FX Commentary – U.S. Dollar Hovered Near 1-Month High Amid Expectations Of Higher U.S. Rates

Market Talk
– The U.S. dollar hovered near a one-month peak on Tuesday as traders raised their forecasts of U.S. Federal Reserve interest rate levels needed to tame inflation, as a stubbornly resilient labour market remains largely immune to aggressive rate hikes.

– U.S. Treasury yields have risen on the back of higher rate expectations with benchmark 10-year yields last at 3.6305%, sending the Japanese yen pinned near Monday’s one-month low of 132.90 per dollar.

– The British pound tumbled to a one-month low of $1.2006 in the previous session. It was last 0.09% higher at $1.2033. The euro gained 0.06% to $1.0733, having slid to $1.0709 in the previous session, the lowest since Jan. 9.

– Reserve Bank of Australia raised its cash rate 25 basis points to a decade-high of 3.35% on Tuesday and reiterated that further increases would be needed, a more hawkish policy tilt than many had expected. The Aussie shot up to 0.6940, recouping overnight losses.

– Gold prices steadied at $1873 per ounce, near a one-month low on Tuesday amid continued pressure from strength in the greenback and rising Treasury yields. Focus is turning to economic cues from a talk by Federal Reserve Chair Jerome Powell later in the day after stronger-than-expected U.S. jobs data saw markets broadly shift their expectations for interest rate hikes by the Fed.


Chart Focus EUR/USD

Key Points

1. Sell EUR/USD recommendation.

2. Sell EUR/USD at 1.0795. Stop at 1.0825 and profit target at 1.0705.

3. Expectations of more interest rate hikes from the Fed and rising yield are aiding the U.S. dollar.

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

Fundamental Comments

1. Expectations of more interest rate hikes from the Fed are aiding the U.S. dollar.

2. Rising US Treasury yield is weighing on the Euro dollar.

Technical Comments

1. Price is likely to be capped by the previous support turned resistance line and the 20EMA line.

2. MACD remains bearish and is hinting at a bearish price trend.



Key Levels

Support1.07051.06701.0630
Resistance1.07451.07951.0835










Technical Overview

USD/JPY – Price was unable to move above 132.90 and we have seen a price decline to 132.13 at the point of this writing. We are likely to see the decline continues to 131.55 in the next 24 hours. Stochastic and MACD are both hinting at a price decline after reaching an extreme level. 20EMA continues to hint at a bullish price trend. We favour a decline to 131.55 before a rally takes price higher above 133 in the next few days ahead.

Support131.95131.55131.05
Resistance132.40132.90133.30

USD/CAD – We had a buy call yesterday at 1.3370 but price only declined to a low of 1.3400 and our entry order was not filled. Price had reached a high of 1.3475 overnight and has turned down. Stochastic and MACD are both also hinting that price could move lower. However, 20EMA is hinting at a bullish price trend. We think any price decline could be supported at 1.3375 and we can see another rally in the next few days to 1.3520.

Support1.33951.33451.3295
Resistance1.34451.34801.3520

GBP/USD – Price reached a low of 1.2005 overnight and the decline has stopped for the moment with price hovering around the overnight low. We think this pause in decline is only temporary and a decline to 1.1900 is likely in the next few days. Trend indicators, both MACD and 20EMA are hinting at a bearish price trend. Price will need to move above 1.2130 to negate this bearish price trend for the next few days.

Support1.20051.19501.1905
Resistance1.20751.21251.2180

XAU/USD – Price has declined below last week low of $1900.55, reaching an overnight low of $1860.65. We are likely to see a continuation of this bearish price trend to $1843 in the next 48 hours. While both trend indicators are confirming the bearish price trend, stochastic is hinting at a corrective price rally to get into a short position. The corrective rally can bring price higher to $1881.70. From this price level, we see a decline to $1843.

Support1871.601860.651843.60
Resistance1881.701896.551909.50

AUD/USD – Price has declined to a low of 0.6854 overnight. A 25 basis points hike by the RBA has lifted price to 0.6950 this morning. Price is likely to face a strong resistance at 0.6975. We do not think price can move above this resistance. We think price is likely to decline back to 0.6855 again in the next few days. Both MACD and 20EMA are hinting at a strong bearish price trend. Stochastic is hinting at a price rally to 0.6975 to get into a short position.

Support0.69050.68550.6790
Resistance0.69500.69950.7045

CFD Trading – Buy Sinopec SEG (2386.HKE) at $3.90. Stop at $3.75 and Target at $4.25.

SINOPEC SEG   Stock Code 2386.HKE

Outlook

The chart outlook remains bullish as price is trading above the cloud. Conversion and base lines remain in a bullish crossover, hinting at a bullish price trend. Lagging Span is above price of 26 days ago and above the cloud, confirming the bullish price trend. MACD is strong and bullish with both of its lines far above the zero line. These could increase chances of the stock price rebounding to move higher in the next 1-2 weeks.

Strategy

$3.90                 Buy

$4.25                 Price Target

$3.75                 Risk Management Stop

2 weeks             Trade Duration

CFD Trading – Buy HSBC Holdings (005.HKE) at $56.50. Stop at $54.50 and Target at $60.30.

HSBC HOLDINGS   Stock Code 0005.HKE

Outlook

This stock has been moving higher along with the rising middle band. The 20-day moving average is currently acting as the first layer of support. MACD is strong and bullish with both of its lines far above the zero line. As long as price stays above the middle band, we see price continuing to move higher in the next 1-2 weeks.

Strategy                     

$56.50                Buy

$60.30                Price Target

$54.50                Risk Management Stop

2 weeks              Trade Duration

FX Commentary – U.S. Dollar Jumped On Upbeat U.S. Labour Data

Market Talk
– The U.S. dollar jumped on Friday after upbeat economic data from the United States lessened the risk of recession, but also suggested the Federal Reserve would have to hike interest rate further and keep rates up for longer.

– The Labour Department’s closely watched employment report showed that nonfarm payrolls surged by 517,000 in the previous month. The department revised December data higher to show 260,000 jobs added instead of the previously reported 223,000. Average hourly earnings also rose for the second consecutive month, boosting the U.S. dollar.

– The greenback extended its rally on the yen to a three-week top of 132.60 on Monday amid reports the Japanese government had offered the job of central bank governor to the current deputy, Masayoshi Amamiya, who is considered by markets to be more dovish than some other contenders.

– The euro was huddled at $1.0791 after shedding 1.1% on Friday. Sterling fell 1.39% to $1.2055, the lowest since Jan. 6 and its worst day since Dec. 15. The Aussie was struggling at $0.6923, after slumping 2.2% on Friday while the kiwi dollar was hovering at $0.6320.

– Gold prices were muted on Monday, after plummeting 2.5% on Friday. A stronger-than-expected U.S. employment data ramped up fears that the Federal Reserve could keep hiking interest rates sending gold prices lower to $1860.45.


Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation.

2. Buy USD/CAD at 1.3370. Stop at 1.3340 and profit target at 1.3470.

3. A strong US labour data and a decline in crude oil prices are both likely to keep the U.S. dollar strong.

4. Price is likely to be supported by the 20EMA line, with both trend indicators hinting at a bullish price trend.

Fundamental Comments

1. A strong US labour data is hinting that the Fed is likely to hike rates further, keeping the dollar strong.

2. A decline in crude oil price is likely to keep the Canadian dollar weak.

Technical Comments

1. Price is likely to be supported by the 20EMA line, which is also hinting at a bullish price trend.

2. MACD is also hinting at a bullish price trend.



Key Levels

Support1.33901.33351.3295
Resistance1.34301.34751.3520










Technical Overview

USD/JPY – We had a sell recommendation from last Thursday at $128.95 and on Friday, we had shifted stop to cost at 128.95 and kept profit order at 127.80. Price went up above our stop last Friday and we are out of this position without a loss. Price will need to move above 132.86. If price is unable to move above this resistance, we see price going lower to 130.00 in the next 24 hours. We are in favour of the bearish price trend.

Support131.55131.05130.55
Resistance132.00132.40132.90

EUR/USD – Price has declined below last week low of 1.0801, triggering a bearish price trend. We are likely to see a continuation of this bearish price trend to 1.0710 in the next 48 hours. Trend indicators, MACD and 20EMA confirm this bearish price trend but Stochastic is hinting at a limited downside. We favour the bearish price and only a move above 1.0930 would negate our bearish view.

Support1.07651.07051.0650
Resistance1.08051.08551.0890

GBP/USD – Price reached a low of 1.2030 this morning but looks like it may have reached a low. Both stochastic and MACD are hinting that price has reached a low. However, 20EMA is hinting at a strong bearish price trend. We tend to favour the stochastic and MACD. We think price is likely to move up today to 1.2145 or to 1.2185. From this location, we see the start of another decline.

Support1.20301.19851.1935
Resistance1.20751.21251.2185

XAU/USD – Price has declined below last week low of $1900.55, triggering a bearish price trend. We are likely to see a continuation of this bearish price trend to $1843 in the next few days. However, Stochastic is hinting at a price rally to $1900 to go short. Trend indicators are hinting at a bearish price trend. We have the same view as the stochastic indicator and would prefer to get into a short position on a rally towards the 20EMA line at $1900.

Support1872.101860.651843.60
Resistance1882.201900.551918.85

EUR/JPY – Last Friday, we had a sell call on this pair but our call was wrong. Price has moved up higher to the previous high at 142.85. If price cannot move above this resistance, we are likely to see a decline back to 141.20 in the next 48 hours. However, if price moves above the previous high at 142.85, we are likely to see a move to 143.90. We favour the bearish side and see a decline to 141.20 for the next 24 hours.

Support141.85141.25140.75
Resistance142.35142.85143.30

CFD Trading –Sell 3M Company (MMM.NYS) @ $118.00. Stop @ $123.60 and Target @ $106.20.

Three M Company Stock Code MMM.NYS

Outlook

Price tested the lower edge of the cloud two days ago but was unable to move above the cloud, keeping the bearish outlook intact. Conversion and Base lines had a bearish crossover, hinting at a bearish price trend. Lagging Span is below price of 26 days ago and below the cloud, confirming the bearish price trend. MACD is bearish with both lines below the zero line. We think price is likely to move lower to the previous price low at $106.20 in the next 2-3 weeks.

Strategy                  

$118.00              Sell

$106.20              Price Target

$123.60              Risk Management Stop

3 weeks              Trade Duration