FX Commentary – US Strengthened On Rising Treasury Yields

Market Talk

– The safe-haven U.S. dollar strengthened again on Friday, supported by higher Treasury yields and falling stock markets, as investors continued to digest the Federal Reserve’s push back against expectations of any early interest-rate hikes.

– The benchmark U.S. 10-year yield climbed to a more than one-year peak of 1.754% overnight after the Fed pledged to press on with aggressive monetary stimulus, saying a near-term spike in inflation would prove temporary amid their projections for the strongest U.S economic growth in nearly 40 years.

– The British pound sank to $1.3903 after the Bank of England warned the outlook for Britain’s recovery remained unclear, dampening some speculation the bank would signal a more confident outlook. BOE kept its rate unchanged at 0.10% when it handed down its decision on Thursday.

– The yen weakened past 109 per dollar before retracing that entire move, after BOJ’s decision to widen the target band for the 10-year Japanese government bond yield to 25 basis points around 0% from 20 basis points previously.

– Gold was down on Friday morning in Asia, feeling the pressure from rising U.S. Treasury yields after the U.S. Federal Reserve pledged to look past inflation and keep interest rates near 0% until at least the end of 2023.


Chart Focus AUD/USD
Key Points
1. Sell AUD/USD recommendation
2. Sell AUD/USD at 0.7760. Stop at 0.7805 and target at 0.7640
3. A rising US Treasury yields and falling stock markets are both moving investors into the safe haven US dollar.
4. Price has formed a bearish reversal candlestick pattern and Stochastic is hinting of a bearish price trend.

Fundamental Comments
1. Rising US Treasury yields are in favour of the US dollar.
2. Falling stock markets is moving investors into the safe haven US dollar

Technical Comments
1. Price has formed an Evening Star candlestick price pattern which is a hint of a possible price high.
2. Stochastic has given a divergence warning and is declining after a bearish crossover.

Key Levels

Support0.77250.76900.7665
Resistance0.77650.77950.7845

Technical Overview

USD/JPY – Price was unable to move above 109.36 and we saw a price decline to 108.80 this morning. We are expecting the decline to continue lower to 108.30. A break of this support would be a bearish hint. It confirms a Double Tops chart pattern and a possible price move to 107.30. MACD is showing weakness. Stochastic and 20EMA are both hinting of a bearish price trend ahead.

Support108.60108.30107.85
Resistance108.95109.35109.55

EUR/USD – Price tested the previous high of 1.1990 yesterday but was unable to move above this point. Price has declined to a low of 1.1901 and which was also above the previous week’s low. Stochastic has a bullish crossover and is moving higher but MACD remains bearish. 20EMA is neutral. We are likely to see price trade within the range of 1.1990 to 1.1890 until there is a break of this range.

Support1.19001.18801.1835
Resistance1.19301.19601.1990

GBP/USD – Price tested the previous week’s high of 1.4004 yesterday but was unable to move above this resistance. Price has declined to 1.3914 this morning and is currently capped by the 20EMA at 1.3925. MACD is neutral but Stochastic is declining after a bearish crossover. We are expecting price to test the range low of 1.3810 in the next 1-2 days.

Support1.38901.38501.3810
Resistance1.39351.39751.4005

XAU/USD – Gold rallied on the back of Powell’s comments past our $1747.40 price target to a high of $1755.35 on Thursday morning. However, price has declined to a low of $1718.90 and is currently moving higher towards $1755. MACD remains bullish and Stochastic has a bullish crossover and is moving higher. 20EMA is neutral at the moment. We see a movement higher to the Fibonacci 200% price projection target at $1763.95 for today.

Support1728.401718.901706.10
Resistance1745.401755.351763.95

USD/CHF – Our sell recommendation yesterday was stopped out when price rallied to a high of 0.9304. Price has broken out of a down trend channel as well as the 20EMA line. Price is currently supported by the 20EMA. Stochastic continues to rise higher but MACD remains bearish. 20EMA is rather flat at the moment and is not hinting of any strong trend movement. Price could moves in a range from 0.9210 to 0.9310.

Support0.92550.92100.9170
Resistance0.92800.93100.9355

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