Market Talk
– The dollar was up on Thursday morning in Asia, reaching a four-month high against the euro. The gap in the U.S. and European COVID-19 response continues to widen thanks to lockdowns in Europe and a delayed vaccine rollout due to a serious complication in the vaccine used.
– U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell reiterated their confidence in the U.S. economic recovery during a second day of testimony to Congress on Wednesday boosting the US dollar.
-The euro traded near the four-month low of $1.1803 touched earlier this morning as Europe continues its battle against a third wave of COVID-19 cases. Even Germany’s extended, strict lockdown failed to restore confidence in the regional economic outlook, with discontent mounting over Chancellor Angela Merkel’s handling of COVID-19 pandemic instead.
– Investors worry over inflation as disruptions in the supply chain exert cost pressures for manufacturers, with U.S. factory activity picking up in early March. In Europe, an unexpected expansion of business activity adds to inflation worries.- Gold gained as the safe-haven metal drew support from Federal Reserve Chair Jerome Powell’s repeated calls to keep interest rates pinned near zero and a decline in US Treasury yields. However a stronger US dollar capped the yellow metal’s gain.
Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation.
2. Sell AUD/JPY at 83.05. Stop at 83.40 and target at 82.05
3. Spread of coronavirus in Europe and tensions between China and the west are like to favour the safe haven yen.
4. Price is likely to be capped by a support turned resistance line with MACD hinting of a bearish price trend ahead.
Fundamental Comments
1. Spread of coronavirus in Europe is likely to lead to demand for safe haven yen.
2. Tensions between China and the West are likely to weigh on the Aussie dollar.
Technical Comments
1. Price correction is likely capped by the 20EMA and a previous support turned resistance line.
2. MACD remains bearish and is hinting of a bearish price trend.
Key Levels
| Support | 82.45 | 82.05 | 81.75 |
| Resistance | 82.85 | 83.25 | 83.60 |
Technical Overview
USD/JPY – Price declined to a low of 108.40 on Tuesday and price has been moving higher since that day. There was no test of the Double Tops neckline at 108.30. MACD remains bullish but there could be a divergence warning. Stochastic is near to the overbought zone and 20EMA is hinting of a bullish price trend ahead. We think price is likely to be capped at 109.30 and sideways range movement from 108.30 to 109.30 is more likely than a bullish or bearish trend.
| Support | 108.65 | 108.30 | 107.95 |
| Resistance | 109.05 | 109.35 | 109.70 |
EUR/USD – Price broke below 1.1835 yesterday and the decline has continued to 1.1803 this morning. Stochastic is deep in the oversold extreme but MACD remains bearish. 20EMA is also pointing lower with a steep slope, which is a hint of a strong bearish price trend. While we are bearish, we are cautious of a limited downside and a corrective rally to unwind the Stochastic indicator extreme reading.
| Support | 1.1800 | 1.1760 | 1.1720 |
| Resistance | 1.1835 | 1.1870 | 1.1915 |
GBP/USD – Price broke below 1.3810 on Tuesday and break of the neckline is likely to trigger a price move to 1.3615 over the next 1-2 weeks. Price has declined to 1.3673 yesterday. Stochastic is deep in the oversold extreme but MACD and 20EMA remains bearish. We remain bearish but we think there could be a corrective rally first to 1.3760 before the downtrend begins for 1.3615.
| Support | 1.3670 | 1.3635 | 1.3605 |
| Resistance | 1.3710 | 1.3735 | 1.3780 |
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. MACD is flat and near to the zero line, which is a sign of a non-trend price movement. 20EMA is also flat and hinting of a sideways movement while Stochastic is in the middle of its range. Watch the range for breakout and clues to the next direction for gold.
| Support | 1727.05 | 1718.90 | 1706.10 |
| Resistance | 1740.75 | 1755.35 | 1766.90 |
USD/CNH – We have a buy call on this pair at 6.5180 but it was not done as price dripped to a low of 6.5175 on the bid side, with the ask price higher than 6.5180. Price has moved to a high of 6.5367 this morning and we are expecting the rally to continue higher to 6.5500. MACD remains bullish but Stochastic is close to the overbought zone. 20EMA is hinting of bullish price trend.
| Support | 6.5175 | 6.5025 | 6.4915 |
| Resistance | 6.5370 | 6.5505 | 6.5625 |