Month: October 2021

Market Talk
– The dollar languished near its weakest level in a month against major peers on Friday hurt by a stronger euro as traders bet on earlier European interest rate hikes and an equity rally sapped demand for safer assets.

– U.S. gross domestic product increased at a 2% annualized rate last quarter, the slowest since the second quarter of 2020 when the economy was beset by COVID-19 pandemic restrictions, but a better labour report helps to offset the GDP impact.

– The euro was flat after rising as high as $1.1692 overnight after ECB President Christine Lagarde acknowledged higher inflation but pushed back against market bets that inflationary pressures would trigger an interest rate hike as soon as 2022.

– Sterling was flat at 1.3792 as it continued to fluctuate near a one-month high reached last week. The pound has been buffeted recently by speculation over whether the Bank of England would proceed with an interest rate hike at its meeting next week.

– Gold was down on Friday morning in Asia, but is set for a third consecutive weekly gain. Retreating U.S. bond yields which is set for their biggest weekly decline since early September 2021 and a weaker US dollar helped the yellow metal.

Chart Focus USD/CNH

Key Points

1. Sell USD/CNH recommendation.

2. Sell USD/CNH at 6.3885. Stop at 6.3995 and target at 6.3685

3. A decline in US bond yields and a slowdown in the US economy are both likely to weigh on the US dollar.

4. Price could be forming a Flag pattern and Stochastic is re-enforcing the message with a bearish hint.

Fundamental Comments

1. A decline in US bond yield has lessened the attractiveness of the US dollar against the Chinese yuan

2. A slowdown in the US economy is likely to delay a US rate hike which is likely to weigh on the US dollar.

Technical Comments

1. Price could be forming a flag pattern which is hinting of a possible decline.

2. Stochastic is declining and is hinting of further price declines ahead.

Key Levels

Support	6.3795	6.3685	6.3520
Resistance	6.3900	6.4235	6.4395

Technical Overview

USD/JPY – On the 4-hourly chart, price has been capped by the 20EMA and as long as price is unable to move above the 20EMA line at 113.70 currently, we are likely to see a test of the price support at 113.05 in the next few days. Stochastic is near to the oversold zone but MACD remains bearish. 20EMA is also bearish and hinting of a bearish price trend. Above 114.00 could mean price has found a low.

Support	113.35	112.95	112.60
Resistance	113.70	114.00	114.35

EUR/USD – Price rallied to a high of 1.1692 after ECB’s Lagarde acknowledged inflation worries but the rally may be overstretched. We are likely to see a price correction to 1.1640 as Stochastic is in the overbought zone. However, MACD and 20EMA are both bullish and is hinting of a bullish price trend. We would recommend buying the correction towards 1.1640 for another rally to 1.1700 in the next few days ahead.

Support	1.1655	1.1625	1.1585
Resistance	1.1695	1.1720	1.1755

GBP/USD – Price rallied to a high of 1.3815 overnight but we think this rally is likely to continue higher towards 1.3835 within the next 24 hours. A break of resistance at 1.3835 is likely to send price higher to 1.3920. Stochastic continues to rise and 20EMA is hinting of a price rally ahead. MACD remains bearish but we think this could be a sign of a correction instead of a bearish trend.

Support	1.3765	1.3715	1.3670
Resistance	1.3800	1.3835	1.3890

XAU/USD – Gold continued to move within last Friday’s range of $1782.25 to $1813.65. Overnight price tested the high at 1810.30 but was unable to sustain. Price has declined below $1800 and we think the decline is likely to continue to $1782. After failing near the high, price is likely to test the low again. Stochastic is declining after a bearish crossover near to the overbought zone. MACD and 20EMA have both turned bearish and is hinting of a price decline.

Support	1792.15	1782.25	1766.45
Resistance	1801.25	1813.65	1823.05

AUD/USD – We had a sell call yesterday at 0.7510 which was stopped out when price moved above our stop price at 0.7540. We lost 30 pips on this trade. Price may have reached a high at 0.7555 but MACD looks weak and a potential divergence could be forming. Stochastic is also inside the overbought zone, hinting of limited upside. However, 20EMA remains bullish. We would prefer to stand aside and wait for better trading opportunities.

Support	0.7520	0.7480	0.7450
Resistance	0.7555	0.7570	0.7600

Market Talk
– Central bank policy makers buffeted currency trading on Thursday as the Australian dollar held firm on growing speculation about the Reserve Bank of Australia’s tightening plans, while the yen steadied as the Bank of Japan kept policy steady as expected.

– The US dollar fell against the Canadian dollar  after the Bank of Canada signalled on Wednesday it could hike interest rates as soon as April 2022 and said inflation would stay above target through much of next year, due to higher energy prices and supply bottlenecks.

– The greenback declined against the yen to 113.63, after hitting a four year high of 114.69 hit October 20, as the Bank of Japan kept monetary policy settings steady and cut its consumer inflation forecast for the year ending in March 2022 to 0% from 0.6%, reinforcing market bets it will lag other central banks in dialling back crisis-mode policies.

– The euro was little changed at 1.1606 ahead of the ECB meeting, sitting above its 15-month low of 1.1523 hit earlier this month. The ECB is expected to keep policy unchanged and likely to push back expectations for an interest rate hike in 2022, according to Reuters

– Gold was up on Thursday morning in Asia, boosted by a fall in 10-year U.S. Treasury yields to a near two-week low but strong risk appetite in equity markets kept bullion’s gains in check. Silver was steady at $24.04 per ounce

Chart Focus AUD/USD

Key Points

1. Sell AUD/USD recommendation.

2. Sell AUD/USD at 0.7510. Stop at 0.7540 and profit target at 0.7435.

3. Dovish Australian central bank and yields differential are likely to weigh on the Aussie dollar.

4. Price may have hit a high after a 4-week rally and is in need of a correction and Stochastic is hinting of a bearish price trend ahead.

Fundamental Comments

1. Dovish Reserve Bank of Australia is likely to weigh on the Aussie dollar

2. Yields differentials between the US Treasury and the Australian bond favour the US dollar.

Technical Comments

1. Price may have hit a high after a 4-week rally and is in need of a correction.

2. Stochastic is declining and hinting of a bearish price trend.

Key Levels

Support	0.7480	0.7450	0.7425
Resistance	0.7510	0.7545	0.7570

Technical Overview

USD/JPY – We had a sell call on this pair at 114.10 yesterday but price only reached a high of 114.08 and our order was not filled. Price has declined to a low of 113.49 and our view remains unchanged from yesterday. We are expecting price to decline to 113.10 over the next 48 hours. Stochastic continues to decline towards the oversold zone.20EMA is bearish but MACD is neutral at the moment.

Support	113.40	113.00	112.60
Resistance	113.70	114.10	114.35

EUR/USD – For the past 2 days, price has been capped by the resistance at 1.1625 and was supported by the low at 1.1585. We are expecting this range to continue for today, at least until the end of ECB meeting tonight. ECB monetary decision is likely to determine the direction. MACD and 20EMA remains bearish. Stochastic is rising after a bullish crossover in the oversold zone.

Support	1.1585	1.1545	1.1515
Resistance	1.1625	1.1655	1.1690

GBP/USD – Price broke below 1.3735 overnight to reach a low of 1.3709. However, this low was accompanied by divergence warning from the MACD indicator. This could be a hint that price has hit a low and a reversal could be ahead. Stochastic is near to the oversold zone and is hinting of a possible price low as well. However, 20EMA remains bearish. We would prefer to wait for confirmation of a reversal before going long.

Support	1.3710	1.3670	1.3630
Resistance	1.3760	1.3790	1.3835

XAU/USD – Gold continued to move within last Friday’s range of $1782.25 to $1813.65 and on Tuesday’s night, price test the lower end of the range. After holding above the low, we are likely to see price test the top end of the range over the next couple of days. Price has already moved higher to $1803.90 this morning and we are expecting the rally to continue towards 1813.65 in the next 24 hours. Stochastic is rising. MACD and 20EMA are both bullish.

Support	1799.90	1791.25	1782.25
Resistance	1813.65	1823.05	1833.80

USD/CNH – After hitting a low at 6.3751, we have seen price rallied to 6.3950 this morning. The high was in the form of a Shooting Star candlestick price pattern, which is a reversal signal. Price was also capped by a rising trend line. Stochastic is in the overbought zone and is turning down, hinting of a price decline ahead. MACD and 20EMA remain bullish but we think price is likely to decline and test the previous low of 6.3685 again in the next 2-3 days.

Support	6.3880	6.3685	6.3520
Resistance	6.3950	6.4235	6.4395