Market Talk
– The US dollar retreated from recent peaks on Thursday, after Federal Reserve Chair Jerome Powell told Congress the U.S. economy was “still a ways off” from levels the central bank wanted to see before tapering its monetary support.
– In testimony to the U.S. House of Representatives Financial Services Committee, Powell said high inflation seemed linked to reopening, that it would be a mistake to act prematurely to tame it and that tapering bond buying was “still a ways off. Powell is confident recent price hikes will fade.
– Economic data from China was largely more resilient than expected. Monthly data for June, including retail sales, industrial output and fixed investments, showed growth softened but not as much as expected, adding to views that policymakers may do more to support the recovery.
– The euro bounced back to 1.1826 from Wednesday’s three-month low of 1.1772. The dollar fell from a one-week high against the yen at 110.69 and last stood at 109.84 yen while Sterling slipped to 1.3836.
– Gold jumped to a one-month high of $1,829.8 per ounce after U.S. Federal Reserve Chair Jerome Powell reassured investors that the central bank would continue its accommodative monetary policy despite a spike in inflation readings.
Chart Focus NZD/USD
Key Points
1. Buy NZD/USD recommendation.
2. Buy NZD/USD at 0.7010. Stop at 0.6980 and target at 0.7095.
3. A divergence in tapering decision is likely to benefit the NZ dollar/
4. A pullback to the neckline of a Double Bottoms chart pattern offers a buying opportunity with MACD and 20EMA bullish.
Fundamental Comments
1. Powell’s comment that tapering is “still a ways off” is likely to weigh on the US dollar.
2. Reserve Bank of New Zealand’s decision to cut off tapering is likely to benefit the NZ dollar
Technical Comments
1. Price had a Double Bottoms chart pattern and a pullback to the neckline offers a buying opportunity.
2. MACD and 20EMA are both bullish and hinting of a bullish price trend.
Key Levels
| Support | 0.7005 | 0.6960 | 0.6920 |
| Resistance | 0.7045 | 0.7080 | 0.7115 |
Technical Overview
USD/JPY – Price moved to a high of 110.69 on Wednesday and in the process created an Evening Star candlestick price pattern on the 4-hourly chart. This is a hint of a price high and a likely reversal in trend to follow. Price has declined to a low of 109.81 this morning and we are expecting the decline to continue lower to 109.55, which was the previous low. Stochastic is close to the oversold zone but MACD is turning bearish. 20EMA is also hinting of a bearish price trend.
| Support | 109.55 | 109.20 | 108.80 |
| Resistance | 110.05 | 110.35 | 110.70 |
EUR/USD – Price may have reached a low at 1.1772 on Wednesday and we have seen a bounce up to 1.1835 this morning. As price has moved above 1.1820, for today, we are likely to see a price movement up to 1.1885 to test the neckline of the Double Bottoms chart pattern. Stochastic is rising and hinting of a bullish price trend while MACD remains bearish. 20EMA is neutral.
| Support | 1.1810 | 1.1770 | 1.1735 |
| Resistance | 1.1845 | 1.1885 | 1.1915 |
GBP/USD – We had a sell call on this pair at 1.3840 yesterday. However price has moved above our stop at 1.3875 and we are out with a 35 pips loss. Price reached a low of 1.3820 this morning and Stochastic has a bullish crossover in the oversold zone. This is a hint the decline could be over and a price rally in ahead. MACD is also likely to have a bullish crossover, hinting of a bullish price trend ahead. We see price moving higher to test yesterday’s high at 1.3895.
| Support | 1.3820 | 1.3790 | 1.3755 |
| Resistance | 1.3865 | 1.3910 | 1.3955 |
XAU/USD – Price broke above the top end of its range at $1818.25 yesterday and we have seen a price movement to $1832.30 at the time of this writing. We think the price rally can continue higher to $1845 in the next couple of days ahead. Stochastic is in the overbought zone but MACD is bullish. 20EMA is hinting of a strong bullish trend ahead. A move below $1818.25 will risk a possible price range movement again.
| Support | 1818.25 | 1805.00 | 1791.50 |
| Resistance | 1832.65 | 1844.50 | 1853.15 |
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. Yesterday, we had recommended keeping stop at 0.7505 and profit target at 0.7395. Price had reached a low of 0.7430 and has bounced back to 0.7500 again. We think this position is likely to be stop out as both Stochastic and MACD had reversed and are both hinting of a bullish price trend ahead.
| Support | 0.7475 | 0.7440 | 0.7405 |
| Resistance | 0.7505 | 0.7535 | 0.7565 |