Market Talk
– The US dollar was up on Tuesday morning in Asia, after pulling back from the 1-year high hit last week, as traders looked to U.S. jobs data at the end of the week for clues to the Federal Reserve’s next move.
– US data released on Monday in the U.S. showed that US factory orders rose a better-than-expected 1.2% month-on-month in August helping the US dollar to recover from its pullback.
– The Australian dollar maintained a three-day gain, trading little changed at $0.7290 from the day earlier, when it touched a four-day high of $0.7305. The RBA kept rate unchanged at 0.10% in its policy decision earlier in the today.
– The New Zealand dollar held close to the previous session’s four-day high of $0.6981, changing hands at $0.6960 after three days of gains. Markets are pricing for a quarter point rate hike when the nation’s central bank decides policy on Wednesday.
– Gold was down on Tuesday morning in Asia, after rising to a more than one-week peak overnight as a weaker dollar and risk off sentiment in the equity market lifted demand for the safe-haven metal.
Chart Focus USD/JPY
Key Points
1. Buy USD/JPY recommendation.
2. Buy USD/JPY at 111.10. Stop at 110.75 and target at 112.00
3. Yields differential and strong US data are both aiding the US dollar against the yen.
4. Fibonacci price support, Double Bottom and divergence warnings are hinting of a price low and a reversal.
Fundamental Comments
1. A rising Treasury yield is giving support to the US dollar against the yen
2. US data last week showed increased consumer spending, accelerated factory activity and elevated inflation growth, which is likely to lead to an earlier than anticipated rate hike.
Technical Comments
1. Fibonacci 38% price support and a mini Double Bottom chart pattern are both hinting of a price rally.
2. Stochastic and MACD divergence warning are also hinting of a possible price bottom and a reversal ahead.
Key Levels
| Support | 110.80 | 110.50 | 110.15 |
| Resistance | 111.30 | 111.65 | 111.95 |
Technical Overview
AUD/USD – Price’s attempt to move above a V-shaped breakout was not successful this morning and we are likely to see a decline back to 0.7170 unless price can move above 0.7310. Stochastic is turning down after a bearish crossover in the overbought zone. Price has moved below the 20EMA hinting of a bearish price trend ahead. MACD could be about to move below the zero line, which would turned the indicator bearish.
| Support | 0.7245 | 0.7215 | 0.7170 |
| Resistance | 0.7275 | 0.7310 | 0.7345 |
EUR/USD – The rally brought price to a high of 1.1615 on Monday and we think this is likely to be the high and a decline back to 1.1560 is likely over the next couple of days. Below 1.1560, the next support lies at 1.1505. Stochastic has a bearish crossover near to the overbought zone and MACD is hinting of a bearish price trend ahead. 20EMA is also hinting of a bearish price trend.
| Support | 1.1560 | 1.1525 | 1.1490 |
| Resistance | 1.1615 | 1.1640 | 1.1685 |
GBP/USD – Yesterday, we had a sell call on this pair at 1.3555 but we got this wrong and we lost 35 pips on this trade. The rally reached a high of 1.3640 which was just shy of the resistance at 1.3657. As long as the resistance at 1.3657 holds, price trend remains bearish and we are looking at a test of 1.3410 again over the next few days. Stochastic has reached the overbought zone and MACD remains bullish. 20EMA is also bullish.
| Support | 1.3580 | 1.3530 | 1.3485 |
| Resistance | 1.3640 | 1.3670 | 1.3715 |
XAU/USD – Price reached a high of $1770.35 on Monday but that was accompanied by a possible divergence warning from the MACD indicator. Stochastic has a bearish crossover near to the overbought zone as well. However, 20EMA remains bullish. Price may have reached a high and we could be moving back to $1745 again over the next couple of days. A move above $1771 would negate our bearish view.
| Support | 1757.60 | 1744.75 | 1734.80 |
| Resistance | 1770.70 | 1787.15 | 1796.15 |
XAG/USD – Silver on the 4-hourly chart may be forming an Inverse Head and Shoulder chart pattern. A confirmation would be given when price moved above the neckline of this pattern at $22.70. The breakout target would be at $24.00. MACD is bullish but Stochastic is already inside the overbought zone. 20EMA is bullish. Wait for the confirmation to go long on Silver.
| Support | 22.30 | 21.95 | 21.70 |
| Resistance | 22.75 | 23.15 | 23.45 |