FX Commentary – Tapering Talks Helped US Dollar Regain Ground

Market Talk

– The dollar found support on Thursday from emerging views the Federal Reserve is slowly but surely edging towards a discussion about tightening monetary policy, and as traders await crucial U.S. inflation data this week.

-The yen has been boxed in its tightest range against the dollar since December 2019 as investors continue to monitor how the U.S. Federal Reserve is going to change its policy in light of possible runaway inflation, even if Fed officials have reiterated any inflation is transitory.

-The Kiwis edged up to 0.7289 and had pushed up to as high as 0.7316 after hints of a 2022 rate hike by the Reserve Bank of New Zealand. The Aussie inched down to 0.7738, as Australia’s second-most populous state of Victoria entered a week-long lockdown to curb its latest COVID-19 outbreak.

-The offshore yuan strengthened to 6.3861 as U.S. Trade Representative Katherine Tai and Chinese Vice-Premier Liu He had a “candid” first phone conversation. The phone call was one of the few top-level meetings between the two countries since U.S. President Joe Biden took office in January 2021.

-Gold hit a four-and-a-half month high at $1912.56 overnight after US Treasury yield had declined in the previous trading session.  Gold slipped on Thursday morning in Asia after the dollar and Treasury yields edged up.

Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.4120. Stop at 1.4155 and target at 1.4010.
3. Talks of tapering and an increase in US benchmark Treasury yield are both aiding the US dollar.
4. A bearish chart pattern and bearish momentum are both hinting of a bearish price trend for the British pound.

Fundamental Comments
1. Talks of tapering by Fed’s officials are aiding the US dollar.
2. An increase in US benchmark Treasury yield is aiding the US dollar

Technical Comments
1. Chart could have made a Head and Shoulder chart pattern which is a hint of a reversal in price trend.
2. MACD has turned bearish and Stochastic is continuing to move lower. Both are hinting of a bearish price trend for the Sterling.

Key Levels

Support1.40951.40551.4005
Resistance1.41301.41701.4205

Technical Overview
USD/JPY – Price reached a low of 108.55 and has since bounced back up to 109.20. Price has been boxed in its tightest range against the dollar since December 2019. The top side of this range lies at 109.75 while the bottom of the range lies at 108.35. We are now expecting price to stay within this range. Wait for the breakout of this range to provide a clue to the next direction.

Support109.00108.60108.30
Resistance109.30109.50109.75

EUR/USD – While we were right on Friday’s pivot low at 1.2160 and were expecting a test of 1.2285, price only reached a high of 1.2266. Price has since declined to a low of 1.2173. We are expecting price to move below 1.2160 in the next few days to 1.2050 which is also the Fibonacci 38% of the rally from 1.1703 to the recent high. MACD remains bullish but has warned with a divergence. Stochastic is also declining from the overbought position.

Support1.21701.21251.2095
Resistance1.22151.22451.2285

USD/SGD – Price has reached a high of 1.3260 this morning but this could be the high and price could be about to move lower below 1.3200 over the next few days. MACD remains bearish and is hinting of a bearish price trend. Stochastic is weak and 20EMA is pointing lower with a steep slope, which is a hint of a strong bearish price trend. A move above 1.3275 would negate our bearish view for the next few days.

Support1.32251.31951.3155
Resistance1.32601.33001.3330

XAU/USD – Price had reached a 4-month high at $1912.55 on Wednesday night but MACD had warned with a divergence, hinting that a high could be near and a reversal is imminent. As Stochastic is turning up, we may see one more push to $1912 before the decline set in. MACD is also bullish and hinting of a bullish price trend.  A break below $1890 would confirm the high in place.

Support1889.851872.351864.95
Resistance1903.251912.551927.40

NZD/USD – We had a buy call on Wednesday at 0.7205 but price only reached a low of 0.7209, missing our entry price. Price had moved higher and this morning had reached a high of 0.7316. If price can stay above the 20EMA support at 0.7250, there is still another chance of a test to 0.7316 as MACD remains bullish and is hinting of a bullish price trend ahead.

Support0.72750.72350.7200
Resistance0.73150.73500.7390

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