Market Talk
– The dollar hovered near a three-week low against its major rivals on Tuesday, pressured by lower Treasury yields as traders await US CPI data due later in the day for clues to inflation.
– The US dollar has rebounded this year as U.S. Treasury yields rise on expectations of faster economic growth and higher inflation. Investors are betting that price pressures will increase due to increased fiscal and monetary stimulus and as businesses re-open from COVID -19 pandemic induced closures.
– Boston Federal Reserve Bank President Eric Rosengren said on Monday that the U.S. economy could see a significant rebound this year thanks to accommodative monetary and fiscal policy, though the labour market still has much room for improvement.
– Against the euro, the US dollar moved a mere 48 pips while against the yen, the greenback moved 54 pips in a narrow range trading day as the market awaited highly anticipated U.S. inflation data later in the global day.
– Gold fell as an uptick in U.S. Treasury yields weighed on bullion’s appeal, while investors awaited key U.S. inflation and retail sales data to gauge the health of the economy. Elevated yields are still an underlying negative for the metals markets that produce no dividend or yield.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation
2. Buy USD/CHF at 0.9225. Stop at 0.9185 and profit target at 0.9300
3. A rising Treasury yield and expectation of faster economic growth are both aiding the US dollar
4. Price has found support at a previous price low and MACD has a divergence warning of a potential price low. Both are signs of an impending rally.
Fundamental Comments
1. A rising US Treasury yield is aiding the US dollar.
2. Expectation of faster economic growth is aiding the US dollar.
Technical Comments
1. Price has reversed from a previous price low and is moving higher.
2. MACD has a divergence warning, hinting of a possible price low in the making.
Key Levels
| Support | 0.9210 | 0.9175 | 0.9130 |
| Resistance | 0.9255 | 0.9300 | 0.9330 |
Technical Overview
USD/JPY – Price moved to a high of $109.95 last Friday, which was higher than our anticipated level of 109.70. However we still view the rally as corrective and we think price is likely to decline lower to 108.80 to 108.60 in the next few days ahead. MACD remains bearish while Stochastic is in the middle of its range. 20EMA is neutral at the moment. Price will need to move above 110.25 to negate our bearish view.
| Support | 109.45 | 108.95 | 108.45 |
| Resistance | 109.75 | 110.25 | 110.55 |
XAG/USD – Our sell recommendation was filled at 25.15 when price reached a high of $25.25. Price reached a low of $24.67 this morning before rallying to $24.93, which was also the 20EMA resistance line. MACD remains bearish but Stochastic is rising from the oversold extreme. We remain bearish but would recommend lifting profit order higher to $24.30 and lowering stop to cost at $25.15.
| Support | 24.60 | 24.20 | 23.80 |
| Resistance | 24.95 | 25.25 | 25.65 |
GBP/USD – Price tested the previous low at 1.3670 for a third time yesterday since 25 March 2021. The ability to hold above the support at 1.3660 is likely to send price higher to 1.3805 again in the next couple of days. MACD had warned with a divergence and Stochastic has been rising for the past 2 days. We see a test of 1.3805 in the next couple of day but longer term, we remains bearish.
| Support | 1.3725 | 1.3670 | 1.3620 |
| Resistance | 1.3775 | 1.3805 | 1.3840 |
XAU/USD – Price had reached a high of $1758.50 on Thursday and has declined to $1727.25 on Monday. We are expecting the decline to continue lower to $1718 and price is currently at $1724.80. Stochastic is close to the oversold extreme but MACD remains bearish. 20EMA is also bearish and hinting of a bearish price trend ahead.
| Support | 1719.60 | 1708.45 | 1696.80 |
| Resistance | 1730.95 | 1742.80 | 1758.50 |
AUD/USD – We had a sell recommendation of this pair on Friday which was filled at 0.7605 when price reached a high of 0.7640. Price has declined to 0.7603 but bounced up to 0.7636 on Monday. Our view remains unchanged and we are looking at a move to 0.7530. MACD and 20EMA remains bearish and we would recommend keeping stop at 0.7645 and profit order at 0.7530.
| Support | 0.7575 | 0.7530 | 0.7500 |
| Resistance | 0.7615 | 0.7645 | 0.7690 |