USDCAD D1 06 17 2020 1804

The Canadian dollar’s multi-month rally against its neighbor continues and the pair are now pressing down on the 200-day moving average again. This indicator has underpinned USD/CAD since late-January this year until the early-June break and rebound. If the 200-dma gives way again, USD/CAD may find it harder to regain the long-term moving average and further losses look increasingly likely. Keeping with moving averages, the 20-dma is now in play and has acted as resistance over the last week. With the 20-dma and the 200-dma close to crossing over, one of these indicators is going to have to give in the next few days.
Resistance levels start at 1.3548 (20-dma) ahead of the 61.8% Fibonacci retracement level at 1.3608 and Monday’s 1.3690 print. Short-term support starts at 1.3528 (200-dma), followed by a few recent lows before the June 10 multi-week low at 1.3314 comes into focus.

XAUUSD D1 06 17 2020 0957

The price of gold has traded to fresh yearly highs during every single month so far in 2020, and it remains to be seen if the bullish behavior will persist in June amid the limited reaction to the Fed testimony.

Nevertheless, the prepared remarks for Congress suggest the Federal Open Market Committee (FOMC) has little intention of deploying more non-standard measures even though the central bank remains “committed to using our full range of tools” as Chairman Powell insists that “when this crisis is behind us, we will put them away.”

It seems as though the FOMC will carry out a wait-and-see approach as the committee vows to “increase our holdings of Treasury securities and agency mortgage-backed securities over coming months at least at the current pace,” and the central bank may stick to the same script at the next interest rate decision on July 29 as Fed officials pledge to “evaluate our monetary policy stance and communications as more information about the trajectory of the economy becomes available.”

In turn, Chairman Powell and Co. may continue to tame speculation for a yield-curve control program as “whether such an approach would usefully complement our main tools remains an open question,” and the FOMC may scale back the dovish forward guidance as the update to the Summary of Economic Projections (SEP) show “a general expectation of an economic recovery beginning in the second half of this year.”

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EURUSD D1 06 12 2020 1242

Despite soaring into overbought territory earlier in June, EUR/USD failed to penetrate formidable resistance at the convergence of the 2018 downtrend and June 2019 high (1.1412).

A bearish engulfing candle at the psychologically imposing 1.14-handle may signal a correction in the recent rally, as price closed below the 78.6% Fibonacci retracement (1.1311) of the March range.

Furthermore, the RSI diving back below 70, in combination with the momentum indicator U-turning at the March high, could initiate further downside pressure as prices decline towards support at the August 2019 high (1.1250) and 23.6% Fibonacci (1.1202).

Nevertheless, the development of the 50- and 200-day moving averages remains bullish, as a ‘golden cross’ becomes increasingly likely.

Should price remain constructive above support at the 1.12-handle, in tandem with the RSI surging back into overbought, a push to retest the monthly high (1.1423) could eventuate.

However, a break below the 61.8% Fibonacci (1.1167) may carve out a path for price to push back to the June low (1.1100), with the 200-MA (1.1046) and April high (1.1039) pivotal in preventing a collapse back to the yearly low (1.0636).

 

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XAUUSD D1 06 12 2020 2018

Gold hasn’t been doing much lately outside of swinging up and down $50-70, but this is broadly viewed as a good thing as it continues to build a base within the context of a longer-term uptrend. The consolidation pattern developing over the past two months is set to give-way any time.

A breakout beyond 1765 could quickly have three peaks in play that were created in the wake of the 2011 bull market high. All three peaks arrive around the 1800 level. With the consolidation pattern happening so closely to this key area, there may be enough power to push on through.

But before getting ahead of ourselves, we need to first handle the current situation. While a breakout looks probable, there is still risk that we see another swing back towards the lower end of the range in the 1680/60 area.
If we see weakness to the bottom of the range it could provide traders with an opportunity to scoop up gold with solid risk/reward. As long as the bottom of the range holds, so does the current bullish outlook. Should gold break 1658, it doesn’t mean the trend has changed necessarily, but we will need to take a more cautious stance until it firms up again.

UK100 D1 06 11 2020 2130

Risk appetite evaporated during Asia trade with Dow Jones futures plunging over 1.5%, as the number of confirmed COVID-19 cases in the United States surpasses 2 million.

US Treasury yields fell as the Federal Reserve announced it will continue to purchase bonds and mortgage-backed securities. 

Overnight comments from Chair Jerome Powell have taken the sting out of the recent rally in risk assets, dismissing the better-than-expected Non-Farm Payrolls (NFP) report showing a record 2.5 million jobs added in May as “clear evidence of just how uncertain things are”.

Keeping the target rate for the federal funds rate at 0 to 0.25%, the FOMC is “not even thinking about raising rates” as they remain “strongly committed” to doing “whatever we can for as long as it takes”.

Expanding its balance sheet “at least at the current pace” through Treasury purchases of $80 billion a month and mortgage-backed securities of $40 billion, it’s clear that the central bank doesn’t believe the worst has passed as there are still “considerable risks to the economic outlook over the medium term”.

GBPUSD D1 06 11 2020 2129


Psychological resistance at the 1.28-handle proved too much for GBP/USD as a Spinning Top followed by a Bearish Engulfing candle may signal the reversal of a 10-day ‘bull run’.

Breaking through the April high (1.2643) earlier in the month, price continued its surge above the February low (1.2726) before sellers took over just shy of the 61.8% Fibonacci (1.2840).

Bearish divergence between price and momentum highlights a level of exhaustion in the recent rally, with RSI dipping prior to overbought territory providing further bearish bias.

The 200-day moving average (1.2610) may provide temporary support for GBP, however the sharp correction in RSI suggests strengthening downside momentum that could propel price back to 12-week trend support.

A break and close below trend support and the 23.6% Fibonacci (1.2355) may carve out a path back to the May low (1.2075), with RSI snapping its constructive trend possibly signalling a resumption of primary downtrend.

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