Market Talk
– The dollar was up on Wednesday morning in Asia, with other major currencies holding tight ranges in a quiet trading session overnight ahead of a U.S. Federal Reserve FOMC policy decision later on early Thursday morning.
– The Fed is widely expected to make few changes to its current monetary policy. However, investors’ concerns about runaway inflation continue to grow, fueled by the global COVID-19 vaccine rollout, a $1.9 trillion stimulus package in the U.S., and optimism for a faster-than-expected global recovery from COVID-19.
– The euro was at $1.1903, after its downward trend over the last three days, with Sweden and Latvia the latest countries to suspend usage of the AstraZeneca’s vaccine over potential side effects concerns weighing on the Euro dollar.
– The British pound was down to $1.3886 in Asian trading on Wednesday. The currency has come under pressure from profit-taking after it hit a near three-year high last month on the back of a fast vaccine roll-out.
– Gold was up on Wednesday morning in Asia, hovering near their highest level in more than two weeks over growing expectations of higher inflation. Investors will also pay close attention to the Fed’s comments on the recent spike in bond yields, fears about rising inflation, and the economic outlook.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3885. Stop at 1.3925 and profit target at 1.3780.
3. US stimulus and successful vaccine rollout are both likely to boost the US dollar.
4. Price is capped by the 20EMA line with MACD hinting of a bearish price trend ahead.
Fundamental Comments
1. US stimulus is expected to lead to an economic recovery and inflation, with inflation boosting Treasury yields and the US dollar.
2. Successful vaccine rollout in the US is likely to lead to a US economic recovery, boosting the US dollar.
Technical Comments
1. Price is capped by the 20EMA line and could be heading lower again.
2. MACD remains bearish and could be turning down again after finding resistance at the zero line.
Key Levels
| Support | 1.3860 | 1.3810 | 1.3775 |
| Resistance | 1.3905 | 1.3950 | 1.4005 |
Technical Overview
USD/JPY – Price managed to bounce off the 20EMA support but was unable to move above 109.36. The range is narrowing which is a hint of price forming a top. Both MACD and Stochastic had given a divergence warning of a possible high in the making. 20EMA is bullish hinting of a bullish price trend ahead. We think the topside could be limited to 109.55 and a decline is likely within the next few days ahead.
| Support | 108.90 | 108.65 | 108.35 |
| Resistance | 109.35 | 109.55 | 109.85 |
EUR/USD – A rally to 1.1968 on Monday’s morning fizzed off and sent price to a low of 1.1881 on Tuesday. MACD remains bearish but is not strongly bearish. Stochastic is in the oversold zone and is hinting of a price rally. 20EMA is bearish but is also not strongly bearish. The correction to 1.1881 is just below the Fibonacci 62% correction point and if this support holds, we could see price moving higher to 1.20 again in the next few days.
| Support | 1.1880 | 1.1835 | 1.1800 |
| Resistance | 1.1910 | 1.1950 | 1.1990 |
USD/CAD – We had a sell call on this pair yesterday but our sell entry was not filled at 1.2510 as price only reached a high of 1.2499. Overnight, price had declined lower past our target to a low of 1.2431. MACD remains bearish but is hinting with a divergence of a possible price low. Stochastic is also in the oversold zone and hinting of a possible price low in the process of forming. 20EMA remains bearish.
| Support | 1.2430 | 1.2395 | 1.2355 |
| Resistance | 1.2465 | 1.2490 | 1.2520 |
XAU/USD – The price rally continues for another day and price has now reached another marginal high of $1740.95. MACD, while bullish is not strong. Stochastic has a bearish crossover and is heading lower, hinting of a bearish price trend ahead. 20EMA is rising and hinting of a bullish price trend ahead. We see this rally continuing higher to $1747.40. Below $1710 will negate our bullish view.
| Support | 1733.35 | 1721.20 | 1711.75 |
| Resistance | 1747.40 | 1759.50 | 1769.60 |
AUD/USD – We had a sell recommendation on this pair on Monday that was filled when price reached a high of 0.7755. Price suffered a sharp drop to 0.7705 but quickly bounced back to 0.7755 Our view remains unchanged. We would recommend lowering stop at 0.7760 and raising profit order at 0.7670. Stochastic is approaching the oversold zone. MACD remains bearish. 20EMA is also bearish.
| Support | 0.7705 | 0.7665 | 0.7620 |
| Resistance | 0.7745 | 0.7775 | 0.7805 |