Market Talk
– The dollar drifted near the middle of its range of the past month versus major peers on Thursday, as traders looked to next week’s Federal Reserve policy meeting for indications on how soon the U.S central bank will start to taper stimulus.
– US economic data released overnight showed hints of waning inflation and an economic recovery remain robust, even as supply constraints, complicated by hurricane Ida, hindered factory output boosting the US dollar.
– The New Zealand dollar jumped after the economy grew at a much faster pace than expected, reinforcing the view that the central bank will start lifting interest rates despite a recent outbreak of the coronavirus.
– The dollar bought 109.33 yen on Thursday morning, little changed from Wednesday, when it slid to a six-week low of 109.110. The euro was flat at 1.1816, consolidating between this month’s high and low of 1.1909 and 1.1770.
– Gold was little changed on Thursday morning in Asia, having slipped overnight to $1790, as investors continue their wait for clues on when the U.S. Federal Reserve will begin asset tapering.
Chart Focus USD/CNH
Key Points
1. Buy USD/CNH recommendation.
2. Buy USD/CNH at 6.4320. Stop at 6.4195 and target at 6.4540
3. Worries over the spread of Delta variant and with the Chinese economy grappling with COVID-19, the US dollar is in demand due to its safe haven status.
4. Price may have hit a bottom and both MACD and Stochastic are hinting of a possible price low.
Fundamental Comments
1. Worries over the Delta variant is keeping the safe haven US dollar strong.
2. Data out of China showed businesses were grappling with the impact of localized lockdowns following COVID-19 outbreaks, which is likely to weigh on the Chinese Yuan.
Technical Comments
1. Price may have made a Triple Bottom chart pattern.
2. MACD is warning of a bottom with a divergence while Stochastic is in the oversold zone and hinting of a reversal.
Key Levels
| Support | 6.4220 | 6.4090 | 6.3830 |
| Resistance | 6.4335 | 6.4440 | 6.4535 |
Technical Overview
USD/JPY – Price has declined to a low of 109.10 overnight. This low is also the Fibonacci 161.8% of the Fibonacci price projection from the decline at 110.42 to the low of 109.60. 20EMA remains bearish and is capping the rally at 109.40. However, both Stochastic and MACD are warning with divergences of a possible price low.
| Support | 109.10 | 108.70 | 108.35 |
| Resistance | 109.45 | 109.80 | 110.20 |
EUR/USD – Price hit a low of 1.1770 and this low is also just below the 50% Fibonacci 50% correction point of the rally from 1.1663 to the high at 1.1909. Since this low, price has been consolidating in the past 4 days. Stochastic is turning down and is hinting of a price decline ahead. MACD remains bearish while 20EMA is neutral. We think price may have reached a temporary low and we are looking for a rally to 1.1850 in the next few days. Below 1.1770 would negate our bullish view.
| Support | 1.1800 | 1.1770 | 1.1725 |
| Resistance | 1.1845 | 1.1880 | 1.1910 |
GBP/USD – Our view is the same as yesterday. If price cannot move above 1.3870, we are likely to see the decline continue towards 1.3750 or 1.3715 in the next 1-2 days ahead. However, Stochastic is near to the oversold zone. 20EMA is neutral but MACD remains bearish and is hinting of a bearish price trend ahead. MACD had also earlier warned with a divergence of a possible price high.
| Support | 1.3795 | 1.3760 | 1.3715 |
| Resistance | 1.3855 | 1.3885 | 1.3915 |
XAU/USD – Yesterday, we had a buy call on at $1797.60 but price declined to a low of $1790.55, taking out our stop. We lost $9.60 on this trade. Stochastic is declining and hinting of a bearish price trend but MACD remains bullish. Both indicators are in conflict. 20EMA is neutral at the moment. We still think price should be supported at $1780.25 and we are looking for a rally to $1809.
| Support | 1790.55 | 1782.45 | 1770.70 |
| Resistance | 1796.05 | 1808.50 | 1820.45 |
AUD/USD – We had a sell call on Friday at 0.7395 and yesterday, we had recommended bringing 0.7350 while keeping profit order at 0.7290. We would recommend keeping stop and profit target the same as yesterday for today. Stochastic is starting to climb up from the oversold zone. MACD is also starting to show a bullish divergence. This could be the final dip to below 0.7300 before the price reversal.
| Support | 0.7300 | 0.7275 | 0.7245 |
| Resistance | 0.7345 | 0.7375 | 0.7405 |