FX Commentary – US Dollar Weakness Continues Following Powell Message

Market Talk
– The dollar traded near its lowest point in nearly three weeks versus major peers on Wednesday, with investors focused on a key U.S. jobs report due on Friday for clues on when the Federal Reserve might begin paring stimulus.

– US consumer confidence index was down to 113.8, which was a six-month low, but the S&P/Case-Shiller house price index composite grew by a record 19.1% in June, keeping the US dollar in a range and near to a three weeks low

– Last Friday, Fed Chair Jerome Powell acknowledged in his speech at the Jackson Hole conference that tapering could begin this year, but added the central bank is in no hurry to raise interest rates. These comments had started the US dollar decline against its peers.

– The Aussie dollar was flat at 0.73115 after touching a more-than-two-week high of 0.7341 on Tuesday, after the Australian GDP grew 9.6% year-on-year and 0.7% quarter-on-quarter. The kiwi slipped to 0.7035 but remained close to its highest since Aug. 5.

– Gold was down on Wednesday morning in Asia as investors continued their cautious wait for the latest U.S. jobs report, which could provide clues on when the Federal Reserve could begin asset tapering and interest rate hikes.

Chart Focus EUR/USD

Key Points

1. Buy EUR/USD recommendation.

2. Buy EUR/USD at 1.1790. Stop at 1.1755 and profit target at 1.1870

3. A lower level of US consumer confidence and with the Fed in no hurry to hike US interest rate, the US dollar is likely to be weak.

4. Price is supported by the 20EMA and both 20EMA and MACD are hinting of a bullish price trend.

Fundamental Comments

1. A lower level of US consumer confidence is weighing on the US dollar.

2. Hint by Powell that the Fed was in no hurry to hike interest rate is likely to weigh on the US Dollar.

Technical Comments

1. Price is supported by the 20EMA which is hinting of a bullish price trend.

2. MACD remains bullish and is hinting of a bullish price trend.



Key Levels

Support1.17951.17651.1730
Resistance1.18451.18801.1910

Technical Overview

USD/JPY – We had a sell recommendation from Thursday and yesterday, we had recommended keeping stop at 110.10 and profit order at 109.45. Price only reached a low of 109.58 before bouncing above our stop at 110.10. We are out of this trade without a loss as we had raised stop to our breakeven point. Stochastic, MACD and 20EMA are all hinting that price will move higher. The next target above 110.25 is at 110.80.

Support109.95109.65109.35
Resistance110.30110.80111.20

NZD/USD – Price could be forming a bullish Flag chart pattern on the 4-hourly chart at the moment. If the base at 0.7030 holds and price is able to move above 0.7070 today, price could be heading higher to 0.7120 in the next 24 hours. MACD and 20EMA are both hinting of a bullish price trend. Stochastic is near to the overbought zone which could be a hint of a limited upside in the next 24 hours.

Support0.70300.69850.6935
Resistance0.70700.71050.7155

GBP/USD – We had a buy call at 1.3700 on Friday which was filled and yesterday we had recommended bringing stop to 1.3720 and profit order higher to 1.3810. Price reached a high of 1.3807, just shy of our profit target at 1.3810. Price has since decline lower to 1.3730. Price will need to stay above 1.3730 to have any chance of test the high at 1.3810 again. MACD remains bullish while both Stochastic and 20EMA are neutral.

Support1.37301.36801.3650
Resistance1.37601.38101.3845

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. Overnight, price declined to $1801.45 which we viewed as a correction. Price should start its rally soon. MACD and 20EMA remain bullish. Stochastic is neutral. A price move below $1797 would negate our bullish view.

Support1809.301794.401782.65
Resistance1818.901831.201844.50

XAG/USD – We had a buy call at $24.05 yesterday, but our call was wrong. Price declined to $23.75 and our stop was triggered. We lost $0.20 on this trade. Stochastic is declining. 20EMA is bearish but MACD remains bullish. Our three indicators are hinting that the price trend is likely to be mixed for the next 48 hours. We would recommend to wait for better trading idea.

Support23.7523.3022.85
Resistance24.2024.5024.95

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