Market Talk
– The dollar held firm on Friday, staying near its highest level in four months against a basket of currencies as investors looked for more hints from the Federal Reserve on its plans to reduce monetary stimulus.
– US producer price index grew 1% month-on-month in July, the largest annual increase in more than a decade, underscoring the strength of inflationary pressure and helping the case for tapering. U.S. initial jobless claims data came in at 375,000 with the number lower than the 387,000 claims filed during the previous week.
– The euro eased slightly to 1.1732, on course for a second straight week of losses and staying not far from the four-month low of $1.1706 hit on Wednesday. Sterling was on the defensive at 1.3815 after hitting a two-week low of $1.3794 in the previous session, drawing little help from slightly stronger-than-expected GDP estimate for June.
– The dollar changed hands at 110.42 yen, a tad below a one-month high of 110.80 set on Wednesday. The Australian dollar stood at $0.7342, near an eight-month low of $0.72895 touched last month.
– Gold was up on Friday morning in Asia, but was set for a second consecutive weekly decline. Silver was little changed at $23.20. Investors now await the U.S. Federal Reserve’s next monetary policy move.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2520. Stop at 1.2485 and profit target at 1.2590
3. Strong PPI data and a decline in crude oil price are both likely to boost the US dollar against the Canadian dollar.
4. Price is likely to be supported by the price channel and Stochastic is hinting of a bullish price trend.
Fundamental Comments
1. Strong PPI data have boosted hopes of a US Fed tapering which is likely to support the US dollar.
2. A decline in crude oil price is likely to weigh on the Canadian dollar
Technical Comments
1. Price is likely to be supported by the rising price channel
2. Stochastic is rising which is a hint of a bullish price trend ahead.
Key Levels
| Support | 1.2515 | 1.2485 | 1.2450 |
| Resistance | 1.2545 | 1.2590 | 1.2610 |
Technical Overview
USD/JPY – Yesterday, price has declined to the 20EMA support at 110.30 and has been hovering around the 20EMA for the past 36 hours. 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. Stochastic is hinting of a price movement higher but MACD is hinting of a price decline.
| Support | 110.30 | 110.00 | 109.70 |
| Resistance | 110.55 | 110.80 | 111.05 |
EUR/USD – Price was capped by the 20EMA for the past 36 hours and 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. We prefer to stay on the short side.
| Support | 1.1725 | 1.1700 | 1.1655 |
| Resistance | 1.1750 | 1.1775 | 1.1810 |
GBP/USD – Price make a marginal low for a third consecutive day but remains above the Fibonacci 50% correction point. Stochastic continues to decline and is close to the oversold zone. MACD remains bearish and remains near to the zero line. 20EMA continues to hint of a bearish price trend ahead. We prefer to remain neutral and watch the reaction at Fibonacci 50% or 62% correction point for clues to the next price direction.
| Support | 1.3790 | 1.3740 | 1.3715 |
| Resistance | 1.3820 | 1.3850 | 1.3890 |
XAU/USD – Price 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 in the overbought zone on the 4-hourly chart. MACD is close to the zero line and remains neutral. 20EMA has turned mildly bullish. Price is likely to test the gap but is unlikely to move above $1793.70.
| Support | 1753.05 | 1737.60 | 1728.05 |
| Resistance | 1764.55 | 1789.80 | 1793.70 |
USD/CHF – We had a buy recommendation at 0.9200 but price only reached a low of 0.9210 and our entry order was not filled. Price has since moved higher. Stochastic continues to rise and 20EMA is also rising and hinting of a bullish price trend. MACD remains bullish. We think the rally can continue to move higher to 0.9175. A break below 0.9175 would negate our bullish view.
| Support | 0.9200 | 0.9175 | 0.9145 |
| Resistance | 0.9240 | 0.9275 | 0.9305 |