Market Talk
– The dollar was steady on Monday after dropping from a three-month high, weighed down by what analysts viewed as a mixed U.S. nonfarm payrolls report for June. Labour data showed robust hiring but persistent weakness in the labour market that will keep the Federal Reserve from raising interest rates any time soon.
– U.S. nonfarm payrolls increased by a bigger-than-expected 850,000 jobs last month but the unemployment rate unexpectedly ticked up to 5.9% from 5.8%, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month, lower than the consensus forecast for a 0.4% increase.
– The dollar clawed back slightly against the yen, rising 0.14% to 111.15 yen early in the Asia session, after dropping just below 111 yen following the jobs report and after a surge in COVID-19 infections in Tokyo, just weeks before the city hosts the Olympics.
– There is a Reserve Bank of Australia meeting on Tuesday, which has markets on tenterhooks. While the RBA isn’t expected to move its cash rate, economists expect it not to extend its three-year yield target beyond the April 2024 bond and to adopt a flexible approach to bond purchases.
– Gold was up on Monday morning in Asia climbing further from a two-month trough hit earlier last week, as investors weighed prospects for U.S. Federal Reserve tightening after a strong U.S. jobs report that nevertheless showed a slight uptick in the unemployment rate.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 111.05. Stop at 110.80 and target at 111.65.
3. Spread of COVID-19 in Japan and other countries is likely to weigh on the Japanese yen.
4. Price is likely to be supported by the Fibonacci 62% correction point and 20EMA with MACD hinting of a bullish price trend.
Fundamental Comments
1. The spread of the virulent Delta strain of the COVID-19 virus in several countries has decreased investors’ risk appetite.
2. A surge in COVID-19 infections in Tokyo, just weeks before the city hosts the Olympics is likely to weigh on the yen
Technical Comments
1. Price is likely to be supported by the Fibonacci 62% correction point as well as the 20EMA.
2. MACD remains bullish and could be turning up from the zero line, which is a hint of a bullish price trend ahead.
Key Levels
| Support | 110.90 | 110.45 | 110.10 |
| Resistance | 111.25 | 111.65 | 111.95 |
Technical Overview
USD/CNH – We had a buy recommendation on this pair last Friday at 6.4710, which was filled when price dropped to a low of 6.4632. We would recommend keeping stop at 6.4515 and profit target at 6.5010. Stochastic continues to decline and has not reached the oversold zone as yet, hinting there could be more downside ahead. MACD remains bullish but 20EMA is neutral.
| Support | 6.4510 | 6.4400 | 6.4215 |
| Resistance | 6.4700 | 6.4860 | 6.4945 |
EUR/USD – Price had reached a low of 1.1806 last Friday before the rally higher to 1.1873. MACD has given a divergence warning when price hit the low, which is a warning of a possible end of the downtrend. Stochastic has been rising from the oversold zone, hinting of more price upsides ahead. A move above 1.1885 would confirm 1.1806 as the low and a possible rally to 1.1950.
| Support | 1.1845 | 1.1805 | 1.1765 |
| Resistance | 1.1875 | 1.1910 | 1.1950 |
GBP/USD – Price reached a low 1.3731 last Friday before a rally higher to 1.3845. Stochastic and MACD have given a divergence warning when price hit the low, which is a warning of a possible end of the downtrend. 20EMA has also turned bullish and hinting of a bullish price trend ahead. We are expecting this rally to continue higher to 1.4000 in the next few days ahead.
| Support | 1.3810 | 1.3780 | 1.3730 |
| Resistance | 1.3850 | 1.3890 | 1.3940 |
XAU/USD – Price has broken above a down trending line last Thursday and has moved higher to $1794.90 on Friday. Price is likely to be supported at $1780 and we are expecting the rally to continue higher to either $1806 or $1825 in the few days ahead. Stochastic is near to the overbought zone but MACD and 20EMA have both turned bullish and hinting of a bullish price trend ahead. A move below $1772 would negate our bullish view.
| Support | 1782.65 | 1771.90 | 1760.70 |
| Resistance | 1794.90 | 1806.30 | 1818.20 |
XAG/USD – We had a buy call on this pair last Thursday at $26.10 which was filled when price declined to a low of $25.93. We had recommended keeping stop at $25.85 and profit target at $26.75 on Friday. We would recommend bringing stop higher to $26.20 while keeping profit at $26.75 as price has moved higher. Stochastic is rising and MACD remains bullish. Both are hinting the uptrend could continue.
| Support | 26.20 | 25.90 | 25.50 |
| Resistance | 26.60 | 27.00 | 27.25 |