Market Talk
– The US dollar held near three-week highs against a basket of major currencies on Friday after a raft of strong US economic data rekindled expectations for earlier policy tightening by the U.S. Federal Reserve.
– U.S. retail sales unexpectedly increased in August, rising 0.7% from the previous month despite expectations of a 0.8% fall, while business sentiment survey by the Philadelphia Fed also showed a big improvement helping to revive expectations for early Fed tapering.
– The euro hit a three-week low of 1.1750 overnight and last traded at 1.1765. Sterling eased to 1.3795 while the Australian dollar traded at 0.7294 after touching a three-week low of 0.7274 in the previous session.
– The Chinese yuan last traded at 6.4530 to the dollar as the Chinese currency faces pressure from growing worries about China’s real estate sector. Previous Chinese data also showed businesses were grappling with the impact of localized lockdowns following sporadic COVID-19 outbreaks, supply bottlenecks and high raw materials costs, weighing on the yuan.
– Gold stood at $1,754.4 per ounce after 2.3% falls in the previous session after strong U.S. economic data revive expectations for early Fed tapering. Silver changed hands at $22.88 per ounce having lost 3.7% on Thursday, back near the eight-month lows touched in August.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 109.70. Stop at 109.40 and profit target at 110.35
3. Strong US economic data is aiding the US dollar while the yuan is weighed down by poor economic data out of China.
4. Price has moved off the low in a reversal and 20EMA is also hinting of a bullish price trend.
Fundamental Comments
1. A slew of strong US economic data released overnight rekindled expectations for earlier policy tightening by the U.S. Federal Reserve aiding the US dollar
2. Chinese data had shown businesses were grappling with the impact of localized lockdowns following sporadic COVID-19 outbreaks, supply bottlenecks and high raw materials costs, weighing on the yuan.
Technical Comments
1. Price had moved off the low of a 6-week range and could be moving to the opposite end of the range.
2. 20EMA has turned bullish and is hinting of a bullish price trend.
Key Levels
| Support | 109.60 | 109.10 | 108.70 |
| Resistance | 109.95 | 110.20 | 110.50 |
Technical Overview
USD/CNH – We had a buy recommendation on this pair yesterday and this morning price has already reached our price target. However, we were not able to get onto this trade yesterday as price did not reached our entry level. We think the rally can continue higher to 6.4715. Stochastic continues to move higher towards the overbought zone. MACD and 20EMA are hinting of a bullish price trend.
| Support | 6.4410 | 6.4250 | 6.4105 |
| Resistance | 6.4650 | 6.4860 | 6.4960 |
EUR/USD – Price has reached the Fibonacci 62% correction point of the rally from 1.1663 to the high at 1.1909. If price can hold above this support, it is likely to move higher to 1.1850. However, should price fails to hold this support; it is likely to decline to the previous low of 1.1663. Stochastic is in to the oversold zone but both MACD and 20EMA are bearish and hinting of a bearish price trend.
| Support | 1.1750 | 1.1705 | 1.1665 |
| Resistance | 1.1790 | 1.1845 | 1.1885 |
GBP/USD – Price has moved down to 1.3765 overnight and our view is the same as yesterday. We see price going lower to either 1.3750 or 1.3715 over the next 24 hours. Stochastic is near to the oversold zone but MACD remains bearish. 20EMA is also pointing lower and hinting of a bearish price trend. Price will need to move above 1.3870 to negate our bearish view.
| Support | 1.3765 | 1.3715 | 1.3680 |
| Resistance | 1.3805 | 1.3855 | 1.3890 |
XAU/USD – Price had moved to a low of $1745.22 overnight and Stochastic has reached the oversold zone. However, both 20EMA and MACD are bearish and hinting of a bearish price trend ahead. We remain bearish but think there may be a pullback towards the 20EMA at $1776 today before the downtrend resumes again. A move above $1790 would confirm $1775.22 as the low and a possible rally to $1809.
| Support | 1754.90 | 1745.20 | 1738.25 |
| Resistance | 1770.70 | 1787.10 | 1796.10 |
AUD/USD – We had a sell call last Friday at 0.7395 and yesterday, our profit target at 0.7290 was reached. We are out with a 105 pips profit on this trade. We think price may have reached a temporary low. Stochastic has reached the oversold zone and MACD is starting to warn with divergence. However, 20EMA is still hinting of a bearish price trend with the Fibonacci price projection at 0.7265 being the target.
| Support | 0.7275 | 0.7245 | 0.7220 |
| Resistance | 0.7310 | 0.7345 | 0.7375 |