Market Talk
– The dollar was down on Wednesday morning in Asia to a near three-week low against the euro and the yen, after an uptick in a U.S. consumer price gauge did not spark wider fears about accelerating inflation and the Federal Reserve’s tapering, pushing down U.S. bond yields.
– Data released on Tuesday showed U.S. Core CPI rose 0.3% month-on-month in March while US CPI grew 0.6% month-on-month, its highest growth in more than eight-and-a-half years. The core CPI, which excludes volatile foods and energy, was also a tad stronger than expected, with a year-on-year increase of 1.6%.
– The NZ dollar rose to 0.7092 after the Reserve Bank of New Zealand left interest rates unchanged at 0.25% after its meeting earlier today. The Singapore dollar rose to S$1.3376 per U.S. dollar after the Monetary Authority of Singapore (MAS) left its exchange-rate policy settings unchanged.
– The euro popped up to $1.1960, hitting its highest level since mid-March, as it extended a rally from a five-month low of $1.1704 set on March 31. The dollar bought 108.80 yen, its lowest level in three weeks, down about 2 percent from a one-year peak hit at the end of last month.
– Gold was down on Wednesday morning in Asia, but price had climbed to $1749.20, a more than one-week high after data showing a rise in U.S. inflation bolstered bullion’s appeal as an inflation hedge.
Chart Focus GBP/USD
Key Points
1. Buy GBP/USD recommendation.
2. Buy GBP/USD at 1.3775. Stop at 1.3740 and target at 1.3840.
3. A retreat in US bond yield and an unlikely tapering by the Federal Reserve are both likely to weigh on the US dollar.
4. Price supported by the Fibonacci 62% correction point and MACD hinting of a bullish price trend are signs of an impending price rally.
Fundamental Comments
1. A retreat in US bond yields is weighing on the US dollar.
2. Market expectation that inflation data is unlikely to lead to a Federal Reserve tapering is likely to weigh on the US dollar
Technical Comments
1. Price is moving above a recent high after supported by the Fibonacci 62% correction is a sign of a market rally.
2. MACD is moving higher and could turn bullish soon, hinting of a bullish price trend ahead.
Key Levels
| Support | 1.3745 | 1.3695 | 1.3660 |
| Resistance | 1.3780 | 1.3810 | 1.3845 |
Technical Overview
USD/CHF – We had a buy recommendation of this pair yesterday but we were wrong and got stopped out for a loss of 40 pips on this trade. Price has now broken below an important support at 0.9210. We are likely to see a continuation of this decline to 0.9105. MACD and 20EMA has turned bearish. Stochastic is moving lower but is close to the oversold extreme.
| Support | 0.9170 | 0.9130 | 0.9100 |
| Resistance | 0.9210 | 0.9255 | 0.9300 |
EUR/USD – Price continues to move higher after bouncing off the 20EMA support at 1.1882. Price is likely to test the previous high of 1.1988 in the next couple of days ahead. A move above 1.1988 would be bullish but failure to move above could result in a price correction 1.1860. Stochastic is into the overbought zone. MACD is bullish but there is a potential divergence warning. 20EMA is bullish. Watch the reaction at 1.1990 for clues.
| Support | 1.1955 | 1.1915 | 1.1875 |
| Resistance | 1.1990 | 1.2020 | 1.2060 |
XAG/USD – We had a short position on this pair from Monday. Yesterday we had shifted stop to our cost at $25.15 and profit order to $24.30. Unfortunately our stop at $25.15 was triggered. While price is higher, price will need to move above $25.60 to regain its bullish impetuous. 20EMA is bullish but MACD remains bearish. Stochastic is also close to the overbought zone.
| Support | 25.25 | 24.95 | 24.60 |
| Resistance | 25.60 | 25.95 | 26.20 |
XAU/USD – Price has turned around just below the Fibonacci 38% correction point at $1723.60. Price will need to move above $1758.50 to regain its bullish impetuous, else there is still a change of a test of the Fibonacci 50% or 62% correction point. Stochastic is near to the overbought zone but MACD remains bearish. However, 20EMA has turned bullish.
| Support | 1740.55 | 1730.95 | 1719.60 |
| Resistance | 1749.20 | 1758.50 | 1768.30 |
AUD/USD – We had a sell recommendation of this pair from Friday and our stop was triggered yesterday at 0.7645. We lost 40 pips on this trade. Price is close to an important high at 0.7676 and a break of this resistance is likely to send price higher to 0.7825 in the next few days ahead. MACD is turning bullish and Stochastic is rising. 20EMA has also turned bullish. A price move above 0.7700 is the first sign of a rally to 0.7825.
| Support | 0.7630 | 0.7600 | 0.7570 |
| Resistance | 0.7675 | 0.7700 | 0.7755 |