Market Talk
– The dollar was down on Wednesday morning in Asia but clung onto its recent gains as investors digested worsening spread of COVID-19’s more virulent Delta strain while awaiting U.S. jobs data crucial to the direction of the U.S. Federal Reserve’s monetary policy.
– The dollar also got a boost after data showed U.S. consumer confidence increased in June to its highest level since the COVID-19 pandemic started more than a year ago, bolstering expectations for strong economic growth in the second quarter.
– Chinese data this morning showed activity in China’s services sector grew at a slower pace in June as curbs from resurgence in cases in southern China restrained a rebound in consumption, but manufacturing PMI data was above expectation.
– The USD/JPY pair inched down to 110.48 after data released earlier this morning in Japan showed industrial production fell by a worse-than-expected 5.9% month-on-month in May.
– Gold was down on Wednesday morning in Asia, near an over two-month low and headed towards its worst monthly drop since November 2016. Investors now await U.S. jobs data for further clues on the U.S. Federal Reserve’s monetary policy moving forward.
Chart Focus XAU/USD – Gold
Key Points
1. Sell Gold recommendation.
2. Sell Gold at $1763.00. Stop at $1773.50 and target at 1739.00
3. Strong US consumer confidence data and worries over the spread of Delta strain are both likely to aid the safe haven US dollar.
4. 20EMA and MACD are both hinting of a bearish price trend after price broke below a strong support level
Fundamental Comments
1. Strong US consumer confidence, which increased to its highest level since the start of the pandemic is a sign of a strong US economic recovery.
2. The spread of the virulent Delta strain of the COVID-19 virus in several countries has also decreased investors’ risk appetite.
Technical Comments
1. 20EMA is hinting of a bearish price trend after price broke below a strong support level.
2. MACD is bearish and is hinting of a bearish price trend.
Key Levels
| Support | 1750.65 | 1734.90 | 1723.60 |
| Resistance | 1764.50 | 1772.90 | 1787.90 |
Technical Overview
USD/JPY – We had a sell recommendation yesterday at 110.75 which was filled when price reached a high of 110.755. Our view remains the same as yesterday. However, we would recommend bringing stop lower to 110.85 while keeping profit target at 110.10. MACD remains bearish and 20EMA is also bearish but Stochastic is close to the oversold zone, which could limit the decline.
| Support | 110.40 | 110.05 | 109.85 |
| Resistance | 110.70 | 111.10 | 111.40 |
EUR/USD – Our view remains the same as last Friday. We were expecting a break below 1.1910 to lead price lower to 1.1850. Price has broken the support at 1.1910 and had reached a low of 1.1877 overnight. We are expecting the decline to continue towards 1.1850. MACD and 20EMA are bearish but both are not strongly bearish. Stochastic is close to the oversold zone which could limit the downside. Price may reverse ahead of our profit target.
| Support | 1.1875 | 1.1845 | 1.1805 |
| Resistance | 1.1910 | 1.1945 | 1.1975 |
GBP/USD – Price broke the support at 1.3859 overnight to reach a low of 1.3813. Our view remains the same as yesterday. We are looking for the decline to continue lower to 1.3786. While MACD remains bearish and is hinting of a bearish price trend, it is not strongly bearish. Stochastic is close to the oversold zone, which is a hint of a limited downside. Price was capped at 1.3860 overnight and as long as this resistance capped the rally, we are bearish for 1.3786.
| Support | 1.3815 | 1.3785 | 1.3740 |
| Resistance | 1.3865 | 1.3895 | 1.3935 |
NZD/USD – Price reached a low of 0.6972 overnight but the low was in the form of Doji candlestick price pattern, which is a sign of a possible price bottom and a potential price reversal. Stochastic is turning up from the oversold zone and is hinting of a bullish price trend but MACD and 20EMA both remains bearish at the moment. If this rally is a price correction, it should be capped at 0.7025. If it goes above 0.7040, it is likely to hint of a possible price low at 0.6972.
| Support | 0.6990 | 0.6965 | 0.6920 |
| Resistance | 0.7025 | 0.7055 | 0.7095 |
USD/CHF – We had a sell call last Friday at 0.9180, which was filled when price rallied to 0.9188 on Monday morning. We had recommended keeping stop at 0.9220 and profit at 0.9110. Unfortunately, price had moved above our stop and we are out with a 40 pips loss. Price is still below the previous high of 0.9238 and there is still a possibility of a decline unless this resistance is taken out. Stochastic is hinting of a price decline. MACD and 20EMA are both neutral at the moment.
| Support | 0.9210 | 0.9185 | 0.9155 |
| Resistance | 0.9240 | 0.9285 | 0.9320 |