Market Talk
- The dollar teetered near milestone lows on Tuesday morning, after a triple blow of retreating yields, soft U.S. economic data and a dip in safe-haven demand after a fresh rally in tech stocks added to the positive mood exerted broad selling pressure on the US dollar.
- New York Fed’s Empire State business conditions index tumbled to 3.7 in August from 17.2 in July – far lower than the 15 points forecast by a Reuters survey, added to doubts sowed by grim data last week, reinforcing the view that the US economic recovery is on shaky ground.
- The yuan sat at 6.9306 per dollar, within range of a five-month high of 6.9280, despite the Trump administration flagging a further tightening of restrictions against Chinese tech gear maker Huawei and possible sanctions against Alibaba and Tik-Tok.
- Sterling stalled around $1.3111 as investors await the latest round of Brexit negotiations, with the future of London’s financial institutions’ access to the European market in focus while the Euro was little changed from previous day’s level. The Aussie was close to an 18-month high at 0.7242.
- Gold prices jumped more than 2% on Monday as a renewed drop in U.S. Treasury yields pushed investors back toward the yellow metal along with news of Berkshire Hathaway buying a stake in Barrick Gold Corp.
Chart Focus EUR/JPY
Key Points
1. Buy EUR/JPY recommendation
2. Buy EUR/JPY at 125.40. Stop at 125.10 and target at 126.15
3. Poor Japanese GDP data and optimism over Eurozone economies as a result of EU’s COVID-19 stimulus package are both favouring Euro over the yen
4. Price is approaching an important support area with MACD hinting of a possible price bottom.
Fundamental Comments
1. Japan reported a record economic contraction in the second quarter yesterday, with GDP in second quarter shrinking 27.8% year-on-year.
2. Euro dollar is on an upward trend since the European Union struck a deal for a EUR 750 billion COVID-19 stimulus package to aid the Eurozone economies
Technical Comments
1. MACD is warning with divergence of a possible price bottom
2. Price is supported by Fibonacci 50% correction point of the rally as well as a previous high turned support point.
Key Levels
| Support | 125.45 | 125.15 | 124.85 |
| Resistance | 125.70 | 126.05 | 126.45 |
Technical Overview
USD/JPY – Price was capped below 107.05 and has broken below the support at 106.45 and the decline has currently reached a low of 105.55. MACD is bearish and is still moving lower. Stochastic is in the oversold extreme but is not turning up as yet. 20EMA is steep and hinting of a strong bearish trend. The next support lies at the Fibonacci 62% correction point at 105.25.
| Support | 105.25 | 104.90 | 104.60 |
| Resistance | 105.65 | 106.05 | 106.45 |
EUR/USD – Price is approaching a previous high at 1.1915. MACD is still bullish but is getting weaker. Stochastic is into the overbought zone but 20EMA is rising and its slope is still steep. We think price is likely to test the high today. The reaction at the high is likely to determine the next direction. We remain bullish and think price can sustain its movement above the 1.1915 resistance for 1.20.
| Support | 1.1870 | 1.1830 | 1.1780 |
| Resistance | 1.1915 | 1.1945 | 1.1990 |
GBP/USD – Price is likely to test 1.3185 and moved above it within the next 24 hours. MACD is bullish and is rising at the moment. Stochastic is also rising and has not reached the overbought extreme as yet. Both momentum indicators are able to support a price rally ahead. 20EMA is bullish and is pointing higher. We see price moving up to 1.3280. A price move below 1.3040 would negate our bullish view.
| Support | 1.3135 | 1.3090 | 1.3045 |
| Resistance | 1.3185 | 1.3240 | 1.3285 |
XAU/USD – Yesterday, we had lowered stop to $1957 and we were stopped out last night. We had a small loss of $3 on this position. Price has returned to the $2000 level but we are not sure if the correction has ended. MACD may be above zero line and bullish but is not strong. Stochastic is into the overbought zone while 20EMA is bullish and rising. We will stay aside for today without a view.
| Support | 1985.35 | 1972.20 | 1957.65 |
| Resistance | 2005.45 | 2014.60 | 2027.55 |
AUD/USD – Yesterday, our buy order was not filled at 0.7165 as price only reached a low of 0.7170. Overnight price has reached a high of 0.7229, which is near to our target level. Stochastic is already in the overbought zone but MACD is still bullish and rising. 20EMA is also bullish and rising. Price is likely to test the previous high of 0.7242 again and the reaction will likely determine the next direction.
| Support | 0.7205 | 0.7160 | 0.7110 |
| Resistance | 0.7245 | 0.7295 | 0.7340 |
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