Market Talk
– The US dollar inched higher in choppy trade on Wednesday amid heightened nerves about the global growth outlook and as traders awaited U.S. jobs data on Friday for a clue on the timing of Federal Reserve policy tightening.
– The Senate will vote on Wednesday on a Democratic-backed measure to suspend the U.S. debt ceiling, a key lawmaker said on Tuesday, as partisan brinkmanship in Congress risks an economically crippling federal credit default.
– The Reserve Bank of New Zealand lifted its official cash rate to 0.50% from the previous month’s 0.25%, for the first time in seven years, but the well-telegraphed rate hike was expected and the New Zealand dollar barely budged.
– The euro was pinned below $1.16 and last bought $1.1590, scarcely higher than the 14-month low of $1.1563 it struck last week. The yen eased to a one-week low of 111.64 per dollar and was within range of the 18-month trough of 112.08 that it visited last Thursday.
– Gold was down on Wednesday morning in Asia as a firmer U.S. Treasury yields and a stronger dollar dented the safe-haven metal’s appeal, with investors awaiting key U.S. non-farm payrolls data due later this week.
Chart Focus NZD/USD
Key Points
1. Sell NZD/USD recommendation.
2. Sell NZD/USD at 0.6925. Stop at 0.6960 and profit target at 0.6855.
3. Worries about global growth outlook and unwinding of positions are both likely to weigh on the NZ dollar
4. A strong resistance with Stochastic and MACD hinting of a bearish price trend is a hint of a price decline ahead.
Fundamental Comments
1. Heightened nerves about the global growth outlook are likely to aid the US dollar.
2. RBNZ hike rate had no impact and is likely to weigh on the NZD as traders unwind positions betting on the hike.
Technical Comments
1. Price broke a mini Double Top chart pattern and was capped by a previous support turned resistance line.
2. Stochastic and MACD are both turning down and hinting of a bearish price trend ahead.
Key Levels
| Support | 0.6900 | 0.6860 | 0.6805 |
| Resistance | 0.6945 | 0.6990 | 0.7030 |
Technical Overview
USD/JPY – We had a buy call at 111.10 yesterday which was filled when price dropped to a low of 111.07. Price has moved higher to 111.75 and we would recommend bringing stop to cost at 111.10 and profit target unchanged at 112.00. Stochastic is moving towards the overbought zone and is hinting that price can go higher. Both MACD and 20EMA are also hinting of a price rally.
| Support | 111.40 | 111.05 | 110.80 |
| Resistance | 111.85 | 112.10 | 112.40 |
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 decline is likely to head towards 1.1505. Stochastic is moving towards the oversold zone. 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 – A rally brought price to a high of 1.3640 which was just shy of the resistance at 1.3657. As long as the resistance at 1.3657 holds, the 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 had a bearish crossover and is likely to move lower. MACD remains bullish but there was a bearish divergence warning. 20EMA is also bullish.
| Support | 1.3580 | 1.3530 | 1.3485 |
| Resistance | 1.3625 | 1.3660 | 1.3715 |
XAU/USD – Price reached a high of $1770.35 on Monday but this high was accompanied by a divergence warning from the MACD indicator. 20EMA has turned bearish. MACD remains bullish but had a bearish divergence warning of a possible price high being made. Price could be moving back to $1721 over the next few days. A move above $1771 would negate our bearish view.
| Support | 1747.50 | 1734.80 | 1721.60 |
| Resistance | 1757.90 | 1770.70 | 1787.15 |
XAG/USD – Silver on the 4-hourly chart may be forming an Inverse Head and Shoulder chart pattern for the past 3 days. 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. However, if price is unable to move above $22.70 soon, we are likely to see a price back to $21.45 in the next few days. MACD is bullish but Stochastic is declining after hitting the overbought zone.
| Support | 22.30 | 21.95 | 21.70 |
| Resistance | 22.70 | 23.15 | 23.45 |