Market Talk
– The dollar was little changed against a basket of major currencies on Tuesday ahead of a much-anticipated Federal Reserve meeting that could signal a change in the outlook for U.S. monetary policy.
– Fed Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come, although recent economic data has raised concerns that price pressure after the post-COVID-19 economic reopening could force an earlier stimulus withdrawal.
– The euro was little changed against the greenback at 1.2118 on Tuesday, near an almost one-month low reached on Friday. The yen was at 110.07 per dollar, almost flat from Monday, after a more than 0.3% slide in each of the past two sessions.
– The Aussie dollar had little reaction to the release of RBA’s policy meeting minutes this morning. The British pound was weaker after UK PM Boris Johnson delayed the country exit from lockdown as concerns mount over a surge in delta variant cases.
– Gold held near the lowest level in four weeks as the yield on 10-year Treasuries rose to 1.49%, after hitting three-month lows last Thursday, which damped the appeal of the non-interest bearing precious metal. Investors will be looking to the Fed gathering, which starts Tuesday, for signals on a timeline for paring down emergency stimulus.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.4010. Stop at 6.3890 and target at 6.4390.
3. Tensions between the US and China and a rise in 10-year Treasury yield are both aiding the US dollar.
4. Price is likely to be supported by the 20EMA. Both 20EMA and MACD are hinting of a bullish price trend
Fundamental Comments
1. A rise in the US 10-year Treasury yield is aiding the US dollar.
2. Tensions between the US and China is likely to drive up demand for the US dollar
Technical Comments
1. The 20EMA is likely to support price and is hinting of a bullish price trend.
2. MACD is rising and hinting of a bullish price trend.
Key Levels
| Support | 6.4000 | 6.3810 | 6.3750 |
| Resistance | 6.4110 | 6.4220 | 6.4405 |
Technical Overview
USD/JPY – We had a sell order last Wednesday which was filled at 109.55 when price rallied to a high of 109.67. Yesterday, we had recommended keeping stop at 109.95 and profit target at 108.75. However, our stop was triggered last night when price moved above 110. MACD and 20EMA are both bullish but Stochastic is into the overbought zone, which could be a hint of a limited upside.
| Support | 109.95 | 109.65 | 109.30 |
| Resistance | 110.35 | 110.75 | 111.00 |
EUR/USD – Price broke below 1.2140 last Friday and declined to a low of 1.2092. Yesterday we had expected this support to break and price to continue lower to 1.2050 over the next 48 hours. However, price managed to hold above this support and move higher. We think price is likely to be capped at the 20EMA resistance at 1.2140. From here we may see another decline to 1.2050.
| Support | 1.2110 | 1.2080 | 1.2050 |
| Resistance | 1.2145 | 1.2190 | 1.2215 |
GBP/USD – Price managed to hold above the strong support at 1.4070 and has moved higher to 1.4123. Price is currently capped by the 20EMA line at 1.4125. A break above this line is likely to send price higher to 1.4185. Stochastic is rising from the oversold zone which is a hint of a bullish price trend ahead. Both 20EMA and MACD are bearish but their trend strength is not strong. We favour a move to 1.4185 in the next 24 hours.
| Support | 1.4070 | 1.4035 | 1.3990 |
| Resistance | 1.4125 | 1.4150 | 1.4205 |
XAU/USD – Price broke below the support at $1854.70 and reached a low of $1844.50 overnight. A quick bounce has seen price risen to $1865. We think the decline may not be over as yet. Price is likely to be capped at $1874.20 and from here we may see a decline to $1844.50 again. Stochastic is rising from the oversold zone but MACD remains bearish. 20EMA is also hinting of a bearish price trend ahead.
| Support | 1858.50 | 1845.50 | 1829.50 |
| Resistance | 1869.70 | 1877.80 | 1884.25 |
NZD/USD – We had a sell call at 0.7160 yesterday but price only reached a high of 0.7156, missing our entry order. Our view remains unchanged from yesterday. We think price is likely to be capped at 0.7160 and a decline to 0.7100 is likely within the next 48 hours. MACD and 20EMA remain bearish but Stochastic is still rising and hinting of a bullish price trend.
| Support | 0.7115 | 0.7070 | 0.7025 |
| Resistance | 0.7165 | 0.7200 | 0.7235 |