Market Talk
– The dollar was up on Friday morning in Asia, hovering near three-month highs after U.S. Federal Chairman Jerome Powell disappointed investors by not indicating that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates and keep yields in check.
– U.S. Fed Chair Powell said the sell-off in Treasuries was “notable and caught my attention” but was not “disorderly” or likely to push long-term rates so high as to warrant a more forceful Fed intervention. Instead, Powell reiterated the Fed’s commitment to maintaining its ultra-easy monetary policy until the economy is “very far along the road to recovery.”
– Riskier currencies including the Australian and New Zealand dollars were down along with global stocks as investor sentiment soured, as 10-year Treasury yield to climb back above 1.5%, rising as high as 1.5830% in Asia
– China set a conservative economic growth target of above 6%, below economists’ forecasts, for 2021 as the National People’s Congress opened earlier in the day. China’s leadership also outlined fiscal support for China’s economic recovery from COVID-19.
– Gold was down on Friday morning in Asia, staying near a nine-month low and is headed for a third consecutive weekly decline after dovish comments from U.S. Federal Reserve Chairman Jerome Powell.
Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation.
2. Sell AUD/USD at 0.7735. Stop at 0.7765 and target at 0.7650.
3. An increase in risk aversion and rising Treasury yield are lending support to the US dollar.
4. 20EMA and Stochastic are both hinting of a bearish price trend ahead.
Fundamental Comments
1. Rising US 10-year Treasury yields is lending support to the US dollar.
2. An increase in risk aversion is also supporting the safe haven US dollar.
Technical Comments
1. Price is capped by the declining 20EMA which is hinting of a bearish price trend ahead.
2. Stochastic is moving lower and hinting of a bearish price trend ahead.
Key Levels
| Support | 0.7685 | 0.7645 | 0.7615 |
| Resistance | 0.7720 | 0.7750 | 0.7790 |
Technical Overview
USD/JPY – Yesterday, we got our direction wrong for this pair. We are looking for a decline after a price high. However, the price rally continues and price has now reached a high of 108.11 and looks likely to continue higher. MACD is bullish and rising. Stochastic is in the overbought zone but 20EMA is bullish and hinting of a strong bullish price trend ahead. The next target could be 108.50.
| Support | 107.85 | 107.35 | 106.95 |
| Resistance | 108.15 | 108.50 | 108.95 |
EUR/USD – From a high of 1.2110, price has now broken below the previous low of 1.1952 and could be heading lower to 1.1920. Stochastic is declining and has not yet reached the oversold zone. MACD remains bearish and is moving lower. 20EMA is pointing lower with a steep slope, hinting of a strong bearish price trend ahead.
| Support | 1.1945 | 1.1920 | 1.1875 |
| Resistance | 1.1990 | 1.2035 | 1.2080 |
GBP/USD – Price only reached a high of 1.4015 and has tumbled down to 1.3866 this morning. Stochastic is already in the oversold zone and is moving higher after a bullish crossover. MACD remains bearish. 20EMA is hinting of a bearish price trend ahead. However, price will need to break an important support at 1.3858 to move lower to 1.3775.
| Support | 1.3855 | 1.3810 | 1.3775 |
| Resistance | 1.3900 | 1.3930 | 1.3970 |
XAU/USD – Price moved to a low of $1686.45 overnight and there was divergence warning from MACD. While MACD remains bearish, there is a divergence warning of a possible price low in the making and a hint of a possible price reversal. Stochastic is in the oversold zone but 20EMA remains bullish. Price will need to move above $1707 to confirm a possible reversal and impending uptrend.
| Support | 1690.60 | 1677.05 | 1668.75 |
| Resistance | 1706.70 | 1722.85 | 1732.70 |
USD/CAD – We had a buy call on this pair yesterday but we were stopped out last night when price dropped to a low of 1.2574. We lost 45 pips on this trade. Our view remains the same. We view this decline as part of a correction and we think the US dollar will continue to move up to 1.2800 over the next few days. A move below 1.2560 would negate our bullish view.
| Support | 1.2650 | 1.2615 | 1.2575 |
| Resistance | 1.2695 | 1.2740 | 1.2780 |