Market Talk
– The dollar was up on Friday morning in Asia but was set to end the week with its worst back-to-back weekly drop in 2021. Treasury yields continued their retreat from a 14-month high as investors increasingly bought into the U.S. Federal Reserve’s pledge of continued monetary support.
– U.S. Treasury yields fell to a one-month low of 1.528% overnight, moving further away from the high of 1.776% reached at the end of last month, even in the face of Thursday’s stronger-than-expected retail sales and employment data.
– San Francisco Fed President Mary Daly said on the same day that the U.S. economy is still far from making “substantial progress” toward the central bank’s goals of 2% inflation and full employment, the bar the Fed has set for beginning to consider reducing its support for the economy.
The dollar traded at 108.825 yen, while the euro changed hands at $1.19585, set for a 0.5% weekly advance, adding to the previous period’s 1.3% surge. The Chinese Yuan strengthened to 6.52 against the US dollar after a strong GDP data this morning.
Gold was down on Friday morning in Asia, as better-than-expected U.S. retail sales and employment data cancelled support from lower Treasury yields. Silver was flat at $25.85 per ounce but is set for a second consecutive week of gains.
Chart Focus AUD/USD
Key Points
1. Buy AUD/USD recommendation.
2. Buy AUD/USD at 0.7705. Stop at 0.7670 and profit target at 0.7800.
3. A retreat in US Treasury yields and a belief in Fed’s continued monetary support is likely to weigh on the US dollar.
4. A strong price support and a bullish MACD are both likely to send price higher in the near future.
Fundamental Comments
1. A retreat in U.S. Treasury yield from a 14-month high of 1.776% to 1.528% is likely to weigh on the US dollar.
2. Investors’ belief of U.S. Federal Reserve’s pledge of continued monetary support is likely to weigh on the US dollar.
Technical Comments
1. Price is likely to find support at the 20EMA line as well as the Fibonacci 38% correction point.
2. MACD remains bullish and is hinting of a bullish price trend ahead.
Key Levels
| Support | 0.7705 | 0.7660 | 0.7630 |
| Resistance | 0.7760 | 0.7790 | 0.7835 |
Technical Overview
USD/JPY – Price reached a low of 108.60 and has turned up this morning. Stochastic and MACD had earlier warned with divergence, which is a hint of a possible price low. 20EMA has turned bullish and is hinting of a bullish price trend ahead. We see price continuing its rally higher towards 109.10 or 109.25 in the next couple of days.
| Support | 108.75 | 108.40 | 108.10 |
| Resistance | 109.10 | 109.55 | 109.95 |
EUR/USD – Price was capped by resistance at 1.1990 and if price is unable to move above this resistance, there could be a decline back to 1.1860. MACD is starting to warn with divergence and Stochastic is near to the overbought zone. 20EMA remains bullish and is currently providing support to price at 1.1950. A break of this 20EMA support is likely to send price lower to 1.1860.
| Support | 1.1950 | 1.1915 | 1.1875 |
| Resistance | 1.1990 | 1.2020 | 1.2060 |
GBP/USD – We had a buy recommendation of this pair on Wednesday at 1.3775. Last night our stop at 1.3740 was triggered. We lost 35 pips on this trade. Stochastic is moving lower after a bearish crossover. MACD remains bullish but 20EMA has now turned bearish. We are likely to see a decline to 1.3670 if price is capped at 1.3805. Above 1.3805 would call for a test of 1.3920.
| Support | 1.3720 | 1.3660 | 1.3610 |
| Resistance | 1.3760 | 1.3810 | 1.3840 |
XAU/USD – Price had reached a high of $1758.50 last Thursday and had declined to $1723.58 on Tuesday, which is the Fibonacci 38% correction point of the rally from $1677.50 to $1758.50. Price moved above $1758.50 yesterday and we see this rally continuing higher to $1780 in the next couple of days. MACD is bullish but Stochastic is close to the overbought extreme.
| Support | 1758.50 | 1749.20 | 1733.90 |
| Resistance | 1769.50 | 1780.40 | 1794.95 |
XAG/USD – We had a buy recommendation at $25.45 which was filled when price declined to a low of $25.42. Price has reached a high of $25.98 which was just below our profit target at $26.10. MACD remains bullish but Stochastic is moving lower after a bearish crossover. 20EMA is bullish. We would recommend shifting stop to $25.40 while keeping profit target at $26.10
| Support | 25.60 | 25.25 | 24.95 |
| Resistance | 25.95 | 26.20 | 26.60 |