FX Commentary – US Dollar Weighed Down By Treasury Yields Drop

Market Talk

  • The dollar fell on Thursday as Treasury yields continued to plumb new lows and investors bet the Federal Reserve would cut interest rates to offset the impact of a spreading coronavirus. Investors feared a jump in coronavirus infections in the U.S. could derail U.S. economic growth.
  • US 10-year Treasury yields sank to record lows below 1.25%, closing the day at 1.28%.  The tumble in yields weighed on the dollar, with the market now aggressively pricing in Fed rate cuts fearing that the virus outbreak will dampen the US economy.
  • EUR/USD rose on news that Germany may be introducing stimulus measures to counter the virus outbreak. The pound sank below 1.29 as the UK affirmed that it will walk away from trade talks with the EU if they can’t get an agreement by June.
  • The Aussie and Kiwi are also posting decent gains amid short covering against the dollar, with the greenback now in a tricky spot amid virus concerns that are brewing in the US.
  • Risk aversion is set to be in full flood on Friday with safe-haven Yen and Swiss gaining ground but Gold was little changed. Profit-taking prevented gold from regaining the momentum that took it to seven-year highs this week, despite Wall Street’s continued meltdown.

Chart Focus AUD/NZD
Key Points
1. Buy AUD/NZD recommendation
2. Buy AUD/NZD at 1.0450. Stop at 1.0410 and target at 1.0495
3. Negative NZ business confidence and China’s factory return from lock down are both likely to benefit the Aussie dollar
4. Price has broken above a downtrend line with both momentum indicators hinting of further price upsides

Fundamental Comments
1. NZ business confidence was negative and is likely to weigh on the NZ dollar.
2. China’s gradual return to business activity after lock down is likely to benefit the Aussie dollar

Technical Comments
1. Price has broken above a 3-week down trend line signal a possible reversal in trend
2. Both momentum indicators are moving higher, hinting of further price upside

Key Levels

Support 1.04451.04251.0385
Resistance 1.04751.05051.0530

Technical Overview

USD/JPY – We were looking, over the past 2 days for a decline to 109.60 to complete the down move. Price has moved below this point to 109.40 this morning. MACD is starting to show divergence warnings and Stochastic is into the oversold extreme. Now we need to wait for a reversal candlestick signal to confirm the reversal.

Support 109.30108.90108.55
Resistance 109.65110.00110.30

EUR/USD – We saw a strong up move yesterday after price broke above the 1.09 handle. MACD is strong now with both its lines above the zero line. MACD can support a price move to 1.1080. However Stochastic is into the overbought extreme. The rally may have to come after a small price correction lower to 1.0925 from current level.

Support 1.09601.09251.0880
Resistance 1.09951.10301.1080

GBP/USD – Price declined from a high of 1.3015 over the past 2 days to 1.2860 last night. Price is still above an important support at 1.2840. A break of this support is likely to lead price lower to 1.2760. MACD is bearish at the moment and we favour a down move to the next support at 1.2760. Stochastic is into the oversold extreme and may not be able to support a down move. Wait for better signals.

Support 1.28801.28451.2805
Resistance 1.29151.29501.2995

XAU/USD – Our buy call was filled yesterday and our view remains unchanged. Despite the plunge in DJI overnight, Gold was capped at 1660. MACD is neutral at the moment while Stochastic is still rising. The 20EMA on the 4-hourly chart at 1644 is currently holding price. Keep stop and profit order unchanged and watch out for 1634 chart point as first warning of a failure pattern.

Support 1643.501634.101624.75
Resistance 1652.151660.201671.40

AUD/USD – Price managed to recover from 0.6541 but the rally was capped near the 20EMA at 0.6590. MACD is still bearish and Stochastic is still weak after moving out of the oversold zone. 20EMA is bearish and its gradient is steep. The bearish trend is still strong and we think if price is capped at 0.6590, we see another decline to 0.6500 or 0.6460.

Support 0.65400.65000.6460
Resistance 0.65800.66100.6640

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FX Commentary – Legislation Threatens China-U.S. Trade Deal

Market Talk

– Safe-havens rose against the dollar after U.S. President Donald Trump signed into law legislation supporting anti-government protesters in Hong Kong, fueling concerns that efforts to end the long-running trade dispute between the world’s two biggest economies could become more complicated.

– Yen’s strength was curbed by Japan’s retail sales which tumbled at their fastest pace in more than four and a half years in October as a sales tax hike prompted consumers to cut spending.

– U.S. economic growth picked up slightly in the third quarter. While the number of Americans filing applications for unemployment benefits fell last week, new orders for key U.S.-made capital goods increased by the most in nine months in October and shipments rebounded, suggesting some stabilization in business investment.

-Gold rose on Thursday as investors bought the safe-haven metal amid new doubts an imminent trade agreement between the United States and China will be concluded after President Trump signed legislation supporting protesters in Hong Kong, irking Beijing.

– China’s reaction will be monitored as investors try to gauge how much impact U.S. support of anti-government protests in Hong Kong will have on negotiations to scale back a 16-month long trade war between the world’s two-largest economies. Many see the U.S. legislation as symbolic, but it has the potential, if implemented, to upend relations between the U.S. and China.

– There will be no Daily FX Commentary report on Friday.

Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation
2. Sell AUD/JPY at 74.05. Stop at 74.40 and target at 73.45
3. US legislation supporting anti-government protesters in Hong Kong raise concerns and risk which could drive AUD/JPY lower
4. Price has a reversal Spinning Top candlestick pattern and momentum indicators are hinting of further price declines

Fundamental Comments
1. Trump signed into law legislation supporting anti-government protesters in Hong Kong, fueling concerns an imminent trade agreement can be reached.
2. Risk and uncertainty increased as a result and AUD/JPY is the most sensitive to risk

Technical Comments
1. Price had reached the top boundary of a range and a Spinning Top candlestick price pattern is hinting of a reversal
2. Stochastic and MACD are both turning down which is hinting of a price decline

Key Levels

Support 73.8573.6573.45
Resistance 74.1574.3574.55

Technical Overview

USD/JPY – After almost 8 days in a 100 pips range, price has moved above 109.30. We believe price is likely to continue higher towards 109.80 as long as price is able to stay above 109.00. Stochastic is in the overbought extreme. However MACD is bullish and strong with both its lines above the zero line. 20EMA is rising and its gradient is steep, hinting of a bullish trend.

Support 109.30108.95108.45
Resistance 109.60109.95110.20

EUR/USD – Price reached a low of 1.0992 overnight, missing our profit order at 1.0990. We would suggest closing the position at current 1.1008. MACD is starting to show potential bullish divergence, which is a warning of a possible bottom in the process of forming. A move above 1.1035 would confirm a reversal and a new bullish trend.

Support 1.09901.09601.0930
Resistance 1.10301.10501.1090

GBP/USD – Yesterday, we had lowered our stop order to cost at 1.2875. Our stop was triggered and we are out without a loss. Price has moved higher to 1.2930 and we think the rally will continue towards 1.2970 or 1.2985. A break of this zone will open up 1.3015. This movement is possible as Stochastic and MACD are both still rising and has not reached their extreme levels as yet.

Support 1.29151.28701.2835
Resistance 1.29701.30151.3045

XAU/USD – Gold reached a low of 1452.40 overnight and has bounced higher to 1458.15. Price seems to be consolidating and there is a possibility the big correction from the high of 1556 in early Sep may not be over as yet. On the 4-hourly chart, momentum is inconclusive at the moment. We are expecting sideways movement from 1445 to 1478 in the next few days. Wait for better trading idea.

Support 1452.401445.501438.20
Resistance 1463.801478.701486.15

AUD/NZD – Yesterday, we had recommended a buy for this pair. Our order was filled as price is at 1.0527. Our view remains unchanged but we have causes for concerns as both Stochastic and MACD has not yet turned up but continued to slide lower. 20EMA is also continuing its downward movement. Keep stop at 1.0495 and profit order at 1.0640.

Support 1.05151.04901.0460
Resistance 1.05501.05751.0610

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FX Commentary – Gold Recovered From A 2-week Low

Market Talk

– Major currencies hardly budged on Wednesday as investors look for concrete developments on U.S.-China trade as the threat of increased tariffs looms if no deal is concluded before Dec.15. Many market participants are now hesitant to make big bets before they see the actual deal and with Thanksgiving holiday on Thursday in the U.S.

– Leading negotiators from Washington and Beijing held another phone conversation to discuss and resolve trade issues, China’s Ministry of Commerce said. U.S. President Donald Trump said on Tuesday, both sides were in the “final throes” of a deal but he also underscored Washington’s support for protesters in Hong Kong which is a potential huge sore point with China and could derail an imminent trade deal.

– Gold prices edged higher from a two-week low hit earlier on Tuesday, with investors awaiting more details on the imminent trade agreement between the United States and China. Gold earlier touched its lowest since Nov. 12 at $1,450.30, having posted losses in the previous four sessions.

– On Tuesday, data showed the U.S. trade deficit fell sharply in October as both exports and imports declined. U.S. consumer confidence fell for a fourth straight month in November amid worries about current business conditions and employment prospects, but remained at levels sufficient to support a steady pace of consumer spending.

– Cable was soft on polls showing the Conservatives Party losing some momentum in polls. The pound hit a low of 1.2835 into the London closing. The Euro was little changed, holding above key 1.1000 for a second day.

Chart Focus AUD/NZD
Key Points
1. Buy AUD/NZD recommendation
2. Buy AUD/NZD at 1.0535. Stop at 1.0495 and target at 1.0640
3. RBA’s Lowe ruling out QE and RBNZ forecasted to lower interest rate is weighing on the NZ dollar
4. Price has reached the extreme price target and MACD is warning of a possible low.

Fundamental Comments
1. RBA’s Governor Lowe ruling out QE is favourable for the Aussie dollar

2. RBNZ is expected to lower interest rate which should weigh on the NZD

Technical Comments
1. Price has reached the extreme price target and could be due for a correction
2. MACD is showing bullish divergence as price moved lower

Key Levels

Support 1.05301.04901.0460
Resistance 1.05751.06101.0655

Technical Overview

USD/JPY – For a 7th consecutive day, price has stayed within a 100 pips range. Last Thursday, price had tested the lower boundary and has bounced higher. Yesterday, price was moving towards the upper boundary and today price is likely to test the 109.30 upper range boundary. Unless this 100-pips range is breached, price is likely to stay within this range.

Support 108.85108.45108.20
Resistance 109.30109.75110.10

EUR/USD – Both our profit and stop order was not touched yesterday. Today, we think price is likely to reach our profit target at 1.0990, as the rally was capped at 1.1025 despite breaching the 20EMA. Stochastic is moving lower towards the oversold extreme and MACD is now bearish. Keep our orders at 1.1035 and 1.0990.

Support 1.09901.09601.0930
Resistance 1.10301.10501.1090

GBP/USD – Yesterday, price was close to our stop but today, price is closer to our profit target. The 20EMA is now moving lower and its gradient steep, which is a sign of a strong bearish trend. MACD is still bearish. Stochastic is moving lower. Lower stop to cost at 1.2875 and keep profit target unchanged at 1.2800.

Support 1.28351.28001.2770
Resistance 1.28701.29101.2945

XAU/USD – Price reached a low of 1449.75 last night and has bounced higher above 1456. The low could have been made and price could be heading higher. Price is sitting on the 20EMA at the moment and if price can hold above this 20EMA support, price is likely to move up to 1468. MACD is still bullish and is starting to turn up from its correction.

Support 1455.101445.501438.20
Resistance 1463.801478.701486.15

USD/SGD – Yesterday we had recommended a buy for this pair but price dropped to a low of 1.3636, missing our buy order at 1.3635. Price has moved up to 1.3660 now but our view remains unchanged. We are expecting price to move higher to 1.3710 in the next couple of days. Stochastic is moving lower but MACD is still bullish but showing some weaknesses.

Support 1.36301.35901.3555
Resistance 1.36601.36901.3730

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FX Trading 16 April 2019

Technical View

Price broke above a declining trendline 2 weeks ago and last week, it closed above the trend line for a second consecutive week. For the past 3 weeks, after the low, the candles have been larger than usual as the rally continues. This is a hint of a strong upward price movement. Price has also move above the 20EMA which is also a bullish sign. MACD had given a divergence warning earlier and now continues to move higher although MACD is still bearish. Stochastic is rising and not into overbought extreme as yet. Price could have hit a low and could be moving higher toward the next Fibonacci 161.8% projection point at 1.0990.

Fundamental View

Currently the interest rate differential favours the NZ dollar. The NZ dollar interest rate is 1.75% while the Aussie dollar interest rate is 1.5%. This advantage to NZ dollar could be about to disappear into thin air. While market expects RBA to hold its rate at 1.5%, there is market expectation on RBNZ to cut its rate next month. Current advantage to NZ dollar is already small and if there is a cut by RBNZ, there will be no more advantage to hold the NZ dollar.

Australia’s economy is more resilient despite its housing issues than the NZ’s economy. Australian economy is also expected to benefit from an improving Chinese economy. Since the turn of the year, China’s economy has been improving and each month’s economic data is showing improvement. Coupled with the Chinese government stimulus to ensure the Chinese economy does not go into a hard landing, economic data is bound to improve. An improving Chinese economy will be a boost to the Australian economy as Australia is a major supplier of raw material to the Chinese economy.

Trade tariffs between China and US could be coming to an end. An end to tariffs war will help both the US and the Chinese economies to recover from their slowdown. US Treasury Secretary Mnuchin has said US and China are going into the final round of talk. An end to tariffs will likely benefit the Australian economy.


We expect the Australian economy to be stronger than the NZ economy. Buy AUD/NZD at 1.0560. Stop at 1.0395 and target at 1.0990

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