Market Talk
– The dollar fell on Wednesday after U.S. inflation data showed consumer price increases eased in July, taking some pressure off the Federal Reserve to begin scaling back the monthly bond purchases that are part of its toolbox to support the economic recovery.
– The data indicated that inflation may have peaked as COVID-19-induced supply-chain disruptions work their way through the economy in line with what Powell had said about inflationary pressures being transitional. However, two Fed officials offered divergent views on whether the data indicates that the economy is ready for asset tapering and interest rate hikes.
– In Europe, investor sentiment has declined, with a survey showing a third straight month of deterioration in Germany as rising global COVID-19 cases keep markets on edge. The Euro climbed to 1.1739, following six straight sessions of losses and having fallen as low as 1.1706 in early European trading, near the year’s low of $1.1704.
– The dollar eased to 110.35 yen, continuing to pull back from a five-week high of 110.80. Sterling climbed to 1.3864 against the dollar, pulling back from a two-week low. The Australian dollar rose after the U.S. CPI report to 0.7388.
– Gold was down on Thursday morning in Asia but clung onto most of its gains from Wednesday. The U.S.’ latest inflation data indicated a slowdown in consumer price increases and eased concerns of the U.S. Federal Reserve beginning asset tapering earlier than expected.
Chart Focus USD/CHF
Key Points
1. Buy USD/CHF recommendation.
2. Buy USD/CHF at 0.9200. Stop at 0.9175 and profit target at 0.9270
3. Higher Treasury yields and interest rate differential are both supporting the US dollar.
4. Price is supported by the 20EMA and both 20EMA and MACD are hinting of a bullish price trend ahead.
Fundamental Comments
1. Higher Treasury yield is supporting the US dollar.
2. Interest rate differential is also supporting the US dollar.
Technical Comments
1. Price is likely to be supported by the 20EMA which is also hinting of a bullish price trend.
2. MACD remains bullish and is hinting of a bullish price trend.
Key Levels
| Support | 0.9200 | 0.9175 | 0.9145 |
| Resistance | 0.9240 | 0.9275 | 0.9305 |
Technical Overview
USD/JPY – Yesterday, we saw a rally to 110.80 and this high was accompanied by a divergence warning from MACD. Stochastic is also in the overbought zone. Price has since declined to the 20EMA support at 110.30. If price is able to stay above this support, we are likely to see another test of the overnight high at 110.80. A move below this support is likely to send price lower to 109.75. We prefer to be on the bullish side as MACD and 20EMA remain bullish.
| Support | 110.30 | 110.00 | 109.70 |
| Resistance | 110.55 | 110.80 | 111.05 |
EUR/USD – Price tested year 2021’s low of 1.1702 and was able to hold above this support. There was a bounce higher to 1.1753 but the rally was capped by the 20EMA. Price will need to move above this resistance to regain its bullish impetus. A failure at the resistance could lead to another test of the low at 1.1702. Stochastic continues to rise but MACD remains bearish. 20EMA is also hinting of a bearish price trend at the moment.
| Support | 1.1725 | 1.1700 | 1.1655 |
| Resistance | 1.1750 | 1.1775 | 1.1810 |
GBP/USD – Price had declined to a low of 1.3802 overnight and this in between the Fibonacci 38% to 50% of the rally from 1.3571 to 1.3982. A rally from this low had sent price higher to 1.3887 which is also above the 20EMA. If price can stay above the 20EMA, we are likely to see a continuation of this rally to 1.3935. Stochastic is rising but MACD remains bearish. 20EMA is neutral.
| Support | 1.3845 | 1.3790 | 1.3740 |
| Resistance | 1.3890 | 1.3935 | 1.3980 |
XAU/USD – Price tested the downside on Tuesday but only reached a low of $1717.55, which was higher than Monday’s low of $1697.37. The rebound has carried price to $1755.80 at the point of this writing. Price still needs to close a big gap ($1764.55 to $1793.70) in order to regain its bullish impetus. If price remains below $1793.70, the trend is likely to remain bearish. Stochastic is already close to the overbought zone and MACD remains bearish.
| Support | 1753.05 | 1737.80 | 1728.05 |
| Resistance | 1764.55 | 1789.80 | 1793.70 |
NZD/USD – We had a sell recommendation at 0.7010 but unfortunately, our stop was triggered. We lost 20 pips on this trade. Price is declining from the overnight high towards the 20EMA support at 0.7020. Price will need to stay above this level to remain bullish. A break of this support is likely to send price lower to 0.6970. 20EMA and MACD remain bullish but Stochastic is declining from the overbought zone. Indicators are mixed at the moment.
| Support | 0.7020 | 0.6985 | 0.6940 |
| Resistance | 0.7060 | 0.7090 | 0.7125 |