Market Talk
– The dollar was down on Thursday morning in Asia after surging on Wednesday to a one-year high against major currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases starting in November and an interest rate hike, possibly in late 2022.
– The euro was among the currencies to lose ground, falling below the $1.16 level, its lowest since late July 2020. The British pound declined to 1.3455 on soaring natural gas prices alongside petrol shortages in the U.K. that have lasted almost a week.
– The yen, the currency most sensitive to U.S. yields as higher rates can attract flows from Japan, touched an 18-month low against a resurgent dollar. The dollar climbed as high as 112.04, its strongest level since late February 2020, and was last up 0.4% at 111.99 yen.
– The Chinese yuan was little changed at 6.4710. China’s economic data released earlier in the day were mixed. September’s Manufacturing PMI data was at a lower-than-expected 49.6 but non-manufacturing PMI data was at a better-than-expected 53.2.
– Gold was up on Thursday morning in Asia, after tumbling to a seven-week trough during the previous session as a stronger US dollar and rising U.S. Treasury yields continued to apply pressure on the yellow metal.
Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2710. Stop at 1.2675 and target at 1.2770
3. The US dollar was boosted by increased expectations for a tapering and an interest rate hike, possibly in late 2022.
4. Price is coming into a strong support level with Stochastic and MACD both hinting of a bullish price trend ahead.
Fundamental Comments
1. The US dollar is boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases.
2. Expectation of an interest rate hike, possibly in late 2022 is also aiding the US dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 38% correction point as well as a previous resistance turned support line.
2. Stochastic is approaching the oversold zone and MACD remains bullish. Both are hinting of a bullish price trend ahead.
Key Levels
| Support | 1.2710 | 1.2670 | 1.2645 |
| Resistance | 1.2740 | 1.2775 | 1.2825 |
Technical Overview
USD/JPY – We had a buy call yesterday but price did not declined to our entry level. Price has reached a high at 112.04, which is strongest level since late February 2020. Stochastic is in the overbought zone. MACD has started to warn with bearish divergence signal but 20EMA is pointing up with a steep slope, which is a hint of a strong bullish price trend. The next resistance comes in at 112.40.
| Support | 111.75 | 111.40 | 110.95 |
| Resistance | 112.05 | 112.40 | 112.85 |
EUR/USD – Price had reached a low of 1.1589 overnight against our expectation. Stochastic is in the oversold extreme but MACD is bearish and hinting of a strong bearish price trend ahead. There is also no sign of a divergence, which means price is likely to continue lower. 20EMA is also hinting of a bearish price trend. The next support level comes in at 1.1490.
| Support | 1.1590 | 1.1540 | 1.1505 |
| Resistance | 1.1610 | 1.1640 | 1.1685 |
GBP/USD – Price reached a low of 1.3411 overnight and we have seen a rally to 1.3455 this morning. However the rally could be a counter trend move with a Flag chart pattern in the progress of forming. A Flag chart pattern would be a sign of a bearish trend ahead. Stochastic is oversold but MACD and 20EMA both remain bearish and hinting of a bearish price trend ahead. Price would need to move above 1.3520 to negate this bearish trend.
| Support | 1.3410 | 1.3385 | 1.3350 |
| Resistance | 1.3470 | 1.3520 | 1.3560 |
XAU/USD – Price declined to a low of 1721.60 but price remains weak. Stochastic is already in the oversold zone but MACD remains bearish and is hinting of a bearish price trend ahead. A bullish divergence was given by the MACD but this divergence looks weak. 20EMA remains bearish and is hinting of a bearish price trend. We may see a test to $1717 again to complete the decline despite the oversold conditions.
| Support | 1721.60 | 1717.00 | 1699.85 |
| Resistance | 1734.80 | 1744.75 | 1754.50 |
USD/CHF – We had a buy call on Monday at 0.9255 which was filled. Yesterday, we had place a stop at 0.9255 and profit order at 0.9335. Our profit order was filled and we are out with an 80 pips profit. MACD is starting to show a possible divergence warning forming, which is a hint that price may have reached a high. Stochastic is in the overbought zone but 20EMA remains bullish.
| Support | 0.9325 | 0.9300 | 0.9260 |
| Resistance | 0.9355 | 0.9390 | 0.9420 |