Market Talk
– The dollar retreated on Wednesday after Fed’s Chairman Powell struck a dovish tone in Congress, saying trade uncertainties and concerns about the global outlook continued to exert pressure on the U.S. economy, which reinforced expectations the Fed will cut interest rates at its next monetary policy meeting at the end of this month.
– Powell’s testimony to Congress indicates that despite the trade truce following the recent G20 meeting and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of this month. The Fed minutes of the June policy meeting released on Wednesday echoed Powell’s comments to Congress.
– Sterling’s rally from a 6-month low may be short-lived and limited to 1.2650. Brexit is weighing on the British pound. Poor UK data may force the Bank of England to change its upbeat assessment of the economy and cut UK interest rate.
– Bank of Canada left interest rate unchanged at 1.75% and showed no sign that it would follow the dovish global trend, making clear it had no intentions of easing its monetary policy. The Canadian dollar recovered to a near eight-month high and is threatening to cross below the 1.30 barrier.
– US CPI is scheduled at 8.30pm tonight and Powell’s testimony continues for a second day before Congress at 10pm.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1250. Stop at 1.1220 and target at 1.1325
3. US dollar is weighed down by Powell’s hint of a rate cut and comments that external uncertainties will exert pressure on US economy
4. 20EMA has a bullish reversal and MACD is turning up and rising.
Fundamental Comments
1. Powell’s comment that external uncertainties continue to exert pressure on US economy is weighing on the US$
2. Power’s hint that US interest rate would be lowered is also weighing on the US$
Technical Comments
1. 20EMA has a reversal and is turning up
2. MACD is turning up and both lines could have a bullish crossover.
Key Levels
| Support | 1.1245 | 1.1215 | 1.1180 |
| Resistance | 1.1280 | 1.1310 | 1.1345 |
Technical Overview
USD/JPY – Price fell from Fibonacci 127% of the rally from 106.77 to 108.52 with news of Powell’s speech. Price is sitting on an important support at the moment at 107.85. If price were to move below 107.51, it could trigger a move to 106.77. Watch the support at 107.51 for directional clue.
| Support | 107.85 | 107.50 | 107.10 |
| Resistance | 108.30 | 108.60 | 108.95 |
AUD/USD – Yesterday, we had changed our stop to 0.6960 and our profit target to 0.6910. Price reached a low of 0.6909 yesterday but our profit order was not filled as the low was on the bid side. This morning our stop got triggered at 0.6960. MACD is still bearish but Stochastic is rising strongly. We think the rally could extend to 0.7010.
| Support | 0.6945 | 0.6910 | 0.6885 |
| Resistance | 0.6990 | 0.7015 | 0.7045 |
GBP/USD – Price moved above 1.25 to negate the bearish trend and confirmed the low at 1.2439. MACD is still bearish but Stochastic is rising and not into overbought extreme as yet. Price could be moving higher to Fibonacci 62% of the decline from 1.2783 to 1.2439 at 1.2650.
| Support | 1.2510 | 1.2480 | 1.2440 |
| Resistance | 1.2550 | 1.2590 | 1.2650 |
XAU/USD – Price broke above the 1416 barrier and we think price could be heading towards 1438. MACD has turned bullish and is rising. Stochastic is also rising. Both momentum indicators are hinting of more price rally ahead. Support is at 20EMA point of 1407.50.
| Support | 1418.70 | 1407.20 | 1395.20 |
| Resistance | 1426.90 | 1432.20 | 1438.90 |
NZD/USD – Yesterday, we had a buy call on this pair at 0.6600. This morning, our profit target was filled at 0.6655. We are out with a 55 pips profit. Stochastic is still rising and MACD is rising as well. 20EMA is still bullish and rising. There is still potential for a price rally to 0.6690.
| Support | 0.6640 | 0.6615 | 0.6590 |
| Resistance | 0.6675 | 0.6695 | 0.6720 |
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