Market Talk
– The dollar inched up on Wednesday morning in Asia as investors await the U.S. Federal Reserve’s policy decision, to be handed down later in the day after declining in the previous session after IMF upgraded global economic growth.
– Investors will be looking to Fed Chairman Jerome Powell’s comments as the Fed wraps up its first policy meeting of 2021 and hands down its policy decision later in the day. He is widely expected to renew a commitment to the current ultra-easy policy.
– The greenback declined against riskier currencies after the IMF upgraded its forecast for 2021 global growth to 5.5% this year, a 0.3 percentage point increase from October 2020’s forecasts, and global gross domestic product to expand by 4.2% in 2022 boosting hopes for a global economic recovery from COVID-19. IMF also warned that new COVID-19 variants could pose a risk to economic recovery.
– The Aussie dollar inched up to 0.7744, with Australian markets returning from a holiday, after a better-than-expected inflation figures were released earlier in the day. Aussie CPI rose 0.9% both quarter-on-quarter and year-on-year during the fourth quarter of 2020.
– Gold prices edged lower on concerns over timing and size of a U.S. coronavirus aid package to be passed by Congress, while a slightly weaker dollar and subdued treasury yields limited losses as investors kept a close eye on the Federal Reserve’s policy meeting.
Chart Focus XAU/USD Gold
Key Points
1. Buy Gold recommendation.
2. Buy Gold at $1842.90. Stop at $1831.25 and target at $1892.20.
3. Fed likely commitment to ultra-easy policy and IMF upgraded growth forecast are both likely to weaken the US dollar.
4. Price is likely to be supported by the Fibonacci 50% correction point and momentum indicators are hinting of a bullish price trend ahead.
Fundamental Comments
1. Fed likely commitment to an ultra-easy policy is likely to keep Gold strong and US dollar weak.
2. IMF upgraded forecast for global economic growth is likely to lead to less demand for the safe haven US dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 50% correction point of the rally.
2. MACD and Stochastic are both near to the low point and both look like they are likely to turn higher.
Key Levels
| Support | 1842.40 | 1832.50 | 1820.20 |
| Resistance | 1855.30 | 1867.65 | 1874.80 |
Technical Overview–
USD/JPY – Price range is starting to narrow, which is a hint of a sideways consolidation ahead. On the 4-hourly chart, MACD is also moving in a flat line near to the zero line, confirming the sideways movement. Stochastic could be turning up soon if a bullish crossover is seen. We think price is likely to consolidate within last week’s range of 103.32 to the high of 104.10 for the next few days ahead.
| Support | 103.60 | 103.30 | 102.95 |
| Resistance | 103.90 | 104.15 | 104.50 |
EUR/USD – Price seems to have made a 3-wave movement to 1.2190 last week and has declined to 1.2107 yesterday. We may see a movement to 1.2065 within the next few days to complete the decline. MACD is still bullish but is near to the zero line. Stochastic has turned up after a bullish crossover. 20EMA is neutral at the moment. We remain bullish unless 1.2065 price support is broken.
| Support | 1.2150 | 1.2110 | 1.2080 |
| Resistance | 1.2185 | 1.2220 | 1.2250 |
GBP/USD – Price had declined below 1.3635 yesterday to a low of 1.3609. After a false break, price has bounced back above 1.3700 again to a high of 1.3751. MACD is bullish and rising. Stochastic is near to the overbought zone. 20EMA is bullish and is pointing higher with a steep slope. Trend indicators are bullish and if price can stay above 1.3700, we can see a test of the 1.3800 handle within the next 24 hours
| Support | 1.3705 | 1.3660 | 1.3610 |
| Resistance | 1.3750 | 1.3795 | 1.3840 |
NZD/JPY – We had a sell call on this pair yesterday but price had shot up and our stop was triggered at 74.90. We lost 30 pips as a result. Price reached a high of 75.10 but has been capped by a previous high resistance around 75.00. MACD has warned with a divergence, 20EMA is still rising and strong. Stochastic has reached the overbought zone and is turning down after a bearish crossover.
| Support | 74.80 | 74.35 | 74.05 |
| Resistance | 75.10 | 75.50 | 75.90 |
XAG/USD – Our buy recommendation was filled at 25.25 on Monday when price declined to a low of 25.16. MACD has remained bearish while Stochastic is near to the oversold zone. 20EMA remained bearish but is flat and close to the zero line. The 3 indicators are showing mixed signals at the moment. We are cautious and would recommend bringing stop higher to $25.10 while keeping profit target unchanged at 26.50. Price will need to move above 26.05 for the bullish view to be valid.
| Support | 25.15 | 24.85 | 24.60 |
| Resistance | 25.50 | 25.75 | 26.05 |
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