which was filled when price moved to a high of 11.23. Our view remains unchanged as price was capped by the range’s high. We would recommend keeping stop at 110.40 and profit order at 109.45. Stochastic has a bearish crossover in the overbought zone and is moving lower. 20EMA is neutral, MACD remains bullish.

Support109.85109.40109.10
Resistance110.25110.55110.80

EUR/USD – Price had declined below the 20EMA but it turned out to be a false break. The recovery has sent price up to 1.1766 which near the previous high of 1.1777. A break of this high is likely to lead to a test of 1.1805 in the next few days. MACD remains bullish but Stochastic is declining after a bearish crossover earlier. 20EMA remains bullish and is hinting of a bullish price trend ahead.

Support1.17401.17051.1665
Resistance1.17801.18101.1840

XAG/USD – We had a buy recommendation at $23.60 which was filled. Yesterday we had recommended placing stop at $23.35 and profit order at 24.35 and we would recommend keeping them for today. Stochastic has a bullish crossover and is hinting of a bullish price trend ahead. MACD remains bullish and could be turning up, hinting of a bullish price trend. 20EMA is neutral at the moment.

Support23.4023.1522.90
Resistance23.9024.4024.85

XAU/USD – We were expecting price to move down to $1774.30 but price only reached a low of $1779.90 before turning up. Staying above $1774.30, price is now likely to test the high at $1809.30 again. A break of this resistance will lead to a rally to $1831.70. Stochastic is rising and hinting of a bullish price trend. Both MACD and 20EMA are also hinting of a bullish price trend.

Support1794.401782.651774.30
Resistance1809.351819.401833.95

USD/CHF – Yesterday, we had lowered our stop to 0.9165 but unfortunately, our stop was triggered. We are out of this position with a loss of 20 pips. Price could be forming a Triangle chart pattern, which is a corrective pattern before the uptrend resumes again. Stochastic has a bearish crossover in the overbought zone and is likely to move lower. Both MACD and 20EMA remain bullish.

Support0.91500.91100.9080
Resistance0.91950.92400.9275

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