Market Talk
– The US dollar continued its climb against a basket of currencies, buoyed by strong labour market data on Friday that encouraged investors to bring forward their bets that the Federal Reserve could soon start tapering its massive pandemic-era stimulus.
– U.S. jobs report last Friday had stoked bets that the Fed could start trimming asset purchases this year and raise rates as soon as 2022. Non-farm payroll report showed 943,000 new jobs in July compared with the 870,000 forecast. Numbers for May and June were also revised up.
– The prospect of the Fed’s reduced bond-buying pushed down U.S. bond prices, lifting their yields and hitting other safe-haven assets that had benefited from low returns from U.S. debt, such as the Swiss franc and gold.
– The New Zealand dollar also slipped back to $0.6975 from last week’s high near $0.71, but expectations of a rate hike by the country’s central bank next week propped up the currency against many other rivals.
– Gold saw a sharp selloff on Monday morning that saw the precious metal fall more than 5% at a low of $1697.37 in early Asian trading hours. Gold started its slump on Friday as strong U.S. jobs data bolstered expectations for an early tapering of the Federal Reserve’s economic support measures
Chart Focus GBP/JPY
Key Points
1. Buy GBP/JPY recommendation.
2. Buy GBP/JPY at 152.60. Stop at 152.20 and profit target at 153.45
3. Japan increasing COVID-19 cases may weigh on the Japanese economy and interest rate differential is against the yen.
4. 20EMA is supporting price and both 20EMA and MACD are hinting of a bullish price trend ahead.
Fundamental Comments
1. UK re-opening is a boost to its economy while Japan is facing increasing cases of COVID-19 cases.
2. Interest rate differential is in the British pound favour.
Technical Comments
1. Price is supported by the 20EMA which is hinting of a bullish price trend ahead.
2. MACD remains bullish and is hinting of a bullish price trend.
Key Levels
| Support | 152.55 | 152.15 | 151.90 |
| Resistance | 152.90 | 153.25 | 153.45 |
Technical Overview
USD/JPY – We have seen a rally to 110.40 this morning and this high was accompanied by a divergence warning from MACD. Stochastic is also in the overbought zone. We think price may have reached a high and a correction to 109.80 is likely in the next few days ahead. 20EMA remains bullish but once price were to cross below this 20EMA, it is likely to confirm the price decline to 109.80. The next resistance lies at 110.70.
| Support | 110.00 | 109.70 | 109.40 |
| Resistance | 110.40 | 110.70 | 111.05 |
EUR/USD – Price had declined below a strong support at 1.1850 on Wednesday and we were looking for a price decline to 1.1750 last Friday. Price had declined to a low of 1.1731 this morning and this could be a temporary low. We are now looking for a bounce to 1.1775 in the next 48 hours as Stochastic is deep in the oversold zone and due for a rebound. MACD is also moving away from its low but 20EMA remains strong bearish.
| Support | 1.1730 | 1.1695 | 1.1645 |
| Resistance | 1.1770 | 1.1810 | 1.1845 |
GBP/USD – Price had reached a high of 1.3982 on 20 July and this morning, price had declined to a low of 1.3854. This is close to the Fibonacci 38% of the rally from 1.3571 to 1.3982. Stochastic is in the oversold extreme. MACD is bearish but is near to the zero line. However 20EMA remains bearish. We think the price correction could be close to a low and a rebound could be possible in the next 24 hours. The bounce needs to move above 1.3890 to regain its bullish impetus.
| Support | 1.3835 | 1.3800 | 1.3765 |
| Resistance | 1.3860 | 1.3890 | 1.3930 |
XAU/USD – We had a sell recommendation last Friday at $1805.40 but unfortunately price only reached a high of $1802.10 and our entry order was not filled. Price had declined to a low of $1697.37 and a bounce up had remained below the gap high of $1764.55. As long as price remains below this gap, the trend is bearish. Stochastic is above the oversold zone but remains weak while MACD and 20EMA are both bearish and hinting of another price decline.
| Support | 1724.50 | 1707.10 | 1697.35 |
| Resistance | 1737.80 | 1752.50 | 1764.55 |
NZD/USD – Price reached a low of 0.6968 this morning which is also the Fibonacci 62% of the rally from 0.6896 to 0.7088. If price is able to hold above this support, we are likely to see a move back to 0.7088. However, if price were to decline below this support, we are likely to see a continuation of the decline to 0.6900. Stochastic is in the oversold zone. MACD and 20EMA remains bearish.
| Support | 0.6970 | 0.6940 | 0.6895 |
| Resistance | 0.7005 | 0.7035 | 0.7075 |