Market Talk
– Bank of England unanimously kept interest rates unchanged at 0.75% but warned that one or more rate hike could be needed in future to keep inflation in check. BOE’s inflation report showed an upgrade of growth forecast but cut inflation forecast to negate the positive sentiment. Sterling was little changed.
– Euro gained against the US$ after German retail sales contracted by less than expected while other Euro zone members’ PMI were broadly within expectations. These data showed that Euro zone economy may not be as bad as market had initially expected.
– Australian Building approval dropped more expected with data released on Friday morning. Australian Building approvals has been weak along with housing finance and house prices. Aussie Service PMI was higher than expectation, helping to offset weakness in housing sector. Aussie was weaker today and fell below 0.70.
– Investors are wary of more partisan infighting that could hurt the chances of the White House and Congress working together on an infrastructure bill and a plan to raise the debt ceiling after House Speaker Pelosi accused U.S. Attorney General of lying to Congress to protect Trump.
– U.S. Non-Farm payroll is set to be released on Friday night at 8.30pm and US ISM Non-Manufacturing PMI is scheduled for 10pm. Both are likely to give an indication of the health of the US economy and will be closely watch.
Chart Focus GBP/JPY
Key Points
1. Buy GBP/JPY recommendation
2. Buy GBP/JPY at 145.10. Stop at 144.60 and target at 146.20
3. Optimism of a cross Brexit party deal and a shift away from safe haven have benefited Sterling
4. Price is supported at 20EMA and Fibonacci 38% points, with MACD bullish and Stochastic turning up are hints of a possible price rally.
Fundamental Comments
1. Optimism of a cross party talk that could lead to UK parliament passing of a Brexit deal has lifted Sterling off a 2-week low
2. An increase in risk appetite has shifted capital away from safe haven JPY to more risker assets.
Technical Comments
1. Price is supported at the 20EMA line as well as Fibonacci 38% correction point of the rally
2. MACD is bullish and Stochastic is turning up from the oversold low
Key Levels
| Support | 145.05 | 144.70 | 144.25 |
| Resistance | 145.50 | 145.80 | 146.30 |
Technical Overview
USD/JPY – Price did not test the 111.90 resistance yesterday but instead consolidated around the previous support area of 111.35. 20EMA line is flat at the moment. MACD is also flat and neutral. Price could be in a consolidation till tonight NFP data. The next direction is likely to be determined by the impact of NFP.
| Support | 111.35 | 111.05 | 110.85 |
| Resistance | 111.65 | 111.95 | 112.25 |
EUR/USD – Price is coming into a support area and stochastic is also into oversold zone. MACD is still bullish at the moment. A break of 1.1160 could lead to a test of 1.1105 but ability to hold above could lead to a best of the high at 1.1225 again. We are inclined towards the bearish side but NFP is likely to determine the next direction of this pair.
| Support | 1.1160 | 1.1105 | 1.1085 |
| Resistance | 1.1190 | 1.1235 | 1.1265 |
GBP/USD – Price is close to the 20EMA line which has acted as support for the past 24 hours. This is also near to the Fibonacci 38% correction point. Stochastic is near to oversold zone and MACD is bullish and could be turning higher again. If price is able to hold at support of 1.3020, it is likely to test the high of 1.3100 again. A move below is likely to see a test of 1.2945.
| Support | 1.3020 | 1.2975 | 1.2945 |
| Resistance | 1.3065 | 1.3105 | 1.3135 |
XAU/USD – Gold reached a high of 1272.90, missing out on our sell call from yesterday. Price tested the low of 1266.20 again and has since bounced higher. This could be a sign of the decline coming to an end as there are divergence warnings from the hourly chart. We would prefer to observe movement for today for better clue and confirmation of a bottom.
| Support | 1266.20 | 1260.10 | 1256.70 |
| Resistance | 1274.70 | 1280.10 | 1288.60 |
AUD/USD – Our sell call from Tuesday is still pending. Price made a new recent low of 0.6983 but managed to bounce up higher. Price has stayed below 0.7005 but with divergence warnings given by MACD, we are wary of a low being in place. There is also the possibility of a Double Bottom being formed. We recommend bringing stop lower to 0.7010 and profit target higher to 0.6980.
| Support | 0.6980 | 0.6940 | 0.6900 |
| Resistance | 0.7005 | 0.7025 | 0.7070 |