Market Talk
– The US dollar fell to a one-month low on Thursday, a day after the U.S. Federal Reserve said the job market still had “some ground to cover” before it would be time to ease monetary stimulus, taking the steam out of a month long rally by the greenback.
– Treasury yields were little changed in choppy trading, but were below their peaks for the day, as gains on Wall Street, positive Chinese news and solid European economic reports balanced weaker-than-expected U.S. data.
– Data showed that while the U.S. economy grew solidly in the second quarter, boosted by massive government aid, growth fell short of economists’ expectations while job data supported the Fed’s stance, as 400,000 claims were filed over the past week.
– The euro climbed to a one-month high against the dollar, last trading at 1.1886 while the yuan clawed back most of its losses from Tuesday. Sentiment was aided somewhat by Chinese attempts to calm the market by telling foreign brokerages to avoid “over interpreting” its recent crackdown on sectors including private education.
– Gold continues to gain ground over the US dollar as investors cheered U.S. Federal Reserve Chairman Jerome Powell’s comments suggesting the central bank was unlikely to hike rates anytime soon and is set to end the week with its biggest weekly gains since May 21.
Chart Focus XAU/USD – Silver
Key Points
1. Buy Silver recommendation.
2. Buy Silver at $25.25. Stop at $24.90 and profit target at $25.90
3. Powell’s comments and U.S. job data that came in below expectation are both also likely to weigh on the US dollar.
4. Price has a strong support and MACD is hinting of a bullish price trend.
Fundamental Comments
1. Powell’s comments that the central bank was unlikely to hike rates anytime soon are likely to weigh on the US dollar.
2. U.S. job data that came in below expectation is also likely to weigh on the US dollar.
Technical Comments
1. Price is likely to be supported by a previous resistance turned support line and the 20EMA.
2. MACD is bullish and hinting of a bullish price trend ahead.
Key Levels
| Support | 25.45 | 25.25 | 24.90 |
| Resistance | 25.75 | 26.05 | 26.45 |
Technical Overview
USD/JPY – Our target of 109.40 was achieved last night when price reached a low of 109.35. MACD is warning with a divergence of a price low. Stochastic is warning with a divergence as well. Stochastic is also in the oversold zone. However, 20EMA is still bearish and hinting of a strong bearish price trend. There is still a possibility of price moving 109.05 but the downside should be limited. Watch for a reversal candlestick pattern to trigger the reversal confirmation.
| Support | 109.35 | 109.05 | 108.60 |
| Resistance | 109.65 | 109.95 | 110.30 |
EUR/USD – The price rally has reached a high of 1.1893 but while we may see a small and short correction, the rally looks strong enough to proceed to the next resistance point at 1.1915. Stochastic has remained in the oversold zone, hinting of a strong trend from its prolong stay in the overbought zone. MACD and 20EMA remain bullish and hinting of a strong bullish price trend.
| Support | 1.1865 | 1.1835 | 1.1805 |
| Resistance | 1.1905 | 1.1930 | 1.1975 |
GBP/USD – The rally continues and price reached a high of 1.3981 overnight. 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. MACD remains bullish but caution is advised on long position.
| Support | 1.3945 | 1.3895 | 1.3860 |
| Resistance | 1.3980 | 1.4005 | 1.4040 |
XAU/USD – Price broke above the range high on Thursday at $1814 and the rally has exceeded the previous high at $1824.85. Stochastic is in the overbought zone but both MACD and 20EMA are hinting of a strong bullish price trend. We think the rally is likely to proceed higher to the next resistance at $1844.50. A price move below $1805 would negate our bullish view for the next couple of days.
| Support | 1825.75 | 1811.45 | 1802.10 |
| Resistance | 1832.50 | 1844.55 | 1851.45 |
USD/CAD – We had a sell recommendation at 1.2510 yesterday but this order was not filled. Price has since declined to a low of 1.2432. MACD is starting to warn with a divergence, hinting of a possible price low in the making. Stochastic is also in the oversold zone. However, 20EMA is still hinting of a strong bearish price trend ahead. We think the downside may be limited.
| Support | 1.2430 | 1.2400 | 1.2370 |
| Resistance | 1.2460 | 1.2490 | 1.2530 |