FX Commentary – US Dollar Remains Weak On Powell’s Dovish Comments

Market Talk
– The dollar was up on Tuesday morning in Asia but remained near two-week lows, as the greenback attempted to recover from Friday’s drop on comments from U.S. Federal Reserve Chair Jerome Powell that were interpreted as dovish.

– The U.S. currency fell after Fed Chairman Jerome Powell did not provide a clear timeline for asset tapering and interest rate hikes during the previous week’s Jackson Hole symposium. He only suggested that the asset tapering timeline could be “within 2021.”

– The world’s second-largest economy is feeling the impact of recent strict lockdowns to curb the latest COVID-19 outbreak in the country.  Manufacturing PMI dipped to 50.1 from 50.4 last month, showing factory activity expanded at a slower pace. The Non-manufacturing PMI in August slumped to 47.5, the lowest reading since February 2020.

– The Canadian dollar stood at 1.2580, after hitting a two-week high on Monday as strong oil prices led to a wider-than-expected Canadian current account. Oil prices climbed to three-week highs, after Hurricane Ida blew through the Gulf over the weekend.

– Gold was up on Tuesday morning in Asia, after touching a near a four-week high earlier, as the dollar stabilized and investors showed caution in the run-up to the release of a key U.S. jobs report later in the week to gains clues to when the U.S. Federal Reserve will begin asset tapering.

Chart Focus XAG/USD – Silver

Key Points

1. Buy Silver recommendation.

2. Buy Silver at 24.05. Stop at 23.85 and profit target at 24.60

3. With no timeline set for interest rate hike, investors are betting that interest rate is unlikely to go up soon, which is likely to keep the US dollar weak.

4. A strong support is likely to prevent price from turning bearish while MACD and Stochastic hinting of a bullish price trend.

Fundamental Comments

1. With no dates set for interest rate hike, the US dollar is likely to be weak.

2. Fed Chairman Powell’s dovish speech is likely to weigh on the US dollar.

Technical Comments

1. Stochastic and MACD are both hinting of a bullish price trend.

2. Price is likely to be supported by the 20EMA line as well as a resistance turned support line.

Key Levels


Technical Overview

USD/JPY – We had a sell recommendation from Thursday which is still opened. We would recommend keeping stop at 110.10 and profit order at 109.45. MACD and 20EMA are bearish. Stochastic is pointing lower. All three indicators are hinting of a bearish price trend ahead. Price should be capped below 110.00 today and starts its decline toward the previous low at 109.40.


EUR/USD – Price has moved above a strong resistance point at 1.1810 and we think the rally is likely to continue higher to the next resistance point at 1.1855 Stochastic is in the overbought zone and is hinting of a limited upside. Both 20EMA and MACD are hinting of a bullish price trend ahead. A price move below 1.1800 would negate our bullish view for the next few days ahead.


GBP/USD – We had a buy call at 1.3700 on Friday which was filled when price declined to a low of 1.3679. Yesterday we had recommended bringing stop higher to 1.3720 and profit order higher to 1.3810 as well. Price has moved to a high of 1.3800 at the point of this writing and we think our profit target should be filled today. Stochastic, MACD and 20EMA, all three indicators are hinting of a bullish price trend ahead.


XAU/USD – Last Friday, we had stated our case for $1831.70 and our view remains unchanged. Price has moved up to $1823.05 on Monday morning and we are expecting the rally to continue to $1831 in the next 1-2 days ahead. Stochastic continues to rise, hinting of more price upsides ahead. MACD and 20EMA are both bullish and hinting of a bullish price trend ahead.


USD/CAD – We had a sell call at 1.2640 but price only reached a high of 1.2633 and our order was not filled. However, we remain bearish for 1.2490. MACD and 20EMA, both support our bearish view. Both indicators are hinting of a bearish price trend ahead. Stochastic is in the oversold zone but remains weak and should be able to support a price decline to 1.2490.


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