Market Talk
– The dollar nursed losses against most currencies on Thursday after benign data on U.S. consumer price data and a decline in Treasury yields led some investors to trim bets on a rapid acceleration in inflation.
– U.S. core consumer prices rose 1.3% year-on-year in February, a slight slowdown from a 1.4% annual increase in the previous month, data showed on Wednesday. On a month on month basis, inflation rose 0.1% which was lower than forecast.
– The greenback and U.S. Treasury yields have been rising steadily due to expectations that the Federal Reserve’s loose monetary policy and fiscal stimulus will stoke inflation, but the tame inflation data took some momentum away from the greenback.
– The Australian and New Zealand dollars steadied against the greenback, but sentiment for the antipodean currencies remain strong due rising commodity prices and expectations for acceleration in global trade.
– Gold was up on Thursday morning in Asia, hitting a one-week peak as investors digested further progress on a massive U.S. stimulus package and U.S. inflation data that fell below expectations
Chart Focus XAU/USD Gold
Key Points
1. Buy Gold recommendation
2. Buy Gold at $1726.40. Stop at $1714.10 and profit target at 1760.00
3. A tame CPI data and a retreat in US Treasury yields are both weighing on the US dollar.
4. A break above a price resistance and a bullish MACD are both hinting of a bullish price trend ahead.
Fundamental Comments
1. A retreat in U.S. Treasury yields after investors trim bets on a rapid acceleration in inflation is weighing on the US dollar.
2. A tame Consumer Price Index data which lends support to Powell’s view that loose monetary policy may not lead to higher inflation is weighing on the US dollar.
Technical Comments
1. Price has moved above a trendline which is a hint of a price reversal.
2. MACD is bullish and is hinting of a bullish price trend ahead.
Key Levels
| Support | 1729.70 | 1718.35 | 1707.95 |
| Resistance | 1740.10 | 1753.55 | 1764.60 |
Technical Overview
USD/JPY – Price had reached a high of 109.22 on Tuesday but that high was accompanied by a divergence warning from MACD. MACD remains bullish. Stochastic is declining and is currently close to the oversold zone. However, 20EMA has halted the price decline at on 2 occasions around 108.35. Unless price moved below 108.30, we are likely to see another rally to test the high of 109.22 over the next couple of days.
| Support | 108.35 | 108.05 | 107.75 |
| Resistance | 108.85 | 109.25 | 109.60 |
EUR/USD – We saw a corrective rally to 1.1915 on Tuesday that was followed by a price correction to 1.1869. Price has moved higher to 1.1935 this morning but we think price may have reached a high and a return to 1.1835 is likely. MACD remains bearish while Stochastic is into the overbought zone. 20EMA is neutral at the moment. Above 1.1935, price is likely to test 1.1995.
| Support | 1.1900 | 1.1865 | 1.1835 |
| Resistance | 1.1935 | 1.1975 | 1.2015 |
GBP/USD – Price rose to a high of 1.3925 on Tuesday after bouncing from the low of 1.3801. We had expected price to lower to 1.3778 but after reaching a low of 1.3845, price has rallied to 1.3940 this morning. MACD remains bullish but had a bearish divergence warning of a possible price high. Stochastic is in the overbought zone. 20EMA remains bullish.
| Support | 1.3905 | 1.3860 | 1.3835 |
| Resistance | 1.3940 | 1.3970 | 1.4015 |
AUD/USD – We had a buy recommendation that was filled Tuesday. Price had moved higher to 0.7753 this morning. MACD is showing weakness but Stochastic is still rising but is in the overbought zone. We would recommend bringing stop higher to 0.7715 while keeping profit target at 0.7770. Price could move higher to 0.7800.
| Support | 0.7725 | 0.7695 | 0.7655 |
| Resistance | 0.7770 | 0.7810 | 0.7850 |
USD/CNH – We had a buy recommendation yesterday but was stopped out when price declined to a low of 6.4933. Stochastic remains in the oversold zone. MACD remains bullish while 20EMA is bearish at the moment. Price will need to move above 6.5280 to regain the bullish tone. If price remains below 6.5280, we are likely to see a continuation of the decline to 6.4600.
| Support | 6.4930 | 6.4790 | 6.4570 |
| Resistance | 6.5080 | 6.5150 | 6.5230 |