FX Commentary – US Dollar Weaker, Pulled Down By Treasury Yields

Market Talk

– The US dollar pulled back to its lowest this week against major peers on Thursday, even after minutes of the Federal Open Market Committee’s September meeting confirmed tapering of stimulus is all but certain to start this year, and showed a growing number of policymakers worried that high inflation could persist.

– Minutes from the Federal Reserve’s September meeting showed the central banks could start reducing its crisis-era support for the U.S. economy by mid-November, but policymakers remained split over how big of a threat high inflation represents and how soon they may need to raise rates in response.

– A Labour Department report showed U.S. consumer prices rose solidly in September. Consumer prices are likely to rise further amid a surge in energy prices, potentially pressuring the Fed to act sooner to normalize policy.

– The dollar edged higher to 113.37 yen, but back from the three-year peak of 113.80 yen hit overnight. The euro was mostly flat from Wednesday at 1.1599, but earlier touched 1.1601 for the first time since Oct. 5. Sterling was little changed at 1.3665, holding Wednesday’s advance and near its highest level this month.

– Gold prices hovered near a one-month peak on Thursday as U.S. 10-year Treasury yields pulled back from a more than four-month high reducing the opportunity cost of holding the yellow metal. Silver climbed to $23.09 per ounce, having hit a near one-month high of $23.24 in the previous session.

Chart Focus USD/JPY

Key Points

1. Buy USD/JPY recommendation.

2. Buy USD/JPY at 113.30. Stop at 112.95 and target at 114.50

3. Higher energy prices and higher than expected US consumer prices are likely to lead to a stronger US dollar.

4. A strong price support coupled with bullish MACD is hinting of a price rally.

Fundamental Comments

1. A surge in energy prices is likely to lead to US Federal Reserve tapering their assets purchases as early as mid-November and a hike in interest rate in July 2022.

2. US consumer prices rose more than expecting fuelling inflation fear and a hike in US interest rate earlier than market’s expectation.

Technical Comments

1. Price is likely to be supported by the 20EMA line.

2. MACD is turning around the zero line and is hinting of a bullish price trend ahead.

Key Levels


Technical Overview

XAG/USD – Price was supported by the 20EMA for the past 3 days and has moved higher this morning. Price is likely to break above the previous high again at $23.17 and moves higher to the next resistance point at $23.60, which is also the Fibonacci 161.8% price movement from 29 Sep low to the high at $22.06 on 4 Oct. MACD and 20EMA are bullish and are supportive of the bullish price move. Stochastic is rising towards the overbought zone.


EUR/USD – Price reached a new low of 1.1523 on Tuesday which was marginally lower than last week’s low of 1.1528. A Double Bottom chart pattern was confirmed overnight when price broke above the neckline at 1.1585. The objective of this chart pattern lies at 1.1645. MACD remains bullish and is hinting of a bullish price trend. 20EMA is also hinting of a bullish price trend. However, Stochastic is already in the overbought zone.


GBP/USD – Price broke above 1.3673 again this morning and we could be heading higher to 1.3750. Stochastic continues to rise higher towards the overbought zone. MACD remains bullish. 20EMA is pointing higher with a steep slope, which is a hint of a strong bullish price trend ahead. However, a price move below 1.3565 would negate our bullish view for the next couple of days.


XAU/USD – Price was able to stay above $1750 overnight and we have seen a move that broke above $1781.20 to a high of $1795.85 overnight. Stochastic has risen into the overbought zone but remains strong. MACD is bullish. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish price trend ahead. We see price moving to $1808.50 over the next days.


EUR/AUD – Yesterday, we had recommended selling at 1.5750 which was filled when price hit a high of 1.5753. Price has declined to current 1.5690 and Stochastic has a bearish crossover, hinting of a price decline ahead. MACD and 20EMA remains bearish. We would recommend bringing stop down to 1.5715 while keeping profit target at 1.5650.


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