Market Talk
– The U.S. dollar was perched at a 15-month high on the yen and at multi-month peaks against other majors on Friday, with most currencies trading within narrow ranges, as investors looked to Friday’s U.S. nonfarm payrolls report for clues on whether the Federal Reserve will start to reduce monetary stimulus sooner rather than later.
– US initial jobless claims fell to 364,000, below market expectations of 390,000 and the lowest number in 15 months but ISM manufacturing PMI was a slightly lower-than-expected 60.6 in June against expectation of 61.0 and 61.2 in May.
– The greenback climbed to 111.60 against the yen and hit its highest since March 2020 on Friday, while the Euro stayed at 1.1843, a whisker short of Thursday’s three-month low of 1.1837. Sterling declined to a fresh two-and-a-half month low at $1.3752.
– The risk sensitive and commodity exposed Australian dollar fell to $0.7461, having slipped to its lowest level since December 2020 in the overnight trading session while the kiwi was down to 0.6961.
– Gold was up on Friday morning in Asia amid concerns over the Delta variant of the coronavirus, but investors avoided big bets ahead of the release of critical U.S. employment data that could sway the U.S. Federal Reserve’s recent hawkish stance on monetary policy.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.4710. Stop at 6.4515 and target at 6.5010.
3. Spread of Delta strain and strong US economic data are both aiding the greenback.
4. Price rally is support by 20EMA and momentum indicators which are hinting of a bullish price trend ahead.
Fundamental Comments
1. The spread of the virulent Delta strain of the COVID-19 virus in several countries has decreased investors’ risk appetite.
2. Strong US economic data is a sign of a strong US economic recovery which could put pressure on a US rate hike coming earlier than expected.
Technical Comments
1. Price has turned up from the 20EMA which is hinting of a bullish price trend ahead.
2. MACD remains bullish and Stochastic is rising towards the overbought zone. Both momentum indicators are hinting of a bullish price trend.
Key Levels
| Support | 6.4700 | 6.4510 | 6.4400 |
| Resistance | 6.4860 | 6.4945 | 6.5035 |
Technical Overview
USD/JPY – Price continues to rise and is now close to our target of 111.70. Above this resistance, the next resistance lies at 112.20. Stochastic is in the overbought extreme but still looks strong. MACD is hinting of a bullish price trend. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish trend. Below 111.00 would negate our bullish view for the next 48 hours.
| Support | 111.35 | 111.00 | 110.65 |
| Resistance | 111.65 | 111.95 | 112.20 |
EUR/USD – There was no reversal and price continues to move lower although by a small amount to 1.1835. Stochastic has turned down and is moving lower again. MACD remains bearish. 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend. However, we think the downside could be limited and a possible reversal could be around the corner.
| Support | 1.1805 | 1.1765 | 1.1705 |
| Resistance | 1.1850 | 1.1885 | 1.1915 |
GBP/USD – Price had broken below the previous low of 1.3786 and moved to a low of 1.3750 overnight. Stochastic has turned down and is moving lower again but is already inside the oversold zone. MACD remains bearish but a possible divergence with price could be forming. 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend. However, we think the downside could be limited and a possible reversal could be around the corner.
| Support | 1.3750 | 1.3695 | 1.3665 |
| Resistance | 1.3790 | 1.3830 | 1.3870 |
XAU/USD – Price has broken above a down trending line and could be heading higher to $1786. Last night, price reached a high of $1782.70 and as long as price stays above $1772, we are still looking for a rally to $1786. Stochastic is into the overbought extreme but MACD is turning bullish. 20EMA is hinting of a bullish price trend ahead. We would suggest looking at $1772 or $1786 breakout for direction before NFP or the NFP data for direction clue.
| Support | 1771.90 | 1760.70 | 1750.65 |
| Resistance | 1785.60 | 1797.05 | 1806.30 |
XAG/USD – We had a buy call on this pair yesterday at $26.10 which was filled when price declined to a low of $25.93 this morning. We would recommend keeping stop at $25.85 and profit target at $26.75. Stochastic continues to decline but has not yet reached the oversold zone. MACD and 20EMA are both flat and neutral at the moment. We will wait for further confirmation.
| Support | 25.90 | 25.50 | 25.15 |
| Resistance | 26.20 | 26.60 | 27.05 |