Market Talk
– The dollar hit a seven-week peak against the yen and gained on major peers as U.S. bond yields ticked up on new U.S. economic data that showed a greater-than-expected decline in new unemployment claims and acceleration in business spending on equipment.
– Initial claims for state unemployment benefits totalled a seasonally adjusted 406,000 for the week ended May 22, compared to 444,000 in the prior week, the Labour Department said on Thursday. That was the lowest since mid-March 2020 and kept claims below 500,000 for three straight weeks.
– The British pound held firm near a three-month high against the dollar after a Bank of England policy maker said the central bank is likely to raise interest rates well into next year and that an increase could come earlier.
– The dollar jumped to 109.85 yen, breaking out of its tight range over the past few weeks, to reach its highest levels in about seven weeks on concerns about a delay in Japan’s economic recovery after media report that Japan is looking to extend a state of emergency in Tokyo and several other areas by three weeks to June 20.
– Gold was down on Friday morning in Asia as a rising U.S. Treasury yields and a stronger US dollar pressured the yellow metal. Investors also await crucial U.S. inflation data that will be released later in the day.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2070. Stop at 1.2035 and target at 1.2140.
3. A strong labour and business spending data are both keeping the US dollar strong.
4. A possible Double Bottoms chart pattern with bullish MACD is hinting of a bullish price trend ahead.
Fundamental Comments
1. An uptick in US benchmark 10-year Treasury yields is aiding the US dollar.
2. A strong labour data and acceleration in business spending on equipment is keeping the US dollar strong
Technical Comments
1. A possible Double Bottoms chart pattern could be forming on the 4-hourly chart.
2. MACD remains bullish and could be turning around, which is a sign of a bullish price trend ahead.
Key Levels
| Support | 1.2055 | 1.2010 | 1.1945 |
| Resistance | 1.2095 | 1.2145 | 1.2175 |
USD/JPY – The top side of a multi-weeks long sideways consolidation which lies at 109.75 was broken overnight and we are expecting this rally to continue towards 110.95 in the next few days ahead. Stochastic has moved into the overbought zone but MACD remains bullish and strong. MACD is hinting there could be more upsides. 20EMA is hinting of a strong bullish price trend ahead.
| Support | 109.70 | 109.30 | 109.00 |
| Resistance | 110.00 | 110.40 | 110.90 |
EUR/USD – Our view remains the same as yesterday. We are expecting price to test 1.2160 soon and over the next few days to move lower to 1.2050 which is the Fibonacci 38% correction point of the rally from 1.1703 to the recent high of 1.2266. MACD and 20EMA have both turned bearish and are hinting of a bearish price trend. Stochastic is close to the oversold zone but is able to support a price movement lower.
| Support | 1.2160 | 1.2125 | 1.2095 |
| Resistance | 1.2190 | 1.2215 | 1.2245 |
GBP/USD – We had a sell call on this pair but we were wrong on this call. We are changing our longer term view to bullish on this pair after a BOE’s policy maker hinted of a rate hike in 2022. For the short term, price will need to move above the previous high 1.4233 to regain its bullish trend; else we could see a decline back to 1.4100 again. MACD remains bullish and Stochastic is still moving higher; both are hinting of a bullish price trend ahead.
| Support | 1.4170 | 1.4130 | 1.4095 |
| Resistance | 1.4205 | 1.4240 | 1.4290 |
XAU/USD – Price after it had reached a 4-month high at $1912.55 on Wednesday night, continues its decline, reaching a low of $1887.30. The low also confirms $1912 as the high point and a reversal. We are expecting the decline to continue lower to the Fibonacci 161.8% price projection target at 1871.90. 20EMA has turned bearish but MACD remains bullish. Stochastic is on the decline after a bearish crossover. Indicators are hinting of a bearish price trend ahead.
| Support | 1887.90 | 1872.35 | 1864.95 |
| Resistance | 1898.00 | 1912.55 | 1927.40 |
XAG/USD – Price had declined below a 2-month uptrend channel and could be heading lower towards $26.78 in the next few days ahead. 20EMA has turned bearish and MACD is about to turn bearish as well. Stochastic is declining and has yet to reach the oversold zone, hinting that there could be more downside. Only a move back into the bullish trend channel above $27.90 could avert our bearish trend view.
| Support | 27.50 | 27.20 | 26.95 |
| Resistance | 27.90 | 28.20 | 28.45 |