Market Talk
– The dollar was up on Wednesday morning in Asia after recording two days of losses. The U.S. Federal Reserve, including Chairman Jerome Powell, sought to reassure markets that the tighter monetary policy hinted at in the Fed’s latest policy decision was still some way off.
– With interest rate hikes and asset tapering now expected to begin sooner than expected, Fed officials acted to calm investor concerns, cautioning that further economic recovery is a prerequisite to any asset tapering and interest rate hikes.
– USD/JPY edged higher to 110.81 after the Bank of Japan released the minutes from its monetary policy meeting earlier in the day. Japan manufacturing PMI stood at a lower-than-expected 51.5 which also weighs on the yen.
– The euro was little changed on Wednesday at 1.1934, after rebounding from as low as 1.1847 at the end of last week. The Aussie dollar, often viewed as a proxy for risk sentiment, was largely flat at 0.7546, up from a recent low of 0.7478.
– Gold was up on Wednesday morning in Asia after U.S. Federal Reserve Chairman Jerome Powell’s reassuring message that interest rates will not rise too quickly based only on the fear of coming inflation. However, a strengthening dollar curbed gains for the yellow metal.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2300. Stop at 1.2270 and profit target at 1.2455
3. A recovery in benchmark 10-year Treasury yield as a result of tapering and interest rate hike is likely to aid the US dollar.
4. Price is likely to be supported by Fibonacci 38% correction point and momentum indicators are hinting of a possible bullish price trend ahead.
Fundamental Comments
1. A recovery in the benchmark 10-year Treasury yield is likely to aid US dollar strength.
2. With investors factoring tapering and interest rate hike down the road, the US dollar is likely to be stronger.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% correction point and a previous support point.
2. Stochastic and MACD are near to the low extreme and could be turning up soon.
Key Levels
| Support | 1.2290 | 1.2245 | 1.2205 |
| Resistance | 1.2340 | 1.2370 | 1.2405 |
USD/JPY – Price has broken above the previous high of 110.82 last night and could be on its way to 111.50 over the next few days ahead. Stochastic is rising but is in the overbought zone. MACD is bullish and rising, hinting of more upsides ahead. 20EMA is pointing higher with a steep slope, hinting of a strong bullish price trend. A move below 110.50 would negate our bullish view.
| Support | 110.55 | 110.25 | 109.90 |
| Resistance | 110.95 | 111.35 | 111.70 |
EUR/USD – Price has recovered from the low of 1.1847 reached last Friday to a high of 1.1952 overnight. Stochastic has reached the overbought zone and we think the upside could be limited. MACD remains bearish but 20EMA is neutral at the moment. We think price is likely to be capped at 1.1985 and another decline is likely over the next few days to 1.1850. A move above 1.2040 would negate our bearish view.
| Support | 1.1925 | 1.1885 | 1.1845 |
| Resistance | 1.1960 | 1.2005 | 1.2040 |
GBP/USD – We had a sell call on this pair yesterday at 1.3920.Unfortunately, price also moved to a high of 1.3963, higher than our stop at 1.3960. We lost 40 pips on this trade. Stochastic continues to climb but MACD remains bearish. Price also remains below the Fibonacci 50% which is a hint of a bearish price trend. As long as price stays below 1.4005, we prefer to stay bearish.
| Support | 1.3915 | 1.3860 | 1.3825 |
| Resistance | 1.3965 | 1.4005 | 1.4065 |
XAU/USD – From a low of $1760.70 last Friday, price has recovered and has reached a high of $1790.05 on Tuesday. However, price is capped by the 20EMA and MACD remains bearish. Stochastic is rising but we think the upside is limited and a decline back to $1760 is likely over the next couple of days ahead. A move above $1801 would negate our bearish view.
| Support | 1775.70 | 1760.70 | 1749.20 |
| Resistance | 1787.95 | 1797.05 | 1806.30 |
AUD/USD – We had a buy call on Monday at 0.7480 which was filled when price declined to a low of 0.7476. Yesterday, we had recommended placing stop at 0.7480 and profit target at 0.7580. Price had recovered declined overnight to 0.7493 but has recovered this morning to 0.7540. We recommend keeping stop and target unchanged. Stochastic is still rising and MACD could be turning bullish which could be good for our position.
| Support | 0.7525 | 0.7470 | 0.7435 |
| Resistance | 0.7565 | 0.7590 | 0.7640 |