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13 October 2020

Dollar’s haven demand back in vogue amid stimulus delay, vaccine trial pause

Shrugging-off the Wall Street tech rally, the market mood remained tepid so far this Tuesday, in the face of skepticism over a likelihood of a US fiscal stimulus deal to be reached soon. Further, news that the UK pharma giant, Johnson and Johnson, paused its COVID-19 vaccine trial due to an unexplained illness also powered the risk-off flows.

EUR/USD remained pressured around 1.1800 amid vaccine news and re-imposition of stricter restrictions in Germany, Spain and France to contain the coronavirus second-wave. New infections in Germany once again top 4000 on Tuesday.

GBP/USD consolidated the early drop around 1.3050 ahead of the UK jobs report. On Monday, BOE Governor Andrew Bailey downplayed expectations of negative interests while UK PM Boris Johnson announced a three-tier system of restrictions for England with the Liverpool region under strictest tier 3. The cable hit five-week highs of 1.3083 despite the looming no-deal Brexit risks.

Gold held the lower ground around the $1915, looking to extend the correction from two-week highs of $1930.

WTI rebounded to test $40 after hitting a five-day low at $39 amid the return of oversupply concerns.

Gold Price Analysis: XAU/USD downside more compelling below $1904 strong cushion – Confluence Detector

Gold (XAU/USD) attempts a bounce on the $1900 level but the risks remain skewed to the downside amid a broad-based US dollar rebound, as the haven demand returns. The reports that the Johnson and Johnson COVID-19 vaccine study has been paused fuelled the risk-off lows

Further, the delay in a potential US fiscal stimulus deal adds to the worries about the US economic recovery and benefits the US dollar bulls. Markets now await fresh stimulus news and US CPI release for next gold trades.

Gold: Key resistances and supports

The Technical Confluences Indicator suggests that the XAU bulls are attempting a tepid bounce while challenging a fierce resistance at $1918. That level is the confluence of the Fibonacci 23.6% one-week, previous high one-hour and pivot point one-day S1.

Acceptance above the latter could put the next upside barrier at risk, $1923, where the Fibonacci 23.6% one-day coincides with SMA200 four-hour.

Further up, the convergence of the daily high and SMA10 four-hour at $1925 will cap the recovery attempt. Strong resistance at $1932, the previous week high, will be the level to beat for the bulls.

Alternatively, a break below the $1911 (previous low four-hour) support is needed for the sellers to challenge the critical downside target of $1904 (Fibonacci 38.2% one-month).

A sharp drop below the latter cannot be ruled towards $1895, the Fibonacci 61.8% one-week and SMA100 four-hour intersection.

USD/JPY Forex Technical Analysis – Weakens Under 105.389, Strengthens Over 105.526

Daily Swing Chart Technical Forecast

Looking at the early price action, the direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the minor Fibonacci level at 105.389.

Bearish Scenario

A sustained move under 105.389 will indicate the presence of sellers. This could trigger another acceleration to the downside since the nearest downside target is a potential support cluster at 104.944 to 104.903.

Bullish Scenario

A sustained move over 105.389 will signal the presence of buyers. The first upside target is the price cluster at 105.526 – 105.527.

Overtaking 105.527 could trigger an acceleration to the upside with the next potential target the main Fibonacci level at 105.885.

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