Market Talk
– The dollar ticked up to a 2-1/2-year high versus the yen on Monday after a soft U.S. payrolls figure did little to alter market expectations that the U.S. Federal Reserve will announce it will start tapering its massive bond-buying next month.
– The Labour Department’s nonfarm payrolls report showed the U.S. economy in September created the fewest jobs in nine months as hiring dropped at schools and some businesses were short of workers. However, the unemployment rate fell to 4.8% from 5.2% in August and average hourly earnings rose 0.6%, which was more than expected.
– U.S. benchmark 10-year Treasury yield rose to a four-month high of 1.617%, boosting the dollar’s yield attraction. The yen slipped to as low as 112.72 yen per dollar this morning, a level last seen in April 2019.
– The Canadian dollar changed hands at 1.2473 per U.S. dollar, having hit a two-month high of 1.2452 on Friday thanks to surprisingly strong Canadian payrolls data and lofty crude oil prices. Crude oil prices surged to a 7-year high on Friday.
– Gold was down on Monday morning in Asia, as the U.S. Federal Reserve is expected to begin asset tapering as per its timeline after Friday’s disappointing NFP data failed to sway the Federal Reserve from starting a tapering of its asset purchases as early as November.
Chart Focus EUR/GBP
Key Points
1. Sell EUR/GBP recommendation.
2. Sell EUR/GBP at 0.8475. Stop at 0.8490 and profit target at 0.8450
3. Expectation of a BoE hike and interest rate differential are both aiding the British pound.
4. A bearish Pennant chart pattern, coupled with bearish MACD and Stochastic, is hinting of a bearish price trend.
Fundamental Comments
1. Sterling is aided by growing expectations that the Bank of England could raise interest rates to curb soaring inflation.
2. Interest rate differential is in favour of the British pound.
Technical Comments
1. Price has a Pennant chart pattern which is a hint of a price decline ahead.
2. Stochastic is declining and MACD is bearish. Both are hinting of a bearish price trend ahead.
Key Levels
| Support | 0.8465 | 0.8450 | 0.8415 |
| Resistance | 0.8485 | 0.8500 | 0.8525 |
Technical Overview
USD/JPY – We had a buy call at 111.10 which was filled on Tuesday. On Friday, we had recommended stop at 111.40 and profit target at 112.00. Our profit order was filled on Friday. We made 90 pips on this trade. Stochastic is inside the overbought extreme but MACD remains bullish. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish price trend. The Fibonacci 127% and 161.8% reside at 112.92 and 113.90 respectively.
| Support | 112.40 | 112.05 | 111.70 |
| Resistance | 112.90 | 113.20 | 113.55 |
EUR/USD – Price had reached a low of 1.1528 on Wednesday and this low was accompanied by divergence warnings from both Stochastic and MACD indicator, hinting of a possible price low in the making. Price is currently moving towards the previous resistance at 1.1635. Stochastic, 20EMA and MACD are hinting of a rising price trend but price will need to move above 1.1640 to confirm the low at 1.1528.
| Support | 1.1565 | 1.1525 | 1.1490 |
| Resistance | 1.1615 | 1.1640 | 1.1685 |
GBP/USD – Price broke above 1.3660 this morning, negating our bearish view. A move above this key resistance is likely to send price higher to 1.3750 over the next couple of days. Stochastic is rising towards the overbought zone, which is a hinting of a rising price trend. MACD is bullish and 20EMA is also rising and bullish. Only a move below 1.3535 would negate our bullish view for the next couple of days.
| Support | 1.3630 | 1.3590 | 1.3550 |
| Resistance | 1.3690 | 1.3745 | 1.3770 |
XAU/USD – Price broke above the range’s high of $1770.35 after a disappointing NFP data. Price reached a high of $1781.20 but is currently inside the previous week’s range again. There was a MACD divergence when price hit the high on Friday. We think price is likely to test and break the lower range at $1745.70 over the next few days. Stochastic is declining and 20EMA has turned bearish.
| Support | 1745.70 | 1734.80 | 1721.60 |
| Resistance | 1760.90 | 1770.35 | 1787.10 |
NZD/USD – We had a sell recommendation on Friday at 0.6930 and had placed a stop at 0.6960. Unfortunately, price reached a high of 0.6960 and we are out of this trade with a 30 pips loss. Stochastic has a bearish crossover and is heading lower. MACD remains bearish while 20EMA is flat and neutral at the moment. We remain bearish on this pair and we are looking for a decline to 0.6860.
| Support | 0.6910 | 0.6875 | 0.6855 |
| Resistance | 0.6960 | 0.6990 | 0.7030 |