Market Talk
– The dollar was pinned near milestone lows on Friday as risk appetite increased and concerns about the U.S. Federal Reserve’s hint of tapering eased, while economic recovery from COVID-19 and rising commodities prices gave other currencies a boost against the greenback.
– The greenback hovers near a multi-month low which reversed Wednesday’s bounce that was prompted by minutes from the U.S. Fed’s most recent monetary policy meeting, in which several policymakers said discussions on tapering of government bond purchases would be appropriate “at some point” should economic recovery continue to gather steam.
– The Australian and New Zealand dollars stayed near multi-year highs as lofty commodity prices and strong pandemic recoveries in both countries provided support. Both currencies looked to close the week broadly steady against the US dollar.
– The British pound is perched close to its highest since 2018 as high vaccination rates supported a stronger-than-expected economic recovery. Analysts said retail sales figures, as well as May PMIs later on Friday might deliver a further boost to Sterling.
– Spot gold rose, fueled by a dip in the greenback and U.S. Treasury yields after factory activity in the U.S. mid-Atlantic region slowed in May from a record pace, casting doubt on how fast the economy can continue to roar.
Chart Focus USD/JPY
Key Points
1. Sell USD/JPY recommendation.
2. Sell USD/JPY at 108.90. Stop at 109.15 and target at 108.35.
3. An easing in risk appetite and expectation that tapering would not be soon have both weighed on the US dollar.
4. A strong resistance to cap price advance and bearish momentum are both hinting of further a price decline.
Fundamental Comments
1. An easing in risk appetite has weighed against the US dollar.
2. Expectation that tapering would not be soon is weighing on the US dollar.
Technical Comments
1. Price is likely to be capped by the 20EMA which is hinting of a bearish price trend.
2. MACD has remained bearish and is hinting of a bearish price trend.
Key Levels
| Support | 108.55 | 108.30 | 107.90 |
| Resistance | 108.90 | 109.25 | 109.50 |
Technical Overview
USD/CHF – Price has broken below the previous low of 0.8959 and is currently hovering around this low point. Stochastic is moving into the oversold zone but 20EMA remains bearish and is hinting of a continuation of the price decline. However, MACD has given a divergence warning, hinting of a potential price low in the making. We think the downside could be limited to 0.8930 and a reversal is possible from this low.
| Support | 0.8950 | 0.8915 | 0.8870 |
| Resistance | 0.8990 | 0.9020 | 0.9050 |
EUR/USD – Price had declined to a low of 1.2159 on Wednesday night but has bounced off this low and moved to a high of 1.2240 at the time of this writing. Stochastic is rising and is hinting of a price rally. 20EMA is bullish and also hinting of a bullish price trend but MACD is giving a divergence warning of a possible price high. We think the topside could be limited to 1.2285 before a reversal.
| Support | 1.2210 | 1.2185 | 1.2150 |
| Resistance | 1.2245 | 1.2270 | 1.2310 |
GBP/USD – Price has moved to a low of 1.4098 on Wednesday from a high of 1.4210. However, price has since rallied to a high of 1.4200 at the time of this writing. 20EMA is bullish and is hinting of more upside rally ahead. Stochastic is rising and is moving towards the overbought zone but MACD is hinting with a divergence of a potential high. We think the topside could be limited to 1.4240 and a reversal is likely from this high.
| Support | 1.4170 | 1.4130 | 1.4095 |
| Resistance | 1.4220 | 1.4250 | 1.4280 |
XAU/USD – Price has been trading within Wednesday’s Outside Range Day. This range day has a high at $1889.85 and a low at $1851.85. We are expecting this range to hold for today. Price is likely to stay within this consolidation. Stochastic is still undergoing a consolidation. MACD remains bullish but 20EMA is neutral at the moment. We would prefer to wait for the range breakout for clues to the next direction of this trend.
| Support | 1868.95 | 1856.50 | 1845.10 |
| Resistance | 1878.60 | 1889.85 | 1900.60 |
XAG/USD – We had a buy recommendation on Wednesday but price declined below our stop at $28.75, taking out our stop. We lost $0.25 on this trade. Price is currently below the 20EMA which is acting as a resistance to price advance. Price is likely to test the lower trend line of a 7-week trend channel. A break of this trend channel would be a bearish factor. Watch the reaction for clues.
| Support | 27.60 | 27.15 | 26.70 |
| Resistance | 27.95 | 28.30 | 28.75 |