Market Talk
– The dollar is set to take its cues from the U.S. Federal Reserve’s policy statement and a speech by President Joe Biden on Wednesday, as it seeks to extend a recovery from an eight-week low touched earlier in the week against a basket of currencies.
– The greenback’s decline stemmed largely from receding bets that the Federal Reserve could start laying the ground work for future policy tightening soon as the U.S. economy rapidly recovers.
– The yen slipped to 108.80 as Japan’s economic recovery is being hampered by recent surges in COVID-19 cases in the country and after the Bank of Japan acknowledged that inflation will fail to reach its key 2% target through early 2023.
– The Australian dollar dropped to $0.7739 after the country’s consumer price index came in weaker than expected during the first quarter of 2021. The New Zealand dollar was steady around 0.7200.
– Gold was down on Wednesday morning in Asia as investors await U.S. Federal Reserve’ policy decision to be announced on Thursday morning (Singapore time) for clues on the direction of central bank policy. A rising U.S. Treasury yields weigh on price as well.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9150. Stop at 0.9115 and target at 0.9225.
3. A rising US Treasury yield and interest rate differential are both in favour of the US dollar.
4. 20EMA and MACD are both indicating of a bullish price trend.
Fundamental Comments
1. A rising US Treasury yield is giving support to the US dollar.
2. Interest rate differential is in favour of the US dollar.
Technical Comments
1. 20EMA has turned bullish hinting of a bullish price trend ahead.
2. MACD has given a bullish divergence warning hinting of a bullish price trend.
Key Levels
| Support | 0.9150 | 0.9120 | 0.9095 |
| Resistance | 0.9195 | 0.9230 | 0.9260 |
Technical Overview
USD/JPY – We saw a decline to 107.47 on Friday night and price was able to bounce indicating a possible reversal. Price has now move above to the Fibonacci 38% correction point at 108.80 and could be heading to the Fibonacci 50% correction point at 109.20. Stochastic is at the overbought extreme but MACD remains bullish and rising. 20EMA is also hinting of a strong bullish price trend ahead.
| Support | 108.80 | 108.40 | 107.95 |
| Resistance | 109.20 | 109.60 | 109.95 |
EUR/USD – Price reached a high of 1.2117 on Monday and has been on a decline. Price is close to the lower edge of the downtrend channel and a break of this support is likely to see a price decline to 1.1990 in the next few days. Stochastic is declining but MACD has remained bullish. 20EMA is about to turn bearish. Ability to hold above 1.2050 is likely to see a test of 1.2117.
| Support | 1.2060 | 1.2030 | 1.1990 |
| Resistance | 1.2090 | 1.2120 | 1.2160 |
GBP/USD – Our buy entry was filled Monday at 1.3885 when price declined to a low of 1.3865. Our view remains unchanged. We would recommend keeping stop at 1.3850 and profit order at 1.3995. Stochastic is in the middle of its range but has a bearish crossover and is moving lower. MACD is near to the zero line and remains neutral. 20EMA is flat and neutral as well.
| Support | 1.3865 | 1.3825 | 1.3795 |
| Resistance | 1.3895 | 1.3930 | 1.3985 |
XAU/USD – Yesterday, we had a buy call on this pair at $1780 but our stop was triggered last night at $1771.90. Price has dropped to a low of $1766.30 but Stochastic has not yet reached the oversold zone. MACD remains bearish and 20EMA is bearish as well. Price had also broken below a 1-month trend channel. Unless price can move above $1785, the trend is bearish for $1754.
| Support | 1766.30 | 1758.50 | 1747.10 |
| Resistance | 1777.50 | 1788.65 | 1797.85 |
XAG/USD – Price may be in a bigger correction process and we think this correction could send price lower to $25.60 to complete the correction. Stochastic has a bearish crossover and is heading lower. MACD and 20EMA are both bearish and hinting of a bearish price trend ahead. Only a price move above $26.45 would negate our bearish view over the next few days ahead.
| Support | 25.85 | 25.55 | 25.25 |
| Resistance | 26.10 | 26.45 | 26.65 |