FX Commentary – Market Remains Divided By Overnight US CPI Data

Market Talk
– The U.S. dollar rose after U.S. inflation data for June was higher than expected, raising the prospect that inflationary concerns are set to linger spurring bets of faster monetary policy tightening than Federal Reserve officials have so far signaled.

– U.S. consumer prices rose by the most in 13 years in June, with core CPI rising by a higher-than-expected 0.9% month-on-month against expectation of 0.5%, while the year-on-year figure came in at 5.4% against expectation of 4.9% .

– Supply constraints and a continued rebound in the costs of travel-related services from COVID-19 depressed levels contributed to rising inflationary pressures. Analysts said U.S. consumer prices data was unlikely to trigger a swift monetary policy tightening response from the Fed.

– The New Zealand dollar jumped as much as 0.8% to 0.7070 U.S. cents after the Reserve Bank of New Zealand said on Wednesday it would halt its large-scale asset-purchase programme. The RBNZ had kept interest rate unchanged at 0.25% as it handed down its policy decision earlier in the day

– Gold was up on Wednesday morning in Asia, as a firmer US dollar capped the yellow metal’s gains offsetting bets that the Federal Reserve was unlikely to respond with immediate monetary tightening despite U.S. consumer prices rising by the most in 13 years last month.


Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3840. Stop at 1.3875 and target at 1.3740.
3. Increasing COVID-19 cases in UK and strong US inflation data are both likely to weigh on the British pound.
4. Price is likely to be capped by the 20EMA line with MACD hinting of a bearish price trend ahead.

Fundamental Comments
1. Strong US inflation data is likely to support the US dollar.
2. Increasing COVID-19 cases in UK are likely to weigh on the British pound.

Technical Comments
1. Price is likely to be capped by the 20EMA which is also hinting of a bearish price trend ahead.
2. MACD remains bearish and is hinting of a bearish price trend.

Key Levels

Support1.38201.37901.3755
Resistance1.38601.39101.3955

Technical Overview

USD/JPY – Price moved to a high of 110.69 overnight and in the process created a Evening Star candlestick price pattern. This is a hint of a price high and a likely reversal in trend to follow. As long as price stay below 110.69, we are looking for a price move to 109.55. Stochastic has a bearish crossover and is moving lower and hinting of a bearish price trend. MACD is about to have a bearish crossover as well, hinting of a bearish price trend. 20EMA remains bullish.

Support110.35109.95109.50
Resistance110.70111.00111.40

EUR/USD – Price moved below the previous low of 1.1783 to reach a low of 1.1772. However, price will need to move above 1.1820 to regain its bullish impetus. As Stochastic is in the oversold extreme and is about to have a bullish crossover, we think price may have reached a temporary low. However, MACD and 20EMA are both bearish and hinting of a bearish price trend.

Support1.17701.17351.1705
Resistance1.18201.18501.1885

EUR/AUD – We had a buy recommendation on this pair yesterday but our call was wrong and we lost 25 pips on this trade. Price had declined below 1.5795 which is a sign that the decline could be a bearish trend which could be moving to 1.5700 over the next few days ahead. Stochastic is already in the oversold extreme and MACD is about to give a bullish crossover. We prefer not to go short as we fear this could be a false break.

Support1.57701.57351.5700
Resistance1.58151.58401.5885

XAU/USD – Price continues to move within the previous week’s range of $1784.50 to 1818.25. MACD is flat and neutral and close to the zero line, hinting of a sideways movement. Stochastic is near to the overbought extreme but 20EMA is bullish. We prefer to see a break of the topside and would suggest following in the direction of this breakout in the next few days ahead.

Support1805.001791.501784.65
Resistance1818.251825.101844.50

AUD/USD – We had a sell recommendation for this pair on Monday at 0.7480, which was filled when price rose to a high of 0.7502. We had recommended keeping stop at 0.7515 and profit target at 0.7395 yesterday. Price has declined to 0.7427 but has recovered to 0.7465 this morning. We would recommend shifting stop lower to 0.7505. Stochastic is near to the oversold zone but MACD and 20EMA are both neutral at the moment.

Support0.74400.74100.7370
Resistance0.74750.75050.7565

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