Market Talk
– The dollar jumped to a near six-week high on Wednesday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.
– Treasury yields shot up after Fed Chair Jerome Powell told a press conference that officials would begin a discussion about scaling back bond purchases and released forecasts that show they anticipate two interest-rate increases by the end of 2023.
– Risk-sensitive currencies logged a sharp reversal following the Fed announcement, with the New Zealand dollar down to 0.7049 and the Australian dollar – which is seen as a proxy for risk appetite – at 0.7612.
– Sterling, which had strengthened against the dollar on Wednesday after data showed British inflation unexpectedly jumped above the Bank of England’s 2% target in May, gave up those gains to trade below 1.40 while the Euro hit a two-month low at 1.1984 against the greenback.
– Gold steadied after its biggest drop in five months as Treasury yields shot up to 1.589% and the dollar strengthened after the Federal Reserve sped up its expected pace of policy tightening amid optimism about the labour market and heightened concerns over inflation.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.7100. Stop at 0.7135 and target at 0.7045
3. An improved health and performance of the US economy and rising yields are likely to aid the US dollar.
4. Price remains capped by 20EMA in a downtrend and MACD is hinting of a bearish price trend.
Fundamental Comments
1. A rise in US benchmark Treasury yield to 1.589% is aiding the US dollar.
2. Improved health and performance of the US economy is aiding the US dollar.
Technical Comments
1. Price is in a downtrend and is likely to be capped by a previous support turned resistance line and the 20EMA.
2. MACD remains bearish and is hinting of a bearish price trend ahead.
Key Levels
| Support | 0.7075 | 0.7035 | 0.7000 |
| Resistance | 0.7105 | 0.7140 | 0.7165 |
Technical Overview
USD/JPY – We had a buy call yesterday at 109.90 which was filled when price dropped to a low of 109.80. This morning price reached a high of 110.82 and we are out of this position. We made a profit of 40 pips on this trade. A price dip to 110.40 would be a good location to buy for another rally to 111 as MACD remains bullish and hinting of a bullish price trend. 20EMA is also hinting of a bullish price trend.
| Support | 110.45 | 110.15 | 109.85 |
| Resistance | 110.80 | 111.05 | 111.50 |
EUR/USD – Price broke the support at 1.2090 and moved to a low of 1.1973 this morning. Stochastic is still declining and MACD is bearish. Both momentum indicators are hinting there could be more downside ahead. 20EMA is also bearish and hinting of a bearish price trend ahead. We are likely to see a price decline to 1.1930 in the next couple of days ahead.
| Support | 1.1970 | 1.1940 | 1.1915 |
| Resistance | 1.2005 | 1.2050 | 1.2080 |
GBP/USD – Price managed to move higher than the 20EMA resistance at 1.4110 to a high of 1.4132 on the back of a stronger than expected UK inflation data. However price has declined below the support at 1.4070 to a low of 1.3970 this morning. Stochastic is still declining and MACD is bearish. Both momentum indicators are hinting there could be more downside ahead.
| Support | 1.3970 | 1.3940 | 1.3905 |
| Resistance | 1.4010 | 1.4060 | 1.4105 |
XAU/USD – Price declined to a low of $1803.35 after Treasury yields spiked higher on the back of FOMC announcement. 20EMA is pointing lower with a steep slope, hinting of a strong bearish trend ahead. MACD is also bearish. Stochastic is still declining and hinting of more downside ahead. We may see a decline to $1797 in the next few days ahead.
| Support | 1809.60 | 1798.70 | 1781.75 |
| Resistance | 1816.95 | 1825.50 | 1838.60 |
USD/CNH – We had a buy call at 6.4010 which was filled on Tuesday when price dropped to a low of 6.3977. Our bullish view remains unchanged and we had recommended keeping stop at 6.3890 and profit target at 6.4390 yesterday. Our profit order was filled overnight when price reached a high of 6.4419. We are out with a 380 pips profit. MACD remains bullish and is hinting of a bullish price trend. Stochastic is still rising.
| Support | 6.4210 | 6.4075 | 6.3920 |
| Resistance | 6.4320 | 6.4420 | 6.4590 |