Market Talk
– Safe havens eased slightly on Wednesday after struggling Chinese property giant Evergrande said it would make an upcoming bond coupon, allaying immediate fears about a messy corporate collapse.
– Fed’s two-day meet is due to conclude on Wednesday as investors focus on any new signals on when a taper may begin. The U.S. central bank is also likely to provide an outlook on interest rate hikes from the current near zero level.
– The yen weakened about 0.2% to 109.48 to the dollar, showing little reaction to the Bank of Japan’s decision to keep its policy on hold and maintain its massive stimulus even as major counterparts eye a withdrawal of crisis-mode support.
– The Chinese yuan was fairly stable, firming slightly to 6.4748 per dollar in the offshore trade, edging back from one-month low of 6.4878 set on Monday. All eyes are now on whether China Evergrande Group will default on its bond interest repayment.
– Gold prices edged up on Wednesday aided by a flight to safe-haven assets, ahead of the U.S. Federal Reserve’s policy signals later in the day on reducing stimulus for the world’s largest economy.
– There will be no FX Commentary on Thursday and Friday. Update will resume on Monday.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 109.45. Stop at 109.10 and target at 110.00
3. Divergent central bank policy and bond yields are both keeping the US dollar strong.
4. Price may have made a Double Bottom and both MACD and Stochastic are hinting of a possible price low as well.
Fundamental Comments
1. Fed is likely to signal a reduction in stimulus while Bank of Japan is expected to maintain its massive stimulus.
2. US Treasury bond yields are in the US dollar favour compared to Japanese government bonds.
Technical Comments
1. Price have made a potential Double Bottom chart pattern which is a hint of a possible price low.
2. Stochastic and MACD both have a bullish crossover, hinting of a bullish price trend ahead.
Key Levels
| Support | 109.40 | 109.05 | 108.70 |
| Resistance | 109.70 | 110.10 | 110.45 |
Technical Overview
USD/CHF – Price has declined to a low of 0.9224, which is also the Fibonacci 62% correction point of the rally from 0.9162 to the high at 0.9332. A move below 0.9224 is likely to send price lower to 0.9162 while the ability to hold above 0.9224 is likely to send price higher to test 0.9332 again. Stochastic is hinting of a rally but both MACD and 20EMA are both hinting of a decline.
| Support | 0.9220 | 0.9195 | 0.9160 |
| Resistance | 0.9250 | 0.9285 | 0.9315 |
EUR/USD – We had a sell call yesterday at 1.1740, which was filled when price rallied to a high of 1.1748. Price has since moved lower to 1.1721. MACD and 20EMA both remain bearish but Stochastic is moving higher from the oversold zone. We would recommend shifting stop to cost at 1.1740 while keeping profit target at 1.1670. Above 1.1745 would confirm 1.1699 as the low and would target at move back to 1.1800.
| Support | 1.1700 | 1.1665 | 1.1635 |
| Resistance | 1.1740 | 1.1790 | 1.1845 |
GBP/USD – Price has managed to hold above 1.3640 and there is also the possibility of a Double Bottom chart pattern forming. However, price is not able to break above the neckline of this chart pattern to trigger a reversal as both MACD and 20EMA both remains bearish and is hinting of a bearish price trend ahead. Stochastic may be in the oversold zone but remains weak. Watch and follow the breakout of 1.3640 and 1.3700 for clues to the next direction.
| Support | 1.3640 | 1.3600 | 1.3570 |
| Resistance | 1.3685 | 1.3720 | 1.3760 |
XAU/USD – Price broke above $1767.35 last night and this could trigger a price move to $1792 over the next 48 hours, which is the price target for this Double Bottom chart pattern. Stochastic has reached the overbought zone but MACD remains bullish and is hinting of a bullish price trend. 20EMA is also hinting of a bullish price trend. A move below $1767 would negate our bullish view.
| Support | 1767.35 | 1757.80 | 1742.00 |
| Resistance | 1781.65 | 1796.20 | 1808.50 |
XAG/USD – We had a buy call at $22.35 on Monday which was filled. MACD is bullish and rising. Stochastic is also rising but is near to the overbought zone. 20EMA is bullish and hinting of a bullish price trend. We are expecting price to move higher over the next 1-2 days. We would recommend shifting stop higher from $22.10 to $22.45 while keeping profit target at $23.10
| Support | 22.65 | 22.25 | 21.95 |
| Resistance | 22.90 | 23.15 | 23.40 |