Market Talk
– The dollar was up on Wednesday morning in Asia near a four-month high, as COVID-19 concerns, potential U.S. tax hikes, and tensions over tit-for-tat sanctions between China and the West turned investors towards the safe-haven asset.
– Sanctions imposed on China by the U.S., Europe, and the U.K. over human rights issues, prompted China to retaliate with sanctions of its own, sending the USD/CNH to a high of 6.5220. The Aussie dollar was also dragged lower to 0.7615.
– A third wave of COVID-19 cases in Europe prompted fresh lockdowns in several countries. Germany extended its lockdown until Apr. 18, with France and Italy also extending restrictive measures, and the euro fell towards a two-week low of $1.18360.
– Powell told U.S. lawmakers that he expected inflation to rise over the course of the year, but it would be “neither particularly large nor persistent.” The US 10-year Treasury yield dipped to 1.605% weighing on the US dollar strength.
– Gold was up on Wednesday morning in Asia, with investors and Congress reassured by U.S. Federal Reserve Chair Jerome Powell that inflation will remain under control. A decline in equity market after US Treasury Secretary Yellen warned of a tax hike helped the safe haven yellow metal.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.5180. Stop at 6.4980 and target at 6.5480.
3. Tensions between China, Europe and US are likely to lead to demand for the safe haven US dollar.
4. Price is supported by the 20EMA while momentum indicators are hinting of a bullish price trend ahead.
Fundamental Comments
1. Inflation is expected to increase which is likely to lead to a higher Treasury yields and support the US dollar.
2. Tensions between China, Europe and US are likely to drive demands higher for the safe haven US dollar.
Technical Comments
1. Price was supported by the 20EMA and has moved above a recent high, hinting of a bullish price trend ahead.
2. MACD is bullish and Stochastic is moving higher, hinting of a bullish price trend ahead.
Key Levels
| Support | 6.5175 | 6.5025 | 6.4915 |
| Resistance | 6.5290 | 6.5395 | 6.5505 |
Technical Overview
USD/JPY – Price was unable to move above 109.36 and we saw a price decline to 108.52 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. Stochastic is near to the oversold zone but 20EMA and MACD are both hinting of a bearish price trend ahead.
| Support | 108.30 | 107.95 | 107.65 |
| Resistance | 108.60 | 108.95 | 109.35 |
EUR/USD – Price tested the low of 9 March at 1.1835 last night, reaching a low of 1.1833 before moving above this support. Price looks weak at the moment but we think the downside could be limited. 1.1835 is a multi-target area from 2 Fibonacci projections as well as a chart pattern. MACD and Stochastic are both near to their extreme point, although 20EMA remains bearish. However a break of 1.1835 could see a price decline to 1.1705 over the next few days.
| Support | 1.1835 | 1.1800 | 1.1760 |
| Resistance | 1.1870 | 1.1915 | 1.1950 |
GBP/USD – Price broke below 1.3810 yesterday, which was the Double Tops chart pattern’s neckline. A break of the neckline at 1.3810 is likely to trigger a price move to 1.3615 over the next couple weeks. 20EMA is hinting of a bearish price trend. MACD remains bearish but Stochastic is near to its extreme level. We think the downside could be limited to 1.3650 but longer term we are moving our target lower to 1.3490.
| Support | 1.3700 | 1.3655 | 1.3610 |
| Resistance | 1.3740 | 1.3775 | 1.3810 |
XAU/USD – Price remains within last Thursday’s high-low range of $1718 to $1755 and we are expecting this range to hold for today. Stochastic is rising towards the overbought zone but MACD remains bearish. 20EMA is capping price decline at the moment at $1731, but 20EMA remains neutral. Watch the range breakout for clues to the next direction.
| Support | 1727.05 | 1718.90 | 1706.10 |
| Resistance | 1740.75 | 1755.35 | 1766.90 |
AUD/JPY – We had a sell recommendation on this pair yesterday. Price reached a high of 83.71 just even 4pm local time but after 4pm, the high seen was 83.64. We will consider this order as not filled. Price has declined to a low of 82.27 and the trend is still bearish but we think the down side could be limited as both Stochastic and MACD are at their extreme point.
| Support | 82.05 | 81.75 | 81.45 |
| Resistance | 82.45 | 82.90 | 83.25 |