FX Commentary – US Dollar Decline Along With US Treasury Yields

Market Talk

– The US dollar was down on Tuesday morning in Asia, remaining near the bottom of its recent range. Weaker-than-expected U.S. factory data and increasing bets that monetary policy will normalize faster in other countries also contributed to the U.S. currency’s losses.

– Data released on Monday in the U.S. showed that industrial production contracted 1.3% month-on-month and grew a smaller-than-expected 4.6% year-on-year in September.  An ongoing global semiconductor shortage contributed to a decrease in motor vehicle output, further proof that supply constraints are hampering economic recovery from COVID-19.

– The Aussie dollar was near to a more than one-month high of 0.7440 touched at the end of last week, even after minutes of the Reserve Bank of Australia’s September meeting showed on Tuesday that policymakers are concerned tighter policy could harm the labour market.

– The euro advanced to 1.1645, while Sterling edged up to 1.3765, nearing Friday’s one-month peak at 1.3773. Against the safe-haven yen, the dollar was little changed at 114.27, but not far from the almost three-year high of 114.47 touched on Friday.

– Gold was up on Tuesday morning in Asia; thanks to a decline U.S. Treasury bond yields and a weaker US dollar that provided some support to the yellow metal. A softer set of US data also contributed to the US dollar weakness and aided Gold.

Chart Focus XAU/USD (Gold)

Key Points

1. Buy Gold recommendation.

2. Buy Gold at $1771.00. Stop at 1760.00 and profit target at 1786.00

3.  A decline U.S. Treasury bond yields and a soft set of US economic data is weighing on the US dollar against gold

4. Price is supported by a rising trend channel with both MACD and Stochastic hinting of a bullish price trend.

Fundamental Comments

1. A decline U.S. Treasury bond yields, which lower the opportunity cost of holding Gold, is aiding Gold

2. A soft set of US economic data is weighing on the US dollar.

Technical Comments

1. Price was supported by the rising trend channel after a false break down the channel.

2. Both Stochastic and MACD are turning up and are hinting of a bullish price trend.

Technical Overview

USD/JPY – Price reached a high of 114.45 overnight, which was just below last Friday’s high of 114.46. There is a possible Double Top chart pattern forming and MACD had given a divergence warning of a potential price high. Stochastic has a bearish crossover and is declining from the overbought zone. We are looking at a price correction in the next couple of days. We see price going lower to 113.30 in the next 48 hours in a price correction.


EUR/USD – Price was able to hold above 1.1585 after a false break lower to 1.1571. Price broke above the previous high of 1.1625 and is currently testing the next resistance level at 1.1655. This rally has the potential to move to 1.1710 based on the Inverse Head and Shoulder chart pattern. Stochastic and MACD are both bullish and hinting of a rally. 20EMA is hinting of a strong bullish price trend. 


GBP/USD – Price tested and broke above the 1.3773 high and we are likely to see this price rally continues towards 1.3825 in the next 48 hours. Stochastic is rising but is yet to reach the overbought zone, which means price can continue to move higher. MACD and 20EMA are both bullish and hinting of a bullish price trend ahead. If price were to move below 1.3695, it would negate our bullish view.


XAG/USD – A price decline on Monday was supported by the 20EMA and price has moved up towards the $23.60 resistance point. A break of this resistance point is likely to send price higher to $24.00. Stochastic is rising and is close to the overbought zone but MACD is bullish and hinting of a bullish price trend. 20EMA is also bullish. We think a move to $24.00 is likely in the next 48 hours.


NZD/USD – Yesterday, we had a buy call at 0.7030. Unfortunately, price only reached a low of 0.7048 and our order was not filled. Price has moved higher to a high of 0.7128 this morning. We are expecting price to move higher to 0.7170 in the next 48 hours. Price is in the overbought zone but both MACD and 20EMA are strong and bullish. Both are also hinting of a bullish price trend.


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