FX Commentary – U.S. Dollar Rally Halted By Weak Home Data

Market Talk
– The dollar hovered below a 16-month peak in Asian trade on Thursday, losing ground on the New Zealand dollar, after having fallen against the pound and yen overnight as traders assessed whether the U.S. currency’s recent surge was starting to stall.

– U.S. Treasury yields fell on Wednesday, following the government’s October housing starts and building permits report which came in below expectation. The drop in Treasury yields weigh on the US dollar, halting its rally against its peer.

– The British pound rose to a one-week high against the dollar after a jump in U.K. inflation in October hit a 10-year high in Britain and raised expectations that the Bank of England will hike interest rates in December. The consumer price index grew a higher-than-expected 1.1%.

– The Canadian dollar was at 1.2622 per U.S. dollar, at a six-week low despite investors expecting the Bank of Canada to start raising interest rates early next year after data on Wednesday showed inflation in October at an 18-year high in Canada.

– Gold was down on Thursday morning in Asia, but a weakening U.S. dollar and retreating U.S. bond yields retreating capped the yellow metal’s losses. Silver edged up to $25.05 after the Silver Institute said in a report that global silver demand will rise to 1.029 billion ounces in 2021, its first time exceeding one billion ounces since 2015.

Chart Focus EUR/AUD

Key Points

1. Sell EUR/AUD recommendation.

2. Sell EUR/AUD at 1.5570. Stop at 1.5615 and profit target at 1.5450.

3. A slowdown in the Eurozone economy and interest rate differential are both against the Euro dollar.

4. Price is likely to be capped by a strong resistance with MACD hinting at a bearish price trend.

Fundamental Comments

1. The Eurozone economy is expected to slow sharply in the months ahead as the boost from the COVID-19 reopening fades.

2. Interest rate differential is against the Euro dollar.

Technical Comments

1. Price is likely to be capped by a former support turned resistance line.

2. MACD remains bearish and is hinting at a bearish price trend. Stochastic is near to the overbought zone.

Key Levels


USD/JPY – Price had declined more than our expectation to an overnight low at 113.87. We think the price correction could be over and we are likely to see another attempt to the previous high at 114.96 in the next couple of days. MACD remains bullish and is hinting at a bullish price trend but 20EMA has turned bearish. Stochastic continues to decline, hinting at more price decline.


EUR/USD – The price rally off the low of 1.1262 appears to be weaker than our expectation. We do not think price will reach 1.1385. This morning’s high at 1.1337 could be the high and we are likely to see a decline back to the 1.1262 low again in the coming few days. MACD and 20EMA both remains bearish. Stochastic may be moving higher, but appears weak and is hinting at a limited upside.


GBP/USD – We had a sell call yesterday at 1.3475 which was filled when price reached a high of 1.3503, which was just shy of our stop loss at 1.3505. Stochastic is still rising and MACD is bullish. 20EMA has also turned bullish and is hinting at a bullish price trend. We think our stop will be triggered later in the day. The Fibonacci 62% correction points lies at 1.3515, which is likely to determine the next direction for this pair.


XAU/USD – After hitting a high at $1877.02 on Tuesday, we saw a price decline to an overnight low at $1849.60. A rally off this low took price to a high of $1870.80 this morning but the rally appears to be corrective. If price is unable to move above the previous high of $1877.02, we are likely to see a decline to $1818 in the next few days. Indicators are inconclusive at the moment.


USD/CAD – Price reached a high of 1.2623 overnight despite expectation of a hike in interest rate by the BOC early next week. The high overnight was also accompanied by a bearish divergence warning from the MACD indicator. Stochastic is in the overbought zone but 20EMA is hinting at a strong bullish price trend. We think price may have reached a high and a price correction to 1.2490 is likely in the coming days.


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