Market Talk
– The US dollar eased back from a one-year high versus major peers on Wednesday ahead of U.S. consumer price data that could provide additional clues on when the Federal Reserve will taper stimulus and raise interest rates.
– A surge in energy prices has fuelled inflation concerns and stoked bets that the US Federal Reserve may need to move faster to normalize policy than officials had projected.
– Money markets priced about a 50-50 chance of a rate increase by July, after three Fed policymakers said overnight that the U.S. economy has healed enough to begin to scale back the central bank’s asset-purchase programme, including Vice Chair Richard Clarida.
– The U.S. currency weakened to 113.46 yen, down from a three-year high of 113.78 yen reached in the previous session. The euro climbed to 1.1551, off Tuesday’s 1.1522, its lowest in nearly 15 months. Sterling strengthened to 1.3613, but remained around the middle of this month’s range.
– Gold was up on Wednesday morning in Asia, steadying ahead of the US consumer price data and FOMC meeting’s minutes. Both the minutes and the data will be analysed for clues as to the central bank’s timeline for asset tapering.
Chart Focus EUR/AUD
Key Points
1. Sell EUR/AUD recommendation.
2. Sell EUR/AUD at 1.5750. Stop at 1.5790 and target at 1.5650.
3. Surging commodities prices and interest rate differential are both aiding the Aussie dollar against the Euro.
4. Price is capped by a strong resistance with MACD hinting of a bearish price trend.
Fundamental Comments
1. Surging energy and commodities prices are aiding the Aussie dollar.
2. Interest rate differential is in Aussie dollar favour.
Technical Comments
1. Price is capped by the 20EMA and a previous support turned resistance line.
2. MACD is bearish and is hinting of a bearish price trend.
Key Levels
| Support | 1.5705 | 1.5675 | 1.5640 |
| Resistance | 1.5755 | 1.5810 | 1.5855 |
Technical Overview
USD/JPY – We had a buy recommendation at 112.70 overnight but price only reached a low of 112.99 and our order was not filled. We remain bullish and we are looking for a price move to the Fibonacci 161.8% price projection target at 113.90. Stochastic is inside the overbought zone but MACD remains bullish. 20EMA is hinting of a strong bullish price trend ahead.
| Support | 113.30 | 113.00 | 112.70 |
| Resistance | 113.75 | 114.10 | 114.55 |
EUR/USD – Price reached a new low of 1.1523 overnight which was marginally lower than last week’s low of 1.1528. A potential Double Bottom chart pattern could be forming. A price rally above 1.1585 would confirm the end of the bearish trend and a new uptrend to 1.1645. MACD and Stochastic are warning with divergence of a possible price low. If price were to move below 1.1523, the bearish trend can continue to 1.1505.
| Support | 1.1520 | 1.1490 | 1.1450 |
| Resistance | 1.1555 | 1.1585 | 1.1615 |
GBP/USD – Price broke above 1.3660 on Monday morning but this breakout turned out to be a false breakout. After reaching a high of 1.3673, price has gone back into the range again. Stochastic is near the oversold zone but MACD is flat and neutral at the moment. 20EMA is also flat and neutral. We think price is likely to range and we will have to watch the breakout at 1.3675 or 1.3540 for clues.
| Support | 1.3590 | 1.3550 | 1.3500 |
| Resistance | 1.3630 | 1.3675 | 1.3715 |
XAU/USD – Price broke above the range’s high of $1770.35 last Friday to reach a high of $1781.20. However the breakout was unsustainable and has fallen inside the previous week’s range again. Stochastic is turning up from the oversold zone while MACD has turned bullish. However, MACD is flat and is not indicating a strong bullish trend at the moment. 20EMA is neutral. We may see another test of $1781.20 again in the next few days if price is able to stay above $1750.
| Support | 1757.55 | 1745.00 | 1734.80 |
| Resistance | 1769.15 | 1781.20 | 1790.55 |
AUD/USD – Price reached a one-month high of 0.7384 yesterday but pulled back to the 20EMA support line at 0.7332. If price is able to stay above this 20EMA, it is likely to test the high of 0.7384 again. If 20EMA is not able to hold, we are likely to see a decline to 0.7270. MACD remains bullish but there is a potential divergence warning. 20EMA remains bullish. Stochastic is declining.
| Support | 0.7330 | 0.7295 | 0.7260 |
| Resistance | 0.7385 | 0.7410 | 0.7440 |