FX Commentary – Gold Pushes Higher Amid Signs of Accelerating Inflation

Market Talk

  • The dollar languished near multi-month lows versus major peers on Tuesday as traders pondered the prospects for early policy normalization by the Federal Reserve ahead of a key jobs report at the end of the week.
  • The USD/CNH edged back toward a three-year high of 6.3526 per dollar reached on Monday, last trading at 6.3640, paring a retreat spurred by the monetary authority’s tightening of banks’ FX requirements to stem the currency’s rise.
  • Australia’s dollar rose for a second day to as high as 0.7760 ahead of a central bank announcement but after RBA left cash rate unchanged at 0.10% in June monetary policy decision, the Aussie slipped lower to 0.7740.
  • The British pound rallied to a three-month peak at $1.4250 while the Canadian dollar hovered near a six-year top, amid market expectations for policy tightening in these countries.
  • Gold added to its biggest monthly gain since July 2020 amid signs of accelerating inflation. Fresh virus outbreaks and patchy economic data have also boosted gold as investors awaited fresh data on the U.S. economy to feed the debate about inflation

Chart Focus GBP/USD
Key Points

  1. Buy GBP/USD recommendation.
  2. Buy GBP/USD at 1.4190. Stop at 1.4160 and target at 1.4295
  3. Expectation of Fed falling behind the Bank of England in its tightening policy is likely to weigh on the US dollar
  4. Price has broken above a previous high and both price trend and MACD are both hinting of a bullish price trend ahead.

Fundamental Comments

  1. Expectation of a BOE tightening has boosted Sterling.
  2. Expectation of Fed falling behind BOE in tightening is likely to weigh on the US dollar.

Technical Comments

  1. Price is making new highs, hinting of a bullish price trend ahead.
  2. MACD remains bullish and is hinting of a bullish price trend ahead.


Key Levels

Support1.42001.41651.4130
Resistance1.42501.42901.4340

Technical Overview
USD/JPY – We had a buy call at 109.50 yesterday, which was filled when price declined to a low of 109.30. Our view remains unchanged and we would recommend keeping stop at 109.10 and profit order at 110.20. Stochastic is still moving lower towards the oversold zone. MACD remains bullish and is hinting of a bullish price trend ahead. 20EMA is neutral at the moment.

Support109.30108.95108.55
Resistance109.60109.95110.40

EUR/USD – We were looking for another decline to 1.2050 yesterday, but we could be wrong on this. MACD has turned bullish and is hinting of a bullish price trend ahead. While Stochastic is into the overbought zone, it remains strong and is not showing any signs yet of a reversal, 20EMA is hinting of a bullish price trend ahead. Price may be heading higher to test the previous high of 1.2266 within the next couple of days ahead.

Support1.22051.21601.2125
Resistance1.22351.22651.2300

XAG/USD – Price has moved above the previous high of $28.20 and could be heading to the next resistance point at $28.72 to $29.00. Stochastic is in the overbought zone but is strong and has not shown as sign of a reversal as yet. MACD remains bullish and is rising hinting of a bullish price trend. 20EMA is pointing higher with a steep slope, which is a hint of a strong bullish trend.

Support28.2027.9027.65
Resistance28.4528.7529.10

XAU/USD – Price broke above the previous high of $1912.55 today and could be heading to the next strong resistance $1959. MACD remains bullish and is rising which is a sign of a bullish price trend ahead. Stochastic is the overbought zone but continues to rise without any signs of a reversal. 20EMA is rising and hinting of a bullish price trend. A move below $1898 would negate our bullish view for $1959.

Support1912.551898.001887.90
Resistance1927.401941.551959.25

USD/CAD – We had a buy recommendation which was filled at 1.2070 on Friday as price dropped to a low of 1.2055. Stochastic is starting to move higher after turning around below the oversold zone. MACD has turned bearish but is just below the zero line. 20EMA has also turned bearish. We would recommend keeping stop unchanged at 1.2035 and profit target at 1.2140.

Support1.20501.20101.1945
Resistance1.20951.21451.2175

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