Market Talk
– The dollar hovered around a two-week low on Thursday morning in Asia, weighed down by the latest insistence from Federal Reserve chairman Jerome Powell that rate increases aren’t on the radar, and that the job market still had “some ground to cover” before the central bank begins to taper its assets.
– The greenback initially rose following the statement as the Fed first sounded confident about the economy in its statement. Then Powell was more circumspect and said in his news conference that rate increases were “a ways away” and that the job market still had “some ground to cover”.
– The US dollar retreated to a two-week low of $1.1849 against the euro after Powell’s comments. The retreat indicated that the greenback could be taking a breather from its month-long rise, with the euro now above its 20-day moving average.
– The pound has been a big mover during the past week, thanks to initial positive signs from England’s lift of most COVID-19 curbs earlier in the month. Rolling averages of daily U.K. COVID-19 cases are headed towards a downward trend, even as the number of COVID-19 cases in the U.K. continues to rise.
– Gold was up on Thursday morning in Asia to its highest level in over a week following Powell’s comments that an interest rate hike was still some way off. The risk posed by the continuous spread of COVID-19, and its Delta variant globally also adds to the yellow metal’s allure.
Chart Focus USD/CAD
Key Points
1. Sell USD/CAD recommendation.
2. Sell USD/CAD at 1.2510. Stop at 1.2545 and target at 1.2420.
3. Comments by Powell and a rise in crude oil price are both likely to weigh on the US dollar.
4. Price has broken below a price channel and momentum indicators are hinting of a bearish price trend.
Fundamental Comments
1. Comment by Fed Chair Powell that interest rate hike is still some way off is likely to weigh on the US dollar
2. A rally in crude oil price to $73 is likely to aid the Canadian dollar
Technical Comment
1. Price has broken below a small price channel, hinting of more declines to the next support level
2. Stochastic continues to decline while MACD has turned bearish. Both indicators are hinting of a bearish price trend
Key Levels
| Support | 1.2455 | 1.2415 | 1.2375 |
| Resistance | 1.2490 | 1.2530 | 1.2555 |
Technical Overview
USD/JPY – Our view remains the same as yesterday. We are looking for a continuation of the downtrend to a low of 109.40. Last night rally to 110.28 could be the correction. This correction was halted by the Fibonacci 62% correction point of the decline from 110.59 to 109.58. As long as price stays below the resistance at 110.28, we are looking for a decline to 109.40. MACD and 20EMA remain bearish. Stochastic has a bearish crossover but is near to the oversold zone.
| Support | 109.60 | 109.30 | 109.00 |
| Resistance | 109.95 | 110.30 | 110.70 |
EUR/USD – We had a sell call on this pair yesterday but price declined below our stop at 1.1785 to a low of 1.1773, taking out our stop. We lost 20 pips on this trade but our view remains unchanged. We are looking for the rally to continue higher to 1.1885 or 1.1915 in the next couple of day ahead. Both MACD and 20EMA are hinting of a bullish price trend. Stochastic is near to the overbought zone but continues to rise higher. A move below 1.1800 would negate our bullish view.
| Support | 1.1840 | 1.1805 | 1.1780 |
| Resistance | 1.1885 | 1.1925 | 1.1975 |
GBP/USD – The rally continues and price reached a high of 1.3939 this morning. While there are divergence warnings from MACD and Stochastic is into the overbought zone, the rally has shown no signs of stopping at the moment. The next major resistance lies at 1.4000. 20EMA has a steep slope which is a hint of a strong bullish trend. Stochastic is in the overbought zone for a prolong period of time now and caution is advised on long to keep stop tight in case of a reversal.
| Support | 1.3895 | 1.3860 | 1.3830 |
| Resistance | 1.3945 | 1.3980 | 1.4005 |
XAU/USD – Price broke above the range high this morning at $1814 and we think the rally is likely to continue towards the previous high at $1824.85 in the next few days ahead. Stochastic continues to rise and is not near to the overbought zone as yet. This mean there could be further price upsides. MACD and 20EMA has both turned bullish and both are hinting of a bullish price trend ahead. Only a move below $1793.40 would negate our bullish view for the next few days.
| Support | 1811.45 | 1802.10 | 1793.55 |
| Resistance | 1824.80 | 1833.95 | 1844.55 |
AUD/JPY – The decline from the rally of 79.83 to the high at 81.65 was halted by the Fibonacci 62% correction point. The low at 79.83 was also confirmed by a MACD divergence. If price can stay above 80.60, we are likely to see a rally to the Fibonacci 127% projection target at 82.13 in the next few days. Stochastic has a bullish crossover and is rising. MACD is about to turn bullish as well. Both indicators are hinting of a bullish price trend ahead. 20EMA is also likely to turn bullish.
| Support | 80.95 | 80.60 | 80.15 |
| Resistance | 81.30 | 81.65 | 81.95 |