Market Talk
– The dollar began the last quarter of 2021 near its highest levels of the year and is headed for its best week since June 2021, as currency markets braced for U.S. interest rates to rise before those of its major peers.
– U.S. Treasury yields have surged on growing market expectations of U.S. tapering by year-end and rate hikes in 2022.A Federal Reserve meeting last week reinforced expectations for asset purchase tapering beginning this year and rate hikes starting in 2022 or early in 2023.
– The euro slipped on Friday morning to 1.1572 and has fallen 1.3% this week, tumbling through major support around $1.16 to touch its lowest levels since July 2020. The yen is down 0.6% for the week and twice as much in a fortnight as higher U.S. Treasury yields have drawn flows out of the Japanese yen into dollars.
– The Aussie hit one-month lows earlier this week and was last just above those levels at $0.7222. The New Zealand dollar also lifted from a month-low on Thursday and last sat at $0.6892.
– Gold prices edged lower on Friday morning as a resilient dollar pressured the safe-haven metal. Gold had advanced to $1764 overnight as a dip in U.S bond yields and equities kept the metal above the key $1,750 mark.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 110.75. Stop at 110.40 and profit target at 111.65
3. Expectation of a US interest rate hike and a rising US Treasury yield are both aiding the US dollar against the yen.
4. Price is likely to be supported by the Fibonacci 50% correction point with MACD hinting of a bullish price trend.
Fundamental Comments
1. A rising Treasury yield is giving support to the US dollar against the yen.
2. Expectation of an interest rate hike is aiding the US dollar.
Technical Comments
1. Price is likely to be supported by the Fibonacci 50% correction point in the correction.
2. MACD remains bullish and is hinting that the current decline could be a price correction
Key Levels
| Support | 110.95 | 110.50 | 110.15 |
| Resistance | 111.45 | 111.75 | 112.10 |
Technical Overview
USD/CHF – Price had reached a high of 0.9367 on Thursday and we have seen a price decline to current 0.9305. We think the price decline is likely to continue to 0.9250 in the next couple of days ahead. Stochastic has a bearish crossover and is hinting of a bearish price trend. MACD remains bullish and is hinting of a bullish price trend while 20EMA is neutral at the moment.
| Support | 0.9300 | 0.9260 | 0.9215 |
| Resistance | 0.9355 | 0.9395 | 0.9420 |
EUR/USD – Price had reached a low of 1.1562 and this could be a temporary low. We are likely to see a price correction that could bring price higher to 1.1610 or 1.1640 before the downtrend resumes again. Stochastic is grossly oversold at the moment but both MACD and 20EMA are hinting of a strongly bearish price trend ahead. We remain bearish but would be looking for a price corrective rally to get into a short position.
| Support | 1.1560 | 1.1525 | 1.1490 |
| Resistance | 1.1610 | 1.1640 | 1.1685 |
GBP/USD – Price had reached a low of 1.3411 and we have seen a bounce to 1.3517. Our view remains the same. We think the rally could be a counter trend move and a decline is likely to resume once the corrective rally is over. The resistance lies at 1.3560. Above this resistance, it could be a hint that we have seen the low at 1.3411 and a rally to 1.3740 is likely.
| Support | 1.3440 | 1.3410 | 1.3380 |
| Resistance | 1.3480 | 1.3520 | 1.3560 |
XAU/USD – Price had rallied to a high of $1764 overnight but was unable to maintain above the previous resistance high of $1760.65. We are likely to see price decline to $1744 if price is unable to move above $1760.65. Trend is bullish with both MACD and 20EMA hinting of a bullish price trend. Stochastic is rising and hinting of a bullish price trend. The next resistance lies at $1776.
| Support | 1744.75 | 1734.80 | 1721.60 |
| Resistance | 1756.65 | 1764.10 | 1776.35 |
USD/CAD – We had a buy call yesterday at 1.2710 but price declined below our stop at 1.2675 and we are out of this trade with a 35 pips loss. Price reached a low of 1.2630 overnight but MACD remains bullish despite the price decline. Stochastic is in the middle of its range but 20EMA is hinting of a bullish price trend. Our view remains unchanged. We are bullish and are looking for a rally to 1.2770 in the next couple of days ahead.
| Support | 1.2710 | 1.2670 | 1.2645 |
| Resistance | 1.2740 | 1.2775 | 1.2825 |